Bank for future...RETAIL BANKING As one of the key players in St. Petersburg’s retail banking services, Bank Saint Petersburg aims to become the first bank of choice for the city’s

ANNUAL REPORT 2019

Bank for future generations

Annual Report 2019 BANK SAINT PETERSBURG 3

Стратегический вгляд

One of the largest regional banks in Russia, PJSC Bank Saint Petersburg, was founded in 1990. The Bank operates in St. Petersburg, the Leningrad Region, Moscow, Kaliningrad and Novosibirsk.

Thanks to a well-chosen strategy, consistent financial policy, and commitment to the values of a civilized business, the Bank has for many years maintained a reputation as a strong and reliable partner.

cover artwork by Margarita Recundal, 9 years old


2

BANK SAINT PETERSBURG AT A GLANCE

Moscow1 branch and 1 office22% of loans6% of deposits

Novosibirskbranch opened in Dec. 2019

Saint-Petersburg58 offices75% of loans90% of deposits

Kaliningrad1 branch and 5 offices3% of loans4% of deposits

Annual report is also available in the interactive version at:

http://report2019en.bspb.ru/

Contents

STRATEGIC REPORT 4

Letter from the Management 6

Macroeconomic Environment 8

Strategy 2018–2020 12

FINANCIAL PERFORMANCE 16

Financial Highlights 18

Dividend Policy 26

Investor Relations 26

BUSINESS DIVISIONS 28

Corporate Banking 30

Retail Banking 37

Private Banking 43

Digital Banking 44

FROM RISK TO OPPORTUNITY 50

Risk Management 52

Digitalization of credit risk assessment in retail lending 57

Cost of risk dynamic analysis 58

CREATING WEALTH RESPONSIBLY 60

Customers 62

Colleagues 64

Community 67

Corporate governance 71

ASSETS

674 RUB BN 14th in Russia

RETAIL DEPOSITS

249 RUB BN 14th in Russia

50 000corporate customersincl. 49 500 Internet Bank users

2 232 000individual customersincl. 1 300 000 Internet Bank users

NET INTEREST INCOME

23.3 RUB BN

CORE BANKING REVENUE

30.5 RUB BN

6.3%11.2%

2018 20182019 2019

30.5

23.327.4

21.9

NET FEE & COMMISSION INCOME

6.8 RUB BN.

28.9%

2018 2019

6.85.2

http://report2019en.bspb.ru/

4 BANK SAINT PETERSBURG Annual Report 2019 Annual Report 2019 BANK SAINT PETERSBURG 5

Strategic Report

Financial Performance

Business Divisions

From Risk to Opportunity

Creating Wealth Responsibly

To be among the leaders in online sales and operations, while remaining the most efficient digital classic Russian bank

Strategic Report

Letter from the Management 6

Macroeconomic Environment 8

Strategy 2018–2020 12

Elena Paronko, 9 years old



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LETTER FROM THE MANAGEMENT

DEAR CUSTOMERS, INVESTORS AND PARTNERS,

Year 2019 for the Russian economy was characterized by slowdown of economic growth and the ruble strengthening. For this year the banking sector once again posted record-braking results, with interest rates going down coupled with continued growth of retail lending, despite customers’ weaker income dynamics.

A distinctive feature of the past year was tighter regulation, namely concerning risk-weights on retail loans in capital adequacy calculations, a reaction to fast growth rates in this segment for the past few years. Corporate lending featured a mild growth corresponding with that of the economy as a whole. Implemented federal and regional projects, such as fast payments system, CBR’s Marketplace, Resident ID card proved to be significant milestones of 2019, leading to the banking sector transformation in the near future.

Strategy 2020 amendment

In July of 2019 we have actualized our Strategy, providing an additional focus on corporate customer relations, further digital transformation as well as strengthening positions in EXIM operations.

In accordance with the Strategy amendment, we are transforming the business model in Moscow which was focused on the large corporates, and positioning ourselves as a Bank of two capitals, we set ambitious growth goals for our Moscow business. We are actively developing as a universal bank, providing SMEs and individuals in Moscow with a full range of both classical banking services and unique EXIM solutions, which were previously not provided in the region.

Our achievements

Core banking business growth was our biggest achievement in 2019, namely lending and settlement services to corporate and retail customers. Transaction business, being one of key strategic priorities, provided sizable income, leading to increase in net fees and commissions income by 29%.

Thanks to Strategy amendment and focus on corporate customer relations we are also welcoming the changing trend in corporate lending, as a result of which the Bank increased its loan portfolio by 12% in second half of the year, demonstrating our benchmark competitive potential in quality, flexibility and speed of services provided.

With that said, we denote loan portfolio quality improvement in 2019, resulting in problem loans share dropping to 9%, with cost of risk shrinking to 1.8% in accordance with our guidance. Bank’s stability reflected in notched up ratings by the most prominent rating agencies during 2019.

We continued active involvement in key infrastructural projects. In May 2019, we launched Resident ID card issuance, with application number reaching 100 thousand by the end of the year. Resident ID card is an important social project for us – it’s a unique offer on St. Petersburg banking market, including transport fees discount, e-signature as well as loyalty program for the citizens.

We are proud of our achievements among classical universal Banks in terms of digitalization and remote customer service across all product and service lines. Around 99% of corporates and over 58% of Bank's retail customers are active on Bank's digital platforms. The share of online sales reached 60% of total product sales in the mass segment.

Our another achievement in the field of benchmark digital services was the launch of the Exchange Bridge, allowing our retail customers to trade fourteen currencies at a fixed exchange rate. As of today, the service has no equal counterpart on the retail customers’ market, marked by the award “Innovation time – 2019” in the nomination “Product of the year”.

We realize that on order to grow actively and efficiently on the new markets digital-only presence does not suffice – being there “offline” and being close to the customer is important as well.

We are happy to announce that in December of 2019 a “Nevskiy” branch in Novosibirsk was opened. Until then a representative office operated in the city, focusing on big corporates of Sibir and Far East regions. Opening a full-fledged branch allows us to branch out to other segments and to actively grow as a universal bank.

Our response to global challenges in 2020

In the face of uncertainty on Russian as well as global markets in the first half of 2020, providing long-term prognoses is by any means no easy task.

In these difficult times we will rely upon our conservative approach, which, coupled with extensive management experience allowed the Bank to remain profitable through several crises, keeping our clients and shareholders safe and secure.

We did not strive to participate in an unsecured lending “race” over the last few years, as well as employed conservative risk appetite in corporate lending, which allows us to remain confident in our loan portfolio quality stability. As we have ample liquidity, we expect no issues on that side as well.

The Bank undoubtedly will once again prove to be stable and reliable, as well as highly adaptable to the changes in environment, and post strong result once more. We are grateful to our customers, partners and investors for our mutually beneficial cooperation in the last year and are hopeful for the same in the next year as well!

Elena Ivannikova Chairperson of the Supervisory Board

Alexander Savelyev Chairman of the Management Board

Core banking

business growth

was our biggest

achievement in 2019,

namely lending and

settlement services to

corporate and retail

customers.


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The situation was also aggravated by the reduction of export in Q2 due to Druzhba pipeline incident and by the decline in demand for iron and steel products, while external demand for Russian non-ferrous metals expanded. At the same time processing industry and agriculture demonstrated promising dynamics, including the pharmaceutical sector (+19.6% in 2019) and food and chemical industries (+4.9% and +3.4% respectively).

Inflation accelerated in Q1 peaking in March at 5.3%, but after that was sliding to 3.0% by the end of 2019. Strengthening Russian currency against US dollar, fading effect of the VAT hike, stabilization of oil prices and decline of prices on fruits and vegetables due to ample harvest contributed to consumer prices deceleration. The disinflationary impact was also associated with lagging execution of budget expenditures. At the same time inflation of non-food goods saw a more significant slowdown with inflationary expectations remaining high.

In the midst of faster than expected inflation hitting its 4.0% target, decreasing pro-inflationary risks and strengthening rouble, the Bank of Russia, taking weak economic growth into account, started easing its monetary policy in June. The key rate was cut five times reaching 6.25% at year-end. Meanwhile, growing market expectations of further monetary policy easing drove down yields of rouble bonds and other interest-bearing instruments.

In Q1 2019, a number of draft bills on anti-Russian sanctions were introduced to the US Congress but were tabled. Investors were loading up on Russian debt despite a looming threat of new sanctions.

The share of non-residents in Federal Loan Bonds expanded from 24.4% in early 2019 to 32.2% at year-end. The Ministry of Finance placed Federal Loan Bonds worth RUB 514 bn in Q1 2019 and RUB 888 bn in Q2 2019. As actual volume of placement outperformed the plan, the ministry resumed Federal Loan Bonds limits, following by placing securities worth RUB 261 bn in Q3 2019.

A new fiscal rule, according to which the Bank of Russia, acting on behalf of the Ministry of Finance, ordered purchasing foreign currency in the amount of oil and gas budget revenues exceeding the base price of URALS oil at USD/BBL 41.6, was operational throughout this period. The Central Bank forewent financial market transactions from August to December 2018, transferring currency from its own reserves to the Finance Ministry. In order to compensate for the volume of FX purchases built up from August to December, the Bank of Russia increased daily forex purchases under the fiscal rule by RUB 2.8 bn daily starting with February 2019. However, due to seasonally strong payment balance current account and high demand for Russian assets, it did not cause notable pressure on the rouble.

Internal financial markets recovered after an episode of the significant increase in volatility in December 2018. USD exchange rate hovered around RUB/USD 61.8-69.7, average rate amounted to 64.7 RUB/USD, average URALS price amounted toUSD/BBL 64.3. MOEX Russia Index increased by 28.6%, while RTS Index gained 44.9%.

MACROECONOMIC ENVIRONMENT

GLOBAL ECONOMY IN 2019

Trade wars between the USA and China, which raised concerns of accelerating reduction in global growth, continued to influence the world economy in 2019. On May 10, the USA made a decision to increase tariffs on USD 200 bn worth of Chinese-origin products from 10% to 25%. China announced retaliatory tariffs. The year saw a predictable reduction in turnover between these two countries. At the same time, additional revenue of the USA from tariffs was lower than expected due to the redirection of Chinese exports via other countries of Southeast Asia.

The majority of central banks responded to growing risks of economic growth slowdown by suspending measures to tighten monetary policy and then easing it. After four rate hikes in 2018, the US Federal Reserve cut interest rates three times in the second half of 2019. At the same time based on the results of the December meeting on monetary policy, the American regulator stated that reduction of the rate is possible only in case of significant economic deterioration while according to the forecast of Federal Open Market Committee members interest rates are likely to remain unchanged in 2020. The European Central Bank responded to the low inflation pressure and economic weakness by reducing the deposit rate to -0.5% p.a. at the September meeting and renewed the program of purchasing EUR 20 bn worth of assets each month in November. Christine Lagarde, who replaced Mario Draghi as the head of the European regulator, announced a review of the ECB’s strategy in 2020.

Easing of monetary conditions was also influenced by the FED gradually phasing out its balance-sheet reduction process followed by an increase. Starting from October 15 the FED began monthly purchases of USD 60 bn in short term bonds and repo operations in order to support dollar liquidity, which buoyed demand for risk assets in the second half of the year.

As the developed countries’ central banks started to mitigate monetary conditions, emerging market economies followed suit. Rate cuts were undertaken in India, Brazil, Indonesia, Australia, South Korea and Chile. The National Bank of China lowered rates and weakened yuan in an effort to ease the impact of a trade conflict.

Economic activity was slowing down amid geopolitical tensions. Euro Area GDP growth shrank from 1.4% in Q1 2019 to 1.0% in Q4 2019 primarily because of Germany finding itself on the brink of a technical recession. China also experienced a gradual decline in GDP growth — 6.1% in 2019, down from 6.6% in 2018.

Oil prices started the year on a high note with Brent approaching USD/BBL 75 in April. The growth was influenced by OPEC+ efforts to cut production and extend the reduction deal until March 2020, but in the second half of 2019 oil prices were under pressure amid fears of a slowdown in energy demand. By the end of the year, oil prices recovered in light of OPEC+ plans to further reduce production in early 2020, coupled with local oil production halts in Saudi Arabia.

RUSSIAN ECONOMY IN 2019

Russia started the year 2019 with an economic slowdown followed by a gradual recovery in Q2–Q4. According to preliminary estimates, annualized GDP growth amounted to 1.5% compared to 2.5% in 2018. Economic decline in the country is also influenced by VAT rise from 18% to 20% starting with January 1, 2019, as well as execution fallback of federal budget expenditure. The beginning of the year was marked by low investment activity and weak consumer demand resulting from an adverse trend in real disposable income of the population.

1.3% growth of the Russian economy


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ECONOMY OF ST. PETERSBURG

St. Petersburg’s economy continued its growth in the reporting year: industrial production index went up by 4.8% (+5.0%, y-o-y) mostly due to various upward trends in the processing industry, the share of which in total volume made up 91.9%. In particular, the production of electric equipment increased by 34.9%, of finished metal products excluding equipment by 29.4%, medicine and medical materials by 6.3%. Gross turnover of the St. Petersburg enterprises climbed by 8.2% to RUB 13.9 tn. At the same time, wholesale turnover amounted to RUB 8.4 tn, a 0.7% increase from 2018. Retail turnover etched up 0.9% in real terms amounting to RUB 1.5 tn.

BANKING SECTOR IN 2019

In 2019, the Russian banking sector continued its growth, but the rate decreased significantly.

Banking sector assets saw a 2.7% increase, reaching RUB 96.6 tn compared to RUB 94.1 tn the year before.

Lending volumes gained a mere 3% following impressive 12% in 2018. Despite continuing weak population income dynamics, expansion rate of retail lending experienced a slight decline with the total amount of loans growing by 18.5% in the reporting year. Loans to individuals were increasing amid slow recovery of disposable income and declining interest rates caused by CBR’s monetary policy easing. At the same time, debt burden in unsecured consumer lending amounted to 8.9% by October 1 approaching an all-time high of 9.3% reported in 2014. The regulator responded by tightening measures obliging credit institutions and microlenders to calculate the debt burden indicator of a borrower and introduced additional requirements to capital attributed to loans and microloans issued to borrowers with a high level of debt burden.

Corporate lending grew by a mere 1.5% (2018: 10.5%). Less pronounced growth in the corporate loan portfolio is also associated with a decline in volume of foreign currency loans and their revaluation due to strengthening rouble.

The share of non-performing retail loans continued to decrease reaching 4.3% compared to 5.1% in 2018 and 7.0% in 2017, while the absolute volume of the overdue loans remained virtually unchanged. The share of non-performing corporate loans rose from 6.3% to 7.8% by the end of 2019.

RAS net profit of Russian banks increased one-and-a-half times reaching RUB 2.04 tn, up from RUB 1.3 tn in 2018. According to the Bank of Russia, the weighted average interest rate on RUB loans to non-financial institutions with over a year maturity reduced from 9.9% per annum in January to 8.7% in November. Similar werethe dynamics of short-term loans with an average rate on loans with a maturity of up to one year decreasing from 9.26% to 7.8%.

Banking sector assets

Total assets of Russian banking sector, RUB trillion

Assets growth, %

2014

77.7

2015

83.0

2016

80.1

2018

94.1

2017

85.2

2019

96.6

35.2%

6.9%-3.5%

6.4%10.4%

2.7%

2.04 RUB TNnet profit of Russian banks

96.6 RUB TNbanking sector assets

4.8% industrial production index growth in St. Petersburg


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STRATEGY 2018–2020

The Supervisory Board of Bank Saint Petersburg approved the Bank’s Strategy for 2018–2020 on February 1, 2018.

Then adopted strategy sets out the following main strategic goals: to achieve sustainable ROAE of 15%+ while remaining among the Top 20 Russian banks in terms of assets and increase transaction revenues by 50%.

On July 31st, 2019, the Bank’s Supervisory Board approved amendments to the Bank’s Strategy 2018-2020.

This document sets the following additional strategic priorities:

— to become the best private bank for corporates in the regions of operation;

— to become one of the leaders in terms of online sales and operations, while maintaining a position of the most efficient digital classic Russian bank;

— to become one of the leaders on the EXIM market;

— to become the Bank of two capitals.

Capital Management Strategy:

— Profit is the main source of capital growth; — No plans for share issues; — According to the Dividend Policy, the Bank intends to pay dividends of at least 20% of IFRS net profit;

— The Bank does not intend to retain excess capital (if the capital adequacy ratio (N1.2) exceeds 9.75%) and is ready to distribute capital to shareholders in two ways:• dividends,• share buybacks;

— The Bank intends to cancel the acquired shares;

— The Bank intends to maintain the target level of Total Capital adequacy ratio (N1.0) — not lower than 11.2%, Tier 1 Capital adequacy ratio (N1.2) — not lower than 9.0% (RAS).

The Bank aims to be…

…the best privately-owned

bank for corporates in the regions

of operation

Rationale

— Growing demand for a reliable privately-owned bank with fast and flexible decision making — Business model in SPB with maximal proximity to the customer is the main competitive advantage of BSPB

Metrics

— Focus on NPS improvement — 20% increase in the number of large corporates highly profitable for the Bank

…among the leaders

in online sales and operations

Rationale

— Digitalization is the new normal for all banks — BSPB is one of the most efficient banks engaged in digital transformation — Top priority — to be among the digital leaders with moderate investment

Metrics

— 90% automated credit decisions — 90% online sales — Focus on Time-to-Market

…among the leaders

in EXIM services

Rationale

— Advanced EXIM operations infrastructure with limited geopolitics impact — Existing high expertise — Significant EXIM customers market penetration (36% in North-West region)

Metrics

— 50% of the companies in North West involved in EXIM activities — 10% of EXIM trade in the region — To double EXIM operations revenues by 2022 (from RUB 1.5 bn to RUB 3.0 bn)

…the Bank of two capitals

Rationale

— Moscow market allows significant growth potential — Business diversification

Metrics

— 40% share in the Bank’s corporate loan portfolio — 10 000+ SME customers by 2022

Olesya Romanova, 9 years old


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Key Strategic Issues

Geography Staying public

— Bank of the two capitals, conducting core business in St. Petersburg and Moscow

— The Bank is considering the opportunity of developing business in other regions of Russian Federation, both by means of digitalization and through the opening of offices on individual basis

— The Bank remains public and upholds the best practices in investor relations

M&A Lending

— The Bank follows an organic growth strategy — Main focus on corporate loans in the regions of operation

— Market growth rates for all lending segments

Customer base Investments

— The Bank is expanding its mass segment (retail and corporate) customer base

— In relation to big corporates — specialization in industries with high expertise. It doesn’t limit attraction of big customers from other industries

— The Bank provides fast and high-quality copying of digital solutions

— The investment priorities are transaction business, IT-development and IT-infrastructure

Profitability Funding

— Higher profitability due to focus on transaction business (risk-free) and boosting corporate lending

— Improving cost efficiency

— The Bank is funded by customer deposits. Capital market transactions are unlikely

— Market growth rates for current accounts and demand deposits

— Term deposits growth is moderate. The target is to decrease the cost of funding


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Victoriya Stepanova, 11 years oldCore banking revenues increased by 11.2% and amounted to RUB 30.5 billion


Bank of my city

Financial highlights 18

Dividend policy 26

Investor relations 26


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NET INTEREST INCOME

The Bank’s interest income increased by 5.3% in 2019 to RUB 48.5 bn, compared to RUB 46.0 bn in 2018. Customer lending contributed to 74.7% of the total interest income: interest income from loans and advances to customers amounted to RUB 36.2 bn. Interest income from other operations, principally from securities, decreased by 8.4%, amounting to RUB 12.3 bn in 2019, compared to RUB 13.4 bn in 2018. Overall, this interest income component still comprises an insignificant amount of 25.3%.

Interest expense increased by 2.4%, amounting to RUB 23.4 bn in 2019, compared to RUB 22.9 bn in 2018. Interest expense on retail term deposits increased by 14.3% and amounted to RUB 9.7 bn (41.2% of total interest expenses). Interest expenses on corporate term deposits increased by 6.6% and amounted to RUB 5.0 bn (21.2% of total interest expenses). Interest expenses on due to banks decreased by 10.9% and amounted to RUB 7.5 bn (31.8% of total interest expenses).

Net interest income increased by 6.3% to RUB 23.3 bn, compared to RUB 21.9 bn in 2018. The main factor behind the NII increase is the lending expansion in the 2H 2019 with interest rates on liabilities decreasing.

NET FEE AND COMMISSION INCOME

The Bank’s fee and commission income increased by 21.7% in 2019, reaching RUB 8.9 bn, compared to RUB 7.3 bn in 2018. Plastic cards settlements (38.8% of total fee and commission income) increased by 13.6% and amounted to RUB 3.5 bn. Cash and settlement operation fees (40.8% of the total fee and commission income) increased by 11.4% to RUB 3.6 bn compared to 2018. Fees for issuing guarantees and letters of credit (11.5% of the total fee and commission income) increased by 27.8% and stood at RUB 1.0 bn.

Fee and commission expense increased by 3.7% in 2019 to RUB 2.2 bn, compared to RUB 2.1 bn in 2018. The aggregate of commissions on plastic cards settlements (including loyalty programs), securities and settlement transactions amounted to RUB 2.0 bn, or 92.1% of the total fee and commission expenses.

In 2019, the net fee and commission income increased by 28.9% to RUB 6.8 bn (RUB 5.2 bn for 2018).

FINANCIAL HIGHLIGHTS

The principal factors that influenced the Bank’s 2019 financial results included:

— Corporate loan portfolio increased by 4.5% y-o-y and reached RUB 298.5 bn for FY 2019;

— Net interest income for FY 2019 increased by 6.3% and amounted to RUB 23.3 billion;

— Net fee and commission income for FY 2019 increased by 28.9% and amounted to RUB 6.8 billion;

— Core banking revenues for FY 2019 increased by 11.2% and amounted to RUB 30.5 billion.

Income structure*, RUB mln

6 179

4 042

16 870

4 1694 700

21 358

20162015

6 2455 211

19 658

2017

3 9735 243

21 895

2018 -686

6 757

23 281

2019

Net Interest Income

Net Fee and Commission Income

Net Trading Income

Income and expenses data*, RUB mln

12 49011 951

20192016 2017 2018

6 967

14 086

30 93730 300

12 29310 234

27 409

2015

9 57512 365

32 094

7 127

13 047

32 797

Revenues

Operating expenses

Provisions

30.5 RUB BNcore banking revenues

+11.2%

6.8 RUB BNnet fee and commission income+28.9%

23.3 RUB BNnet interest income+6.3%

* One-off incomes are excluded from Revenues and Net Trading Income; the loyalty program in the structure of net fee and commission income has been taken into account in the Bank’s state-ments since 2018


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COST EFFICIENCY

The Bank’s operating expenses grew by 8.0% to RUB 14.1 bn compared to 2018. The impact of weak trading, partially offset by core business growth resulted in the cost/income ratio of 45.5% in FY 2019 (39.8% in 2018).

Staff costs is a major component of the Bank’s operating expenses, comprising 45.8% of all costs. Staff costs increased by 8.6% and amounted to RUB 6.5 bn.

The Bank’s expenses related to premises and equipment amounted to RUB 2.6 bn in 2019, a 25.8% increase compared to 2018.

The Bank’s other operating expenses include rental payments, administrative costs, professional services, security, transportation, delivery and other expenses. In 2019, these expenses decreased by 0.2% to RUB 5.0 bn.

KEY FINANCIAL INDICATORS

The core banking margin remains at a historically high level.

Core banking revenues increased by 11.2% and amounted to RUB 30.5 bn in FY 2019. Net income amounted to RUB 7.9 bn for FY 2019. The Bank’s return on equity (ROAE) amounted to 10.2% for FY 2019 (12.3% for FY 2018).

TRADING INCOME RESULT

In 2019, net trading loss amounted to RUB 0.7 bn. Gains from operations with foreign currencies and derivatives amounted to RUB 0.1 bn, while losses from operations with securities amounted to RUB 0.8 bn. Results from operations in financial markets were driven by the position taken by the Bank to mitigate interest rate risk.

From 2007 onwards, Bank Saint Petersburg has been among the leaders in the most important segments of the Russian financial market and an active trader on foreign stock exchanges. The Bank is systematically included in the activity ratings of the MOEX currency derivatives market and the MOEX futures and options market. The Bank’s currency futures trading volume currently represents a sizeable share of the total trading volume of the Chicago Mercantile Exchange. The Bank is also a major participant in the REPO market and a partner of leading domestic and international financial institutions. The Bank contributes to the interest rate indicators calculated by the National Securities Market Association and is a market maker for interest-bearing instruments of the Moscow Exchange.

Core banking vs trading*, RUB mln

Core Banking F&C

Core Banking NII

Core Banking result

6 293

27 034

5 400

25 972

4 096

21 129

2015 2016 2017 2018

7 073

27 431 30 516

2019

17 03320 572 20 740 20 358

8 123

22 394

Operating Expenses*, RUB mln

Staff costs

Expenses related to premises and equipment

Other operating expenses

Cost-to-Income

5 629

11 951

2015 2016

4 474

4 157

1 6034 520

1 8035 097

10 234

37.3%39.4%

6 4545 942

13 04714 086

2017 2018 2019

5 971

4 498

1 896

5 019

2 087

5 008

2 62412 365

38.5% 39.8%45.5%

4 080

3 663

4 254

6 179

6 570

2015 2016 2017

2 952

4 291

2018

-1 083-54 -195

-230

-198

785

5 393

1 537

-1 836

-1 167

2019-216

884

Trading income

Trading F&C

Trading NII

Aggregate trading result

445

Core banking margin dynamics

2017

2015 2016 2018 2019

Core banking margin

NIM

Trading margin

3.4%3.9%

3.5% 3.6% 3.7%

0.3% 0.5%

-0.7%

0.4%0.7%

5.0%5.7% 5.8% 5.6% 5.9%

Net income dynamics

Net Income, RUB mln

ROAE, %

2015

3 619

2016

4 278

2018 20192017

7 491 9 047 7 906

6.7% 7.3%

11.4% 12.3% 10.2%

* The loyalty program in the structure of net fee and commission income has been taken into account in the Bank’s statements since 2018 Source: the Bank’s management accounts..

* Property tax is excluded from other administrative and oper-ating expenses and included in expenses related to premises and equipment. Costs reclassified according to IFRS 16 – from other OpEx to OpEx related to premises and equipment


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LOAN PORTFOLIO QUALITY

Since lending constitutes the majority of the Bank’s assets, the Bank focuses on maintaining the high quality of its loan portfolio.

In 2019, the volume of loans to customers (gross loans) increased by 7.0% and stood at RUB 401.4 bn. The provision charge for FY 2019 decreased by 2.2% and amounted to RUB 7.0 bn. As at January 1, 2020, the allowance for loan impairment amounted to 8.3% of the loan portfolio (compared to 9.7% as of January 1, 2019).

As at January 1, 2020, the share of problem loans in the Bank’s portfolio (Stage 3 loans and POCI) amounted to 9.2% (compared to 10.8% as at January 1, 2019). The share of corporate problem loans amounted to 11.1% of the total corporate loans; the share of retail problem loans amounted to 3.9% of the total retail loans.

Provisions for the coverage of problem loans were 90%. In 2019, the volume of loans written off amounted to RUB 10.6 bn.

BALANCE STRUCTURE

The Bank’s assets increased by 0.04% in 2019, reaching RUB 673.7 bn, compared to RUB 673.4 bn as at January 1, 2019.

Gross loans increased by 7.0% in 2019 and stood at RUB 401.4 bn, compared to RUB 375.3 bn as at January 1, 2019. The share of loans and advances to customers comprised 54.6% of total assets.

Securities portfolio decreased by 28.2% in 2019 and amounted to RUB 98.7 bn, compared to RUB 137.4 bn as at January 1, 2019. The share of the securities portfolio comprised 14.7% of total assets.

Amounts under reverse repo increased in 2019 by 8.3% to RUB 95.4 bn, compared to RUB 88.1 bn as at January 1, 2019. The share of the amounts under reverse repo comprised 14.2% of total assets.

The volume of customer deposits (customer accounts and promissory notes and deposit certificates issued) increased in 2019 by 0.7% to RUB 417.6 bn, compared to RUB 414.8 bn as at January 1, 2019. The share of customer deposits comprised 62.0% of the liabilities and equity total.

The volume of due to banks increased in 2019 by 7.3% to RUB 158.6 bn, compared to RUB 147.8 bn as at January 1, 2019. The share of due to banks comprised 23.5% of the liabilities and equity total.

As at January 1, 2020, the share of funds attracted from capital markets was 0.7% of the liabilities and equity total, compared to 2.3% as of January 1, 2019.

Assets and liabilities structure, January 1, 2020, RUB bn.

Loans and advances to customers

54.6%

Securities portfolio 14.7%

Liquid assets

265RUB bn

Due to banks23.5%

159RUB bn

Amounts underreverse repo

14.2%

Cash6.3%

Due from banks4.2%

Fixed and other assets

6.1%

Customeraccounts(individuals)37.0%

Customer accounts (corporates) 25.0%

Shareholders' equity11.9%

Capital markets0.7%

Other1.9%

Assets Liabilities

674 RUB bn

368.1

98.7

95.4

40.9

42.6

28.0

249.0

168.6

158.6

80.1

4.812.6

* Starting from Apr. 1, 2018, problem loans include all lifetime ECL credit-impaired loans (stage 3) and loans impaired at initial recognition (POCI)

Loan portfolio quality

Loan portfolio, RUB bn

01.10.2019

390.8

01.01.2020

401.4

01.01.2018

357.7

01.01.2019

375.3

01.04.2019

372.1

01.07.2019

365.7

01.01.2017

354.3

Allowance for impairment / Gross loans

Overdue loans / Gross loans

10.4% 10.7%

9.2%

9.2%

8.3%

9.9% 9.9%9.7%11.0%11.2%

10.6%10,8%

14.3%15.2%

Provision charge and Cost-of-Risk

Provision charge, RUB mln Cost-of-Risk, Cumulative Cost-of-Risk, Quarterly

2016

12 490

1Q19

1 741

2Q19

1 721

3Q19

1 730

4Q19

1 775

2017

9 575

2018

7 127

2019

6 967

3.4%

2.7%

1.9% 1.9% 1.8% 1.8%1.9% 1.8%

401.4 RUB BNloan portfolio in 2019+7.0%


Strategic Report


Business Divisions



CUSTOMER DEPOSITS

The volume of customer deposits (customer accounts and promissory notes and deposit certificates issued) increased in 2019 by 0.7%, reaching RUB 417.6 bn (RUB 414.8 bn as of January 1, 2019). As of January 1, 2020, 59.6% of customer accounts belonged to individuals and 40.4% belonged to corporate customers.

Retail customer deposits decreased by 0.1%, amounting RUB 249.0 bn. In 2019 corporate customer deposits increased by 1.8% to RUB 168.6bn.

Retail term deposits decreased by 4.7% and stood at RUB 174.8 bn. During 2019, corporate term deposits went up by 2.3% to RUB 88.8bn.

SHAREHOLDERS EQUITY AND CAPITAL

As of January 1, 2020, the Bank’s shareholders’ equity (EFRS) stood at RUB 80.1 bn (up 5.8% compared to January 1, 2019). The Bank’s total capital (RAS, Basel III) amounted to RUB 81.8 bn (up 10.5% compared to January 1, 2019). In compliance with Basel Committee requirements (RAS, Basel III), as of January 1, 2020, the Bank’s total capital adequacy stood at 14.8% and Tier 1 capital adequacy stood at 11.5%.

As at January 1, 2020, corporate loans comprised 74.4% of the loan portfolio, its volume increased by 4.5% in 2019 to RUB 298.5 bn. The breakdown of the Bank’s corporate portfolio by sector reflects St. Petersburg’s economic structure, which has a high proportion of construction, allowing the Bank to benefit from all the advantages of the region’s economic structure, as well as to contribute to its development.

In 2019, the retail loan portfolio (mortgage, car and consumer loans) increased by 17.5% and amounted to RUB 99.1 bn. As of January 1, 2020, loans to individuals amounted to RUB 103.0 bn (up 14.7% compared to January 1, 2019). The share of loans to individuals in the loan portfolio amounted to 25.6% as at January 1, 2020 (compared to 23.9% in the previous year).

Loan portfolio by sector, January 1, 2020

25.6%

11.3%

9.2%

13.4%

7.3%

7.2%

7.1%

7.0%

2.6%2.1%

1.3%

5.8%25.6% Individuals13.4% Trade11.3% Leasing and financial services9.2% Real estate7.3% Government-financed7.2% Construction7.1% Heavy machinery and ship-building7.0% Production and food industry2.6% Oil and gas2.1% Transport1.3% Telecom5.8% Other

Retail loan portfolio dynamics, RUB bn, RUB bn

54.1

2.115.0

71.2

10.3

42.4

1.7

54.4

10.7

35.4

2.6

48.7

01.01.2015 01.01.2016 01.01.2017 01.01.2018

60.0

20.8

3.5

84.4

67.0

26.8

5.3

99.1

01.01.2019 01.01.2020

11.0

29.4

44.3

Mortgages

Car loans

Consumer loans

3.9

Customer deposits, RUB bn

Corporate deposits Retail deposits

205.6

154.6

01.01.201901.01.2017

187.4170.4

01.01.2018

249.1

165.7

01.01.2020

40%

60%

249.0

168.6

40%

60%

43%

57%

48%52%

Capital Adequacy Ratio (RAS, BASEL III)

01.01.201801.01.2016 01.01.2017 01.01.2019 01.01.2020

Total Capital adequacy ratio (N1.0)

Tier 1 Capital adequacy ratio (N1.2)

15.4%

8.8% 9.2%10.1% 10.1%

11.5%

14.2% 14.2% 13.7%14.8%


Strategic Report


Business Divisions



Press releases / messages / reports are sent out based on an investor base of about 500 analysts and portfolio managers.

In addition, the Investor Relation team on a weekly basis provides existing and potential investors and investment bank analysts covering the Bank with 5 to 10 comments necessary to analyze the financial condition of the Bank and make informed investment decisions.

Foreign investors hold about 30% of the Bank’s voting shares.

TRADING OF BANK‘S ORDINARY SHARES

The Bank’s ordinary registered shares (state registration number 10300436В, ISIN: RU0009100945) are listed on the stock market of the Moscow Exchange.

Since October 28, 2016, ordinary registered shares of the Bank have been traded with listing level 1 (stock ticker BSPB).

The Bank’s shares are included into the following Moscow Exchange indices: Moscow Exchange Indices (Broad Market Index (MOEXBMI/RUBMI); Sectoral Financials Index (MOEXFN/ RTSfn).

The information on the price can be found on the Bank’s web site and on the %Moscow Exchange web site (stock ticker BSPB).

In October 2019, the Bank completed a new buy-back procedure and acquired 12 million shares at a price of 53.5 rubles per share. After the buyback the Bank’s total treasury shares amounted to 24 million (4.8% of ordinary shares). The Bank confirms the intention to cancel the acquired shares.

As of January 1, 2020, the Bank’s book value per share has reached RUB 168.

DIVIDEND POLICYThe Dividend Policy establishes the Bank's intention to maintain a dividend payout ratio of 20%+ of the Bank's IFRS net profit (RUB 7.9 bn for FY 2019). The dividend amount is approved by the General Shareholders’ Meeting, as recommended by the Supervisory Board. In 2016, dividends amounted to RUB 464 mln, in 2017 – RUB 811 mln, in 2018 – RUB 1.8 bn. According to the results of 2019, the Bank plans to allocate RUB 1.6 bn for the payment of dividends.

However, 2020 Coronavirus pandemic’s impact on economic environment is significant. It creates necessity to maintain extra capital. In these conditions, following global market tendencies and in line with regulator’s measures aimed on Russian banks’ capital strengthening, the Bank’s Supervisory board took a decision to recommend AGM not to pay out dividends on ordinary shares for 2019.

Conditional on the economy stabilization the Bank intends to consider the issue of dividends in the second half of 2020.

INVESTOR RELATIONSThe Bank makes every effort to increase transparency, in addition to improving the quality and quantity of information available to its investors and shareholders. The Bank is focused on providing equal access to public information to all of its stakeholders.

Bank Saint Petersburg built all the processes in Investor Relations based on the best practice that existed in the world and is striving to maintain them at a high level, extending the circle of communications and the range of products prepared for the market.

Making every effort to maintain a close connection with the investment community, the Bank’s representatives pay significant attention to interacting with its current and potential investors. During 2019, Investor Relations team held 149 meetings and 16 events, including Investor Day, FY 2018 IFRS live presentation, four Roadshows, one Analyst Roadshow. Also the Bank took part at seven Investor Conferences.

During Investor Day, the Bank published new presentations on risk management and vintage analysis of the loan portfolio, financials, corporate and retail business, digitalization and the corporate governance system at the Bank.

Top management continues to participate in Investor Days (over the past three years, managers from corporate and retail units, risk management, trading, the Moscow branch have taken part).

In 2019, the Bank opted for more active participation in Investment Conferences including locations where Roadshows are not viable, for example, Cyprus, Athens (Greece) and Prague (Czech Republic).

Proactive communications were carried out as new materials appeared (in the form of presentations, press releases, updating materials on the Bank’s website, etc.). In total, in 2019, IR distributed 48 newsletters (press releases / messages / reports) on the most significant events for the investment community.

Foreign Institutional Investor Base

Scandinavia and Baltic states

Continental Europe

USAUK Asia

9%17%28%39% 4%

The Bank’s ordinary shares performance vs. Peers

Peer 1 Peer 2BSPB

01.01.2019 01.02.2019 01.03.2019 01.04.2019 01.05.2019 01.06.2019 01.07.2019 01.06.2019 01.09.2019 01.10.2019 01.11.2019 01.12.2019 01.01.2020

0.03 RUB 0.05 RUB (+35.1%)

187.0 RUB 255.0 RUB (+36.4%)

44.6 RUB 56.3 RUB (+26.2%)

The Bank is increasing book value per share for its shareholders

01.01.2007 01.01.2008 01.01.2009 01.01.2010 01.01.2011 01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 01.01.2017 01.01.2018 01.01.2019 01.01.2020

2007 – IPO RUB 133 per shareUSD 274 mln (RUB 6.8 bn)First privately-owned Russian bank

2009 – SPORUB 88 per shareUSD 200 mln (RUB 5.8 bn)Convertible pref.stock

2011 – SPORUB 147 per shareRUB 2.7 bnThe major part was acquired by EBRD

2013 – SPORUB 41 per shareRUB 3.0 bnThe major part was acquired by existing shareholders

2017 – SPORUB 53 per shareRUB 3.2 bnMost of the major shareholdersexercised their pre-emptive rights

Book Value per share, RUB

22.4 53.266.6 72.8

82.8109.4 110.2 108.5 116.7

129.2 138.5 141.8155.9

168.4

168 RUB cost of capital per share as of January 1, 2020

* Source: the Bank’s own research, December, 2019


Strategic Report


Business Divisions



Lev Naumov, 6 years oldExpert knowledge of the customer base and proximity to customers ensure the Bank’s flexibility and responsiveness in addressing the needs and interests of each of the 2 232 000 customers.

Business Divisions

Technological bank

Corporate banking 30

Retail banking 37

Private banking 43

Digital banking 44


Strategic Report


Business Divisions



In spite of the stricter compliance requirements imposed by foreign banks, the Bank continues to support non-stop foreign currency settlements. The Bank has installed Sanctions Screening, a SWIFT solution allowing to screen all outgoing payments against the OFAC, EU, and other sanctions lists before they are sent.

The Bank was included in the list of banks that are entitled to open procurement participant accounts according to 44-FZ. Since September 2018, the Bank’s customers can open such accounts in Internet Bank i2B as well as at the Bank’s office. Nowadays, the Bank services over 2 500 customers participating in government procurement.

In 2019 more than 7,000 customers reserved accounts in updated Online Account for Business service for new customers enabling them to reserve an account at the Bank’s website in five minutes. To open an account a customer needs to visit the Bank’s office only once.

In the reporting year, the Bank introduced a new sales channel of cash settlement productfor corporate customers through the Bank’s partners,namely large companies providing services for registration of new businesses, accounting and legal services, electronic trade platforms and others.

The Bank also launched Business Registration service in 2019. This service enabling prospective entrepreneurs to register their business is offered by the Bank in cooperation with Brega Nevy Business Development Center LLC. The company provides advice regarding the preparation of documents for registration of business and choice of the suitable tax system, as well as files documents electronically to Federal Tax Service on behalf of its clients.

The Bank provides a wide range of banking services connected with cash transactions in the regional markets of both St. Petersburg and the Leningrad Region, including receipt collection, payments, foreign exchange, cash re-counting, the delivery of cash wages to customers, and loading ATMs and payment kiosks.

2019 was a milestone year for improving customer service quality. The Bank’s cash collection teams made a total of 185 000 location visits, 142 000for direct customer service, 29 000 to service and replenish the Bank’s ATMs and payment kiosks, and 14 000 to the Bank’s branch network. The amount of cash transported and processed by the Bank in 2019 totaled RUB 530 bn.

CORPORATE LENDING

To reach its strategic goals, Bank Saint Petersburg is striving to create a product range that matches the interests of its corporate customers as much as possible. Despite the challenging macroeconomic situation, the Bank continues to provide corporate lending to companies from various industry sectors and is strengthening its positions in this market segment. In addition to granting new loans, the Bank is also improving the terms of already existing loans, which indicates general financial sector recovery.

In 2019, the Bank expanded its cooperation with PJSC “KAMAZ”. Nowadays the Bank provides a number of services to the company. The Bank opened three credit lines with a total limit of RUB 11 bn to KAMAZ. The funds are provided for replenishing of working capital for a term of up to two years.

In the reporting year, the Bank opened a credit line with a limit of RUB 5 bn to State Transport Leasing Company. The company specializes in railway and aircraft equipment leasing, as well as performs leasing automotive and road vehicles, sea and river vessels.

CORPORATE BANKING

The Bank continues to improve its performance by offering a wide range of cutting-edge banking services to small, medium and large-sized enterprises, taking into account each customer group’s particular requirements and interests.

To date, Bank Saint Petersburg has 50 000 corporate customers. The Bank’s corporate banking business remains primarily focused on the regional market of St. Petersburg. In addition, the Bank strengthened its positions in Kaliningrad in 2015 through the creation of its Evropeisky Branch, which currently has over 9 000 corporate customers (Bank Saint Petersburg completed the integration of Bank Evropeisky in Kaliningrad, reorganizing it together with the Bank’s Kaliningrad Branch into the new Evropeisky Branch). In 2016, Bank Saint Petersburg strengthened its presence outside the domestic Northwest region: The Bank opened a representative office targeted at corporate customers in Novosibirsk. Since December 2019 Nevsky Branch started carrying out banking operations and providing a full range of banking services to its individual and corporate customers instead of a representative office.

In St. Petersburg, six sectoral departments provide services to large and medium businesses. Specialization of employees in companies of particular sectors allows to develop and maintain a high level of sectoral expertise, understand business specifics of customer serviceand tailor products to customer needs.

Loans to legal entities represent 74.4% of the total loan portfolio. The breakdown of the Bank’s corporate portfolio by sector reflects St. Petersburg’s economic structure, which has a high proportion of construction, real estate, trade and production, allowing the Bank to benefit from all the advantages of the region’s economic structure, as well as to contribute to its development.

SETTLEMENT BUSINESS

Bank Saint Petersburg strives to become the leading settlement bank for residents and enterprises in St. Petersburg engaged in payments and settlements with customers and suppliers.

The Bank issues Visa Business and MasterCard Business corporate cards to be used by company employees to cover their travel expenses and current expenses related to the company’s operations. Payments for products and services can also be made online. A corporate card is a universal and safe tool for accessing company funds round-the-clock without the need to visit the Bank’s office: payments for goods and services are carried out by one touch thanks to modern payment services; cash deposits can be made and withdrawn 24/7/365 through the wide network of ATMs. All corporate cards issued by Bank Saint Petersburg support the cutting-edge mobile payment technology offered by Apple Pay, Samsung Pay and Android Pay. Moreover, customers may open a corporate card account and order their first card via Internet Bank i2B.

In connection with transition of business to web-based POS in 2019, the Bank launched sales of the new product for corporate customers –– Evotor web-based POS. Evotor web-based POS is the most well-known brand of new generation cash register equipment , which complies with all requirements of Federal Law No. 54-FZ. The company offers a wide product range with cash register equipment catering for all customers and types of business.

Still one of the traditional advantages of Bank Saint Petersburg is its wide network of correspondent banks across the globe: in the USA, Germany, Austria, UK, Switzerland, France, Sweden, Norway, Japan, China, Hong Kong, Belarus, Lithuania and Poland.

74.4% loan portfolio form loans to legal entities


Strategic Report


Business Divisions



Easy factoring implies fully electronic document management. Notification of buyers will be performed by the light-version.com platform. Data about the fulfilled deliveries will be automatically reflected in the client’s profile in the light-version.com platform. The factoring company provides the client with full amount due from the buyer.

INVESTMENT BANKING SERVICES

In 2019, the Bank continued to work with the existing portfolio of private equity and venture capital investments. Thus, during 2019 the Bank has been negotiating the sale of its shares in a Russian project company from the logistics industry. In 2019, the Bank’s team completed the structuring of this transaction and the development of legal documents with potential buyers.

The Bank acted as a leading investor in a subsequent round of internal financing of its portfolio company together with Goldman Sachs and Vostok New Ventures (VNV).

One of the Bank’s portfolio companies promoting IT in logistics opened a sales office in Moscow aimed at customer acquisition and service quality improvement for large corporate customers and integrators.

In 2019, new contracts were signed with customers in banking, warehouse logistics, telecommunication and security.

In 2019, three out of six early cycle companies (security systems, internet-media and industrial technologies) raised further rounds of financing with the participation of external investors. The Bank’s return on investment in early cycle companies amounted to 22% in dollars.

RISK HEDGING

One of the priorities in Bank Saint Petersburg’s operationsis the creation of effective solutions allowing customers to competently manage currency, commodity and interest risks while maintaining and increasing the profitability of their business.

The Bank is actively establishing a relevant product line for corporate customers, including tools for hedging market risks, creating additional opportunities for increasing profits and managing liquidity.

In the interests of customers, strategies based on an individual approach and thorough analysis of business specifics are constantly being developed for various market segments. They allow the Bank’s customers to choose a solution that meets their expectations.

The level of service and awareness of products increases regularly. In terms of the quality of services and price parameters, the Bank competes with the world’s largest investment and brokerage companies.

Highlights of 2019:

— The Bank executed its first-ever interest derivatives for ruble and currency rates and as a result, the Bank borrowers with index rates have reduced interest risks in their loan portfolio;

— The Exchange Bridge service for individuals has been launched. Now the Bank’s customers have the opportunity to hedge their currency risks at the tap on their smartphone on a par with corporate customers;

— The first cross-currency interest rate swap transactions in the Bank’s history allowing to exchange the currency and rate of the loan with additional derivatives agreement were executed.

In 2019, the Bank was recognized as the winner of an open tender for the conclusion of the loan agreement with SUE Vodokanal of St. Petersburg. The Bank offered the most attractive interest rate in comparison with other participating banks. Loan funds will be used to replenish the company’s working capital.

In July 2019, the Bank and the LSR Group construction company entered into three master facility agreements under which the Bank will allocate a total of RUB 10.5 bn for financing the group’s working capital. In September 2019, the Bank and LSR Group continued their cooperation. The Supervisory Board of the Bank approved the credit limit to LSR Group within the Master Agreement on General Terms and Conditions of Loan Transactions for the total amount of RUB 16 bn for a period of 3 years.

In the reporting year, the Bank won a tender for rendering financial services to St. Petersburg State Unitary Enterprise Gorelektrotrans. The organization will receive a non-revolving credit line for RUB 2 bn. The funds will be used for acquisition of a batch of 21 new Vityaz-M low floor trams, which will transport passengers in the South-West part of St. Petersburg.

In November 2019, the Bank granted a loan to the ZENDEN Group, one of the largest Russian footwear producers and retailers. A loan of RUB 500 mln is granted for development of the retail store network. Today ZENDEN retail network includes more than 400 shops under the ZENDEN, Thomas Munz and Mascotte brands. The group ranks second by the volume of footwear sales in the Russian Federation among domestic footwear networks.

In 2019, the Bank allocated funds to X-Leasing LLC for the acquisition of 500 Nissan Qashqai cars. Cars released in 2019 will be given to the Youdrive Moscow carsharing service.

The Bank updated its line of the standard loans for corporate customers improving terms and conditions and complementing it with new offers for small and medium businesses. The main innovation is that the standard line with simplified conditions of receiving a loan is now also available for businessmen who are not clients of the Bank. Thus, if a corporate customer has a settlement account and turnover in another bank, the Bank can provide it up to RUB 3 mln worth of financing the settlement account under Overdraft-Welcome loan. And if a larger sum is needed, the Bank is ready to offer the loan of up to RUB 20 mln and flexible approach to its pledge.

Moreover, in 2019 the Bank updated the Business Mortgage program for legal entities and individual entrepreneurs for purchase of the commercial real estate: the amount of loan is increased to RUB 50 mln, a term of loan to 10 years and the minimum down payment is reduced to 20%.

In the reporting year, the Bank started issuing pre-approved overdrafts and loans to individual entrepreneurs and legal entities that had settlement account turnovers in the Bank for the last 12 months. The decision is made based on a minimum package of documents in as little as one day.

In 2019 the Bank launched a new credit product Reverse Factoring without Recourse provided in cooperation with St. Petersburg Factoring Company LLC. As of today 30 large buyers had limits opened for financing of factoring transactions.

In October 2019, the Bank began offering factoring financing services under a simplified scheme together with factoring company Pervoye Faktoringovoye Agentstvo LLC and the light-version.com platform. The standard factoring financing received by the client requires significant costs for the organization of document flow.


Strategic Report


Business Divisions



TARGETED PROGRAM FOR AGRICULTURERS

Boasting extensive experience of providing loans to agricultural enterprises, in 2017 the Bank was granted the status of authorized bank of the Ministry of Agriculture of the Russian Federation for the purposes of the agribusiness concessional lending program: The Bank’s customers can now apply for loans with up to a 5% interest rate.

In 2018, the Bank continued active lending to agriculture, for instance, it provided financing in the amount of RUB 900 mln to Detskoselsky Concern – a large agricultural company ranked among 300 best agricultural enterprises in Russia and one of the leaders in milk production in the North-West Region.

In the reporting year, the Bank executed concessional facility agreements with a total value of RUB 1.54 bn with agricultural enterprises.

FOR EXIM COMPANIES

In 2019, the development of services for EXIM companies was one of the Bank’s strategic priorities.

The principal area of focus in this direction is the positioning of the Bank as a reliable partner, a leader in servicing the EXIM activities of Russian companies. Throughout the year the Bank’s experts demonstrated the market a high level of competence in this field, while the operational service provided first-class experience.

Furthering the development of its services, the Bank launched its own Telegram business channel. The channel features daily cases, opinions and estimates from true specialists in different EXIM fields, as well as the latest news of the world of export and import operations.

The content of the channel will be interesting not only for the clients who are already engaged in EXIM but also for those who are just thinking about embarking on this path. The channel has already gained about 3 000 subscribers.

As for the development of technological equipment and provision of benefits to participants of EXIM activities with online services, corporate customers can automatically send SWIFT МТ 940, МТ 941 and МТ 942 statement messages through the i2B online banking system. Russian representative offices of foreign companies and other organizations founded by non-resident entities must regularly provide them financial reports according to the established international reporting standards. Internet Bank i2b has an in-built functionality which, once enabled, will automatically send out reports with the required (daily/monthly) frequency. Financial information is transmitted via protected SWIFT channels directly to the parent entity’s bank. Foreign bank’s consent to receive such statements must be obtained to enable the service.

Maintenance of high-quality EXIM service requires continuous strengthening of existing relationships and establishment of new relationships with the international counterparties and partners, therefore the Bank actively works on expansion of cooperation geography, a search for new opportunities in the new markets. In October 2019, the Bank took part in the Russia-Africa Summit and Economic forum hosted by Sochi. Negotiations held at the Economic forum with representatives of the African development banks (Afreximbank, Eastern & Southern African Trade and Development Bank (TDB)) resulted in the start of joint identification of the mutually advantageous priority areas and forms of cooperation between Bank and the African development banks.

In addition, the Bank continues to develop a product line of interest rate derivatives for corporate clients which, once embedded in the credit process, allow to reduce the interest rate to the Borrower without lowering the interest margin or to increase the profitability of the loan transaction.

DEPOSIT PRODUCTS

One of the strategic priorities of the Bank’s deposit business is to gradually transfer conclusion of deposit agreements to digital channels. This substantially reduces the workload of branch network employees who will be able to focus instead on individually tailored deposits and devote more time to other products for corporate customers. More than 95% of deposits in the standard range are already placed through Internet Bank i2B.

Implementation of the Agreements of General Terms for Attraction of Corporate Customer Funds to Deposits to Internet Bank i2B allowed to eliminate written confirmation exchange between the Bank and its customers. In 2019, up to 95% of deposits opened under these terms were placed online.

PROGRAMS TARGETED AT SMALL AND MEDIUM ENTERPRISES

Loans to small and medium enterprises are strategically important for Bank Saint Petersburg and allow SMEs to finance their working capital, purchase equipment, vehicles, real estate and other property required to develop their business, as well as to start new lines of business.

To grant financing to small and medium-sized businesses on preferential terms, the Bank actively interacts with specialized organizations within the framework of state support programs. Within its Program for Stimulating Lending to Small and Medium-Sized Businesses (Program 6.5) Bank Saint Petersburg offers attractive loans to customers at a rate of up to 9.1% for small and medium-sized enterprises operating in priority sectors of the economy and a rate of up to 10.1% for enterprises operating in other sectors of the economy.

Under the Program 6.5 Bank Saint Petersburg opened a credit line to the company KRONOS SPb, one of the leaders in the paint and varnish production of Russia, in the amount of RUB 180 mln. In total, under the Program 6.5 the Bank entered into loan agreements amounting to RUB 1.1 bn in 2019.

In October 2019, the Bank entered into an agreement with Credit Guarantees Agency NDKO (Non-Banking Deposit and Credit Institution) OJSC. Now the Bank’s customers whose collateral pledged is insufficient to obtain a loan have the opportunity to apply for a loan against the Agency’s guarantee. Cooperation with the Agency also enables entrepreneurs to obtain funding for larger projects. The Credit Guarantees Agency provides bank guarantees on loans and other debt obligations of small and medium-sized businesses. The sole founder and shareholder of the Agency is the Russian Federation, represented by the Federal Agency for State Property Management.

>95%deposits of a standard line are made through Internet Bank

754 EXIM transactions in 2019


Strategic Report


Business Divisions



RETAIL BANKING

As one of the key players in St. Petersburg’s retail banking services, Bank Saint Petersburg aims to become the first bank of choice for the city’s residents. The Bank currently has 2 232 000 retail customers, forming a solid base for the future successful growth of its retail business.

Throughout 2019, the retail loan portfolio increased by 14.7% to RUB 103.0 bn, mortgage loans grew by 11.7%, consumer loans grew by 28.7%, and car loans grew by 50.0%. The share of loans to individuals reached 25.6% of the total loan portfolio.

In 2019, the total amount of retail deposits decreased by 0.1%, totaling RUB 249.0 bn. The share of retail deposits amounted to 59.6% of total customer deposits.

RETAIL DEPOSIT SERVICES

An extensive sales network, an opportunity to make deposits online, a high quality of services, reliability, a wide range of deposit options and competitive interest rates provide the Bank with a continuously increasing number of loyal customers and a steadily broadening deposit base.

According to the Interfax agency, the Bank ranks 14th among Russian banks by total retail deposits as of January 1, 2020.

In order to increase its customer base and attract additional deposit inflow, the Bank offered its customers a choice of several seasonal deposits with historically high interest rates in 2019. Customers receiving their pensions through the Bank enjoyed increased deposit rates on several deposits.

The Bank’s customers also have an opportunity to make deposits online. Online deposits accounted for 73% of retail deposits placed in 2019.

BANK CARDS

One of the priority areas for the Bank’s retail business is the issuance of bank cards and the provision of related services. As of January 1, 2020, a total number of all types of plastic bank cards issued reached 1 513 000. The Bank has also seen an annual increase in the number of its payroll customers: over 8 000 payroll programs with over 800 000 active payroll cards as of January 1, 2020.

To ensure compliance with the Federal Law on the National Payment System, the Bank issued more than 140 000 MIR cards in 2019.

In May 2019, the Bank started issuing the Resident ID Card and by the end of the year received 100 applications for issuance. Resident ID Card is a unique offer in St. Petersburg banking services market. It combines functions of the MIR National Payment System banking card, public transport pass, Medical Insurance Policy card and a discount card. The card is issued and serviced free of charge. Moreover, cardholders participate in National Payment System and YARKO loyalty programs.

TRADE FINANCE OPERATIONS

Bank Saint Petersburg offers its customers a wide range of high-quality services related to documentary operations and international trade finance. The Bank continues to maintain and strengthen its positions in this market segment by supporting and expanding the list of its foreign counterparty banks.

The Bank’s trade finance and documentary operations in the reporting year were characterized by the growing number of foreign trade transactions: 754 in 2019 when compared to 565 transactions arranged in 2018, and a significant increase in import letters of credit

transaction volume from USD 20 to 42 mln. At the same time, the portfolio structure saw a shift towards a greater share of the documentary collections (546 transactions for a total amount of USD 98 mln were realized on documentary collection, versus 283 transactions in the amount of USD 44 mln in 2018).

Among the active participants in trade finance and documentary operations, the Bank’s largest customers representing various industries are the following: KAMAZ, Glavkosmos JSC, Kirovsky Zavod Group Companies, Karelia Pulp LLC, Grossman Rus LLC, Agrolayn Group, Mednogorsk Copper-Sulfur Plant LLC, Himpartners LLC, Ostashkov Export LLC.

103.0 RUB BNretail loan portfolio+14.7%

Dynamics of Retail Customer Deposits, RUB bn

01.01.2019 01.01.2020

Current accounts

Term deposits

174.8

249.0

74.2

183.4

249.1

65.7

1.5MLN plastic cards

>140kMIR cards


Strategic Report


Business Divisions



LOYALTY PROGRAMS

In 2019, the Bank offered its customers to join three loyalty programs:

— YARKO – emotional and engaging; — Cashback – for rational customers; — Travel – for travelers.

In 2019, the YARKO bonus loyalty program celebrated its 5th anniversary and surprised its customers with great gifts from the Program’s partners.

The YARKO program is actively developing its partner base. More than 280 partners have joined the program in 2019. The Bank targets at partners providing cardholders with interesting experiences and positive emotions. Among the new partners are the Imperial Porcelain Factory, Yandex.Taxi, children goods store Detki, Theatre of Musical comedy. Nowadays, the catalogue offers bonuses from large Russian shopping malls, world cosmetics and clothing brands, large electronic retail chains and etc.

In 2019, partners from Novosibirsk joined the Program: leading grocery stores and popular restaurant chains.

Strong confidence of YARKO customers is unchanged with their number reaching 714 000 as of January 1, 2020. At the same time, the number of active users of the program has increased by 13.5% compared to the previous year.

The new mile loyalty programs Mastercard World Travel and Mastercard World Travel Premium enable its cardholders to travel, get new emotions and experience out of the earned miles.

They reward customers for purchases by Mastercard World Travel and Mastercard World Travel Premium and offer additional increased miles when making purchases at the Travel portal as well as an accrual of interest on the account balance in miles. Miles can be spent on any airline tickets, travel agencies, railroad tickets, cruises, hotels and car rent outside the Russian Federation.

MORTGAGE LENDING

The Bank is represented by seven Mortgage Lending Centers (5 in St. Petersburg, 1 in Moscow and 1 in Kaliningrad), where customers can get detailed advice on all mortgage lending programs available and obtain an estimated calculation of the amount and maturity, as well as apply for a mortgage loan. A dedicated loan officer supports each customer throughout the entire process. As an additional convenience for the customers and a way to ensure confidentiality, each center has a separate meeting room; the Bank’s outlets also have depository areas for transactions using safe deposit boxes.

The Bank ranks 3rd among all local banks and 1st among private banks in St. Petersburg’s mortgage lending market. Throughout 2019, the Bank provided a total of RUB 25.1 bn in the form of 10 146 loans, compared to RUB 25.3 bn and 11 310 loans in the previous year. 70% of the total mortgage loan portfolio consisted of mortgage loans for newly constructed buildings.

During the reporting period, the Bank of Russia was gradually lowering its key rate, enabling the Bank to reduce its mortgage interest rates both as limited special offers for certain partners and permanently.

The Bank launched a top-up service for the Schoolchild ID Card from September 2019. At the beginning of the school year, students of schools, lyceums and gymnasiums received Schoolchild ID Cards enabling them to enter their educational institution and pay at canteens. Details of such operations are transferred to the unified information system and may be accessed by parents through their Profile at St. Petersburg Education portal. Schoolchild ID Cards may be topped-up at the Bank, via Internet Bank, mobile application as well as through payment kiosks. No fee is charged. The card is credited instantaneously.

Starting from October 2019, all holders of TRAVEL banking cards and MIR payment system cards including Resident ID Card may set a credit limit for their card. Meaning that, if needed, the Bank’s customers will be able to go over their monthly budget without having to postpone important plans and purchases.

In autumn 2019, the Bank launched a new card product ICount tailored for Moscow and Novosibirsk customers. Free issuance and service, unlimited withdrawals from ATMs of any credit institution, and premium status are just a few benefits of this payroll card. In addition, ICount card includes unique YARKO rewards accrual system providing up to 5% payback of the amounts spent depending on account turnover.

In 2019 the Bank implemented access to Mir Pay contactless payment service. More than 350 000 holders of Mir cards issued by the Bank can now use Mir National Payment System service for contactless smartphone payment. Android OS smartphones guarantee support for Mir Pay. Mir Pay service is valid in any terminal where Mir contactless card payment is enabled.

In 2019, the total number of pension cards exceeded 60 000.

PAYMENTS AND TRANSFERS

In 2019, the Bank significantly expanded the possibilities for convenient and fast transfer to legal entities and individuals. At the beginning of the year, fast payment in digital channels became available to more than 3 thousand organizations in the housing and utilities sector and telecommunications services.

The audience of customers active in digital channels increased by 17% and amounted to 466 000 users in December, while the number of transfers made increased by 5% and in December for the first time exceeded 1.15 mln transactions per month.

In 2019, the number of tax payments made through the Bank’s digital channels amounted to 37 000 payments and increased by 82% compared to 2018.

The number of users of the mobile application grew throughout 2019 at a fast pace and amounted to 371 000 people in December, which is 35% more than the figure as of the year beginning. An increase in the number of transfers made by these customers amounted to more than 44%, reaching 821 000 operations per month.

In 2019 the Bank launched new convenient services Subscription for Bills and Automatic Payment allowing to receive utility bills and pay them automatically. By now services are available for largest service providers — Gazprom Mezhregiongaz, Rostelekom and GUP VCKP “Zhilishchnoe khozyaistvo”. Access to the services will be soon provided to other utility service providers.

714k loyalty programs participants

+13.5%

1st PLACE among private banks in St. Petersburg in mortgage lending

821k operations per month via mobile app


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CAR LOANS

The Bank is represented by three Car Lending Centers in St. Petersburg and one Car Lending Center in Kaliningrad where customers can get detailed advice on all car lending programs, apply for and receive a loan.

In 2019 the Bank efficiently managed competitive product lines and interest rates, continued to maintain a high-quality car loan portfolio, built long-term and reliable partnerships with major auto sales centers in St. Petersburg. The main advantages of the Bank’s car loan product line include large loan amounts, the possibility to add insurance premiums and additional services to the loan amount and a down payment starting from 0% (even if additional products are added to the loan amount). Constant efforts to speed up loan application consideration and drafting of loan transactions, to develop remote sales channels, to keep up with main market trends have also enabled the Bank to gain strong footing in the car loan business.

Among major events of 2019 is the transition to electronic passports for vehicles: the majority of car producers accounting for 70% of the Bank’s sales have joined the project, which required to significantly revamp the existing process.

Moreover, in 2019 the Bank continued its participation in highly popular First Car and Family Car state programs for concessional car loans providing a 10% price discount. Maximum loan amount under these programs amounted to RUB 1 mln., initial payment – at least 10% from car price, maturity – from 1 to 7 years, interest rates within standard programs for acquisition of a new vehicle: from 10.90% under Easy Purchase program and from 8.88% under Easy Business Class Car Purchase program.

The total value of loans provided in 2019 has become record high in Bank Saint Petersburg exceeding results of the previous year by 33%.

In 2019, the Bank ranked 5th out of 20 as the Best St. Petersburg Bank for Car Lending.

The Bank is continuing its productive cooperation with construction companies and real estate agencies. By the end of 2019, more than 600 developers and over 1 000 construction projects received the Bank’s accreditation. Customers can receive mortgage-related advice and apply for a mortgage loan at the Bank’s representative desks located in the offices of its partner companies.

Since May 2019 the Bank provides mortgage lending under the national subsidy program introduced by Decree of the Government of the Russian Federation No.1711 dated January 30, 2017. Families where a second or subsequent child citizen of the Russian Federation has been born since January 1, 2018, are entitled to a mortgage for the acquisition of housing from a legal entity on a new build mortgage lending market at a rate of 6% p.a.

In 2019 Bank Saint Petersburg extended volume of operations through a new solution for real estate transactions: the escrow account, a special-purpose account opened in the name of the depositor (the buyer of the property) where escrow funds can be deposited, blocked or transferred to the beneficiary (recipient of the transaction funds) after certain conditions agreed by the parties are met. An escrow account is opened after a trilateral agreement is signed to formalize the terms and conditions for depositing funds and the procedure for debiting them. Escrow accounts are opened free of charge.

By the end of December 2019, the Bank had opened 10 000 escrow accounts within real estate transactions under sale and purchase contracts and concession agreements between individuals. Bank Saint Petersburg was one of the first banks in the country to introduce an escrow account system for both mortgage lending and real estate transactions without the Bank’s mortgage. This form of settlement implies placement of the buyer’s cash funds on a special-purpose escrow account opened under a trilateral agreement, and transfer of the transaction amount is made available only after all terms and conditions of the agreement are met.

At the RETAIL FINANCE AWARDS 2019, the Bank’s escrow accounts were distinguished as the Best Retail Finance Product. The escrow account is a brand new product created within the mortgage lending development initiative as a substitute for letters of credit and launched by the Bank in autumn 2019. At the moment this service is one of its kind.

Bank Saint Petersburg was recognized as Russia’s best mortgage bank for the fourth time by Global Banking and Finance Review Awards. The competition’s expert board acknowledged the Bank as Best Mortgage Bank Russia 2019. In addition, Bank Saint Petersburg was distinguished as the Best Bank for Escrow Accounts Russia.

3rd PLACEin the ranking of the Best banks of St. Petersburg in terms of consumer lending

High quality Mortgage Portfolio

1.8%

01.01.201701.01.2016 01.01.2018

Overdue loans*

1.4%0.9%

01.01.2019

1.7%1.0%

01.01.2020

1.3%1.8%

1.1%

2.6%

1.7%

Provisions

* Overdue loans include the entire principle of the loan at least 90 days overdue.

RETAIL FINANCE AWARDS 2019The Best Retail Finance Product

THE BEST MORTGAGE BANK in Russia

THE BEST BANK FOR ESCROW ACCOUNTS RUSSIA


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PRIVATE BANKING

Private Banking, a targeted service for affluent individuals, has existed and has been successfully developed in the Bank since 2007.

The main advantages of the Private Banking program are access to the maximum set of product offers with the best price conditions, comprehensive expertise of customer requests and needs, development of individual solutions, full confidentiality of personal and financial data and customer transactions and family service.

By the end of 2019, the volume of funds managed by Private Banking amounted to RUB 42.5 bn in St. Petersburg and RUB 11.8 bn in Moscow.

The customer portfolio of the program in investment instruments has grown more than 3 times.

In 2019, a new model and uniform customer service standards were introduced at the flagship Private Banking offices in St. Petersburg and Moscow.

Highlights of 2019:

— Formation of individual investment offers for customers of the program on the basis of the product line of BSPb Capital management company.

— Examination of customer portfolios, including those managed by other market participants.

— Structuring non-standard asset transactions. — Management of assets with foreign banks.

Our own concierge service is successfully fulfilling customer requests of various levels of complexity: from day-to-day requests to individual traveling, from the creation of wine collections to real estate purchase and art-banking.

The purpose of Private Banking is to be the center of financial expertise for the customer, offer the best products and the best services based on the customer-centric model, build relationships with the customer on the basis of mutually beneficial cooperation.

Private Banking team is constantly researching new market practices to solve any extraordinary requests of our customers.

CONSUMER LOANS

Bank Saint Petersburg takes a conservative approach to risk and offers consumer loans only to the existing customer base. The target segment for the unsecured lending program is still represented by the customers, holding the Bank’s payroll cards, whose financial position is well known to the Bank. 84% of the unsecured loan portfolio is attributed to payroll cardholders. The Bank also offers loans to customers who have a good profile with the Bank or are employed by reliable partner entities.

This approach has proved to be the most efficient one. First of all, targeted work with customers and forecasting their individual needs warrant a more sizeable response. The second advantage is that the Bank can take a cautious approach to new borrowers and accept only measured risks of the external unsecured lending market, having customers whose financial position it can assess most efficiently.

Bank Saint Petersburg continues to maintain and improve the technology of issuing consumer loans, which significantly saves the customers time, as it implies the full remote receipt of loans. Internet Bank users can not only sign an agreement and receive money into an account through a personal account on a proposal approved by the Bank, but also make an application on their own, and track the course of its consideration.

The Bank is in the TOP 3 of St. Petersburg market leaders in terms of consumer lending, and in the TOP 10 in terms of credit cards.

2019 was a record year in terms of refinancing loans at Bank Saint Petersburg. The loans refinanced by the Bank allow customers to optimize the debt burden by reducing the amount of monthly payments and reducing the overpayment on loans of other banks.

Improvement efforts in 2019 were focused on scaling unsecured lending which allowed to increase the loan portfolio in low-risk customer segments. The Bank will continue to enlarge the customer base and maximize its potential by improving the quality of customer service.

42.5 RUB BNfunds under management in St. Petersburg

11.8 RUB BNfunds under management in Moscow

3rd PLACEin the ranking of the Best banks of St. Petersburg in terms of consumer lending


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In 2019, the Bank updated its mobile banking application for individuals on iOS and Android platforms. The updated version of the application has the most relevant features that will make customers’ lives easier and more comfortable. Now the mobile bank enables users to applyfor a credit limit to the MIR debit card, for example, to a payroll card or to the Resident ID Card, as well as to Travelcards. Another innovation that was implemented in the mobile application is the ability to issue an insurance policy for travelers. Holders of YARKO and Travel cards, whose package of services includes an insurance program for travelers, no longer need to draw up a policy through a contact center or office. Now this option is available directly on a mobile phone: one just needs to click on the “Travel Insurance” button, confirm the spelling of the name and email address, and after a few seconds the policy will be delivered. If the policy is lost, it can be easily re-issued the same way through electronic channels.

The most important innovation of 2019 was the launch of the unique Exchange Bridge service, which allows individual customers to buy and sell 14 currencies online at a fixed rate. Nowadays the new service has no analogues among existing offers for individual customers. Within the Exchange Bridge service, the client gets the opportunity to buy and sell currency with a deferred settlement date upon paying 10–12% of the future transaction amount. At the same time, the Bank will accrue and pay monthly interest on the amount of the security deposit, and the planning horizon for a convenient settlement date in the future will be 365 days.

The Exchange Bridge won Time of Innovations 2019 award in the Product of the Year nomination in the Finance and Consulting category.

Other innovations for individual customers introduced in 2019:

— Application of a loan limit to an existing card; — Simplification of the process of ordering a credit card on the Bank’s website;

— Payment in the BSPB Mobile for utility bills by QR code;

— Subscribing to automatic payment of utility bills;

— Updating and significantly simplifying the deposit selection section on the Bank’s website;

— Extending the functionality of push notifications. In 2019, as a result of the implementation of the project on the transition to electronic vehicle passports with most of the vehicle manufacturing organizations in Russia joining in, significant changes in the car loan process can be highlighted. When making a loan transaction, verification of the status of the vehicle passport presented for the transaction is applied through the online service on the electronic portal of the electronic passport system.

In 2019, in partnership with the SRG group of companies, the Bank launched a real estate valuation service. This service will be useful in the process of obtaining a mortgage. Appraisal of primary and secondary housing, as well as real estate, is available upon refinancing or execution of loan secured by real estate. The user enters information about the property, attaches the necessary documents, selects an appraiser and pays for his services using the convenient method (including online). An electronic report that meets the requirements of the Bank will be ready in no more than a day.

At the end of 2019, 99% of corporate customers use the Internet Bank i2B, 99% of payments and FX transactions are made online. In October 2019, the Bank expanded the list of digital channels for interacting with corporate clients and invited businesses to take advantage of the innovative BSPB Business mobile application.

DIGITAL BANKING

DIGITAL CUSTOMER SERVICES

The e-banking system for retail customers, Internet Bank, accessible at i.bspb.ru, is the principal online channel for the customers of Bank Saint Petersburg, offering increasingly better services and solutions at more favorable prices. The number of individuals who have signed up for i.bspb.ru showed a growth of 15% in 2019: from 1 130 000 to 1 300 000.

One-third of the city’s economically active population has access to i.bspb.ru, and every third customer of the Bank uses the mobile banking application: The number of active users exceeded 370 000 per month. The share of users of the mobile banking application grew by 35% and reached 80% of the total number of Internet Bank users.

1 130 000

960 000

7700 000

600 000

44 50048 000

47 00042 000

51%

728

1 000 000

1 049 000

1 300 000

1 354 000

781804

797

30%

22%

43%

97%

97%

96%

96%

62%

69%

71%

2019

2018

2017

2016

2015

Internet Bank users,individuals

1 300 000people

Internet Bank i2Busers, corporates

49 500companies

Shareof onlinedeposits

77%

Issuanceof consumerloans online

60%

Share of digitalpayments

99%

ATMs

813

Cards

1 513 000

99% share of electronic payments


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Since September 2019, the acceptance of payments in the network of payment kiosks of the Bank to school food factories within the framework of the project Schoolchild ID Card has begun.

In September 2019, the Bank together with St. Petersburg Metro SUE implemented a solution for the Metro fare payment at a reduced rate using MIR payment system cards as part of the promotion campaign of the National System of Payment Cards JSC.

At the end of 2019, more than 200 ticket vending machines of St. Petersburg Metro SUE were equipped with the Bank’s terminals accepting bank cards.

In 2019, the Bank introduced new card products for legal entities:

— MIR Business FTD for the Federal Treasury Department;

— Self-collection cards with an individual rate.

IT SUPPORT FOR BUSINESS OPERATIONS

In 2019, in order to increase the efficiency of technological support for the business, measures were taken to deeply modernize transmission networks and data storage. As a result of the changes, the speed of information transfer to the data center was increased by 10 times and the outdated SAN equipment was replaced with an increase in productivity and the number of ports. In addition, a technical basis has been prepared for the 2020 project to modernize data storage systems.

Other measures taken by the Bank to increase the efficiency of technological support of business in 2019:

— A new test circuit for testing the loan conveyor has been developed. Development of unsecured lending in the new process is completed, 90% of testing has been completed;

— The work on modernizing the reception and recounting of cash at ATMs was completed, the process of accepting and recounting cash from additional offices of the Bank was modernized;

— A solution for ensuring information security for the Unified Biometric System was implemented;

— 3 updates of the “CFT-Bank” ABS version were carried out with no technical failures that could affect the Bank’s work;

— 50% of work was done to upgrade servers running Windows 2008R2;

— Measures were taken to upgrade the operating system to Windows10.

Since July 2019, the Bank’s Contact Center introduced a system of automated distribution of outgoing calls to retail customers, taking into account the priority of the largest conversion of offers on sale. Together with CRM development partners from CSBI, a solution was created on the basis of WFCore that allows to receive all calls for processing received from the site, Internet banking, mobile application, ATMs, as well as from the offer center, which can be performed by each operator automatically with a given priority. At the same time, the system monitors the fulfilment of tasks by the employee and provides the opportunity to receive a new call only after processing all those previously assigned. The first results, despite little experience using the new solution, are already noticeable: the reaction time to a client’s application on the site has reduced by 48%, the human factor has been excluded from the prioritization and sequence of calls.

BSPB Business is a logical stage in the transformation of the Bank into a digital bank for corporate and private clients. Now the Bank’s corporate clients can receive the necessary range of remote services for business, make payments and other banking operations quickly and securely, whenever and however convenient – through a computer, laptop, tablet or smartphone. The mobile bank was developed in cooperation with the leader of mobile application developers in Russia – Touch Instinct. The concept of BSPB Business is a Bank for daily use, and thus a simple and intuitive one with attractive and modern interface. Right from the start, the application provided such functions as quick entry, information on account balances, an informative history of operations with a wide range of filters, the possibility of repetition of payments, as well as creation of extract via a convenient form, sending it to e-mail, Traffic Light counterparty due diligence service, and other business-related options. Also, with the help of a mobile phone, no matter where in the world the Bank’s customer is located, he or she will be able to control the cash flows, changes in account balances, the dynamics of credit and withdrawal of funds by counterparties, with the amounts of credit and withdrawal for a certain period.

The BSPB Business became the Innovation of the Year in the Financial Services category of the Innovation Time 2019 award and received the Financial Elite of Russia 2019 award in the nomination Mobile Application for Business.

In addition, in June 2019, the Bank launched a telegram channel for EXIM customers. The channel features cases, opinions and estimates from true specialists in different EXIM fields, as well as the latest news of the world of export and import operations.

In 2019, the Bank in partnership with CSBI received awards in the “Best IT Solution” category in the “Digital Universe” nomination of the Retail Finance Awards 2019 for joint projects:

— Digital Contact Center: Algorithm Setting; — Resident ID Card: remote registration.

Projects are implemented on the WF Core digital platform, CSBI’s own solution for automation of business cases.

PAYMENT SYSTEMS

In May 2019, the Bank started issuing multifunctional Resident ID Card for St. Petersburg citizens as part of the implementation of the city project.

During 2019, the efficient advancement of contactless payment continued:

— Acceptance of bank cards and tokens (digital card identifier in mobile devices) in a contactless mode for Mastercard and VISA payment cards has been launched at the ATMs of the Bank;

— A project was implemented to tokenize MIR payment system cards and provide services for performing transactions for the payment of goods, work and services using Mir Pay and Samsung Pay mobile devices;

— Throughout the acquiring network of the Bank’s terminals, the possibility of accepting UPI payment system cards in contactless mode has been implemented.

The TranzAxis Invoice platform has been launched into commercial operation, which allows to subscribe to receive invoices issued by service providers or its counterparties, as well as make autopayments on invoices.


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INFORMATION SECURITY

The Bank pays great attention to the security of remote customer service systems. Protecting customer data and operations is one of the Bank’s top priorities. In 2019, the Bank continued to implement the Bank’s Information Security Strategy for 2018-2020.

In 2019, counteraction to fraud in payment channels, including the automation of monitoring processes of unauthorized operations, was being established. BI.ZONE will provide services to the Bank in order to prevent, promptly respond and effectively investigate incidents related to financial fraud. In addition, the Bank and BI.ZONE exchange data on new cyber threats, on how to identify and prevent incidents. The monitoring process of fraudulent transactions in all digital service channels is automated by the BI.ZONE Cloud Fraud Prevention solution, which, via artificial intelligence and machine learning technologies, verifies all payments made in real time, as well as prevents unauthorized transactions. The decision allows to fully comply with the requirements of FZ-167 “On Amendments to Certain Legislative Acts of the Russian Federation with regard to Counteracting Theft of Tunds”.

In November, the Information Security Incident Monitoring and Response team on duty started providing 24-hour support. Now the Bank is reliably protected both day and night, and on weekends and holidays. The creation of a 24-hour team takes the Bank’s information security to a new qualitative level — now the Bank’s information security specialists are ready to repel a cyber attack 24 hours, 7 days a week.

In the framework of protection against targeted attacks, the Endpoint Detection and response (EDR) system of one of the leading Russian companies in the field of information security was introduced at all workstations.

In order to maintain the protection system in a high degree of readiness to repel external and internal attacks, the Bank regularly conducts various pen-tests (penetration tests), including the most modern ones in the RedTeam format.

The Bank accredited its Certifying Center at the Ministry of Digital Development, Telecommunications and Mass Media of the Russian Federation and expanded the list of services in terms of providing customers with legal electronic signatures.

The Bank continues to expand and develop cooperation with leading Russian and international companies in the field of information security which ensures a high level of protection of the Bank’s infrastructure, banking information and services.

The high level of compliance of the Bank’s information security system with the latest requirements has been confirmed by successful audits in accordance with such standards as GOST R 57580.1-2017 “Security of financial (banking) operations. Protection of information of financial organizations. Basic set of organizational and technical measures”; Payment Card Industry Data Security Standard (PCI DSS) and a number of others.

In 2019, the Bank helped to launch a new platform functionality for REPO transactions of the National Settlement Depository. The first constituent entity of the Russian Federation, the Finance Committee of St. Petersburg, has been connected to the collateral management system of the National Settlement Depository (CMS NSD). The Bank became one of the most active participants in the process of preparing and launching a new instrument for the city. A platform for the placement of free liquidity in repo transactions (placement of securities with repurchase) has been in place since 2013. Since then over RUB 230 tn were placed with the help of the system.

In 2019, the Bank completed a pilot project for the robotization of operational activities. Due to the software robot on the Kofax RPA platform, it was possible to achieve a threefold reduction in the effort to generate transaction reports. Kofax RPA is a system that provides the launch of robots to perform routine tasks of collecting, converting and migrating data. As part of the project, a software robot has been launched during the reconciliation of reports on completed transactions using bank cards of Visa and Mastercard international payment systems with the CFT accounting system data. Every day the robot analyzes over 70 summary reports for the Bank’s operation department. If the information does not match, the system generates corrective entries in the CFT ABS. It takes the robot no more than an hour to collect, process and aggregate data, while a company employee previously spent from 3 to 6 hours of working time to solve this problem. The implementation of the system was entrusted to the Corus Consulting team. Earlier, the Bank, together with Corus Consulting, automated lending processes on the Microsoft Dynamics CRM platform, formed a unified electronic credit dossier based on Microsoft SharePoint and implemented a communication platform based on 1C-Bitrix24: Enterprise.

In 2019, the Bank took another step towards the banking processes robotization via RPA (RoboticProcessAutomation). RPA is a software that imitates human interaction with information systems in order to carry out business processes. Now the Bank has a new digital employee — MARS (Multifunctional Autonomous Robot Staff) that helps automate routine work and free up time for more complex tasks. MARS helps complete the processes of the Operations Directorate, Settlement Support Directorate, Cash Management Directorate, and Product Department.


Strategic Report


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Bank of High Culture

Vasilisa Nasaulenko, 7 years old

Thanks to efficient and proactive risk management, which strives to transform every risk into an opportunity, Bank Saint Petersburg is always profitable and resistant to external shocks.


Risk management 52Digitalization of credit risk assessment in retail lending 57

Cost of risk dynamic analysis 58


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RISK MANAGEMENT

The strategic objective of risk management is to ensure the Bank’s financial stability. The existing risk management framework comprises a set of measures and solutions designed to identify, monitor and assess all material risk types, to determine their acceptable level, and to mitigate/limit each type of risk.

Pursuant to current legislation and the Bank’s Charter, the Supervisory Board approves the Risk and Capital Management Policy, which covers the coordination of actions taken to enhance the risk management framework, to improve methodology consistently, as well as to standardize and automate risk management processes.

The Supervisory Board has a dedicated Risk Management Committee that assists the Supervisory Board in overseeing the Bank’s risk management system, and the efficient identification, quantification, and control of risk.

For each type of banking risk, a management system has been established that ensures an adequate risk assessment and includes measures to mitigate and limit it. The Bank measures its assumed risks against its equity, supporting the capital adequacy ratio required by the Bank of Russia, which allows the Bank to meet its obligations (including contractor covenants), and to maintain its efficient utilization of capital.

Risk Description Key Mitigating Actions

Credit Risk The risk of losses if a borrower or counterparty fails to meet its contractual obligations.

The year 2019 saw rising concerns about risks from a long-term trend, when loans to individuals were growing faster than income. Since October 2019, the Bank of Russia has toughened requirements to the bank capital attributed to unsecured loans and is planning to extend them to other types of loans to individuals in 2020. Against this backdrop the Bank has introduced a policy of gradual tightening of requirements to individual borrowers since July 2019, which reduced the number of approved loan applications, but is expected to ensure good quality of retail portfolio amongst growing risks.

In the corporate segment, housing sales with placement of investors’ funds on escrow accounts until commissioning have started since July 2019. This scheme protects the rights of investors, but significantly changes construction funding schemes applied by development companies. Amendments to regulation will result in a civilized market in the long run, but will create additional risks in construction industry on a mid-term horizon. In this environment the Bank has launched and is developing project funding for developing companies that raise investor funds to escrow accounts with the Bank, while generally adhering to a strategy of assuming limited credit risk for the construction sector.

In SME lending, the Bank develops internal statistic risk assessment models based on analysis of characteristics of borrowers’ cash flow on settlement accounts as opposed to official financial reports. Products, based on such models and offered to the Bank’s customers in 2019, showed positive results both in terms of demand among customers and in terms of quality of loans issued.. >>


Below are the most notable changes in the credit risk management system throughout 2019:

— Development of internal statistic risk assessment models for individual and corporate borrowers based on the analysis of transactions on settlement accounts;

— Increase of the share of automated decisions based on internal statistic models and data from external systems that assess customer reliability.

Liquidity Risk The risk of losses if the maturities of assets and liabilities do not match.

The approach to managing liquidity is based on ensuring a level of liquidity provisions that will allow the Bank to sustain a certain period of sudden outflow of customer deposits and a reduction in the Bank’s ability to attract resources from the financial market caused by macroeconomic events or any occurrences directly related to the Bank.

The Bank has established a multi-level liquidity management system that provides a comprehensive approach to monitoring, forecasting and decision-making in this sphere, as well as uses a scenario approach to determine current and projected liquidity.

Throughout 2018, the Bank’s total cash and liquidity reserves were adequate enough not only to support its day-to-day operations and cover unplanned liability outflow, but also to support growth in active banking operations, where necessary.

Interest Rate Risk The risk of losses due to adverse fluctuations of market interest rates.

Analysis of the Bank’s exposure to interest rate risk is based on the forecast of unfavorable changes in the current value of the Bank’s assets and liabilities. The key criterion for measuring this risk is the sensitivity of capital to the general interest rate level. Another criterion is the sensitivity of annual net interest income to changes in the general level of interest rates.

Given the available forecast, if interest rate movements appear unfavorable to the Bank’s interest rate risk exposure, the decision is made to regulate the level of risk by undertaking any of the following actions::

— Modification of transfer prices, basic interest rates and banking product rates aimed at changing the structure of the incoming customer operations flow to manage the asset/liability ratio;

— Operations on the financial market to change the Bank’s interest rate risk position, including the adjustment of the debt securities portfolio duration, medium- and long-term fixed-rate interbank borrowing and lending, interest rate swaps, etc.

In 2019, RUB interest rates were decreasing. Such dynamics resulted from lowering interest rate of the Bank of Russia and market expectations about further easing of monetary policy. Reduced hedging quotations in 2019 negatively impacted the financial results of the Bank under existing contracts. The Bank expects IRS quotations to grow and is not intended to strengthen its positions or close hedging positions on current market quotations.


Strategic Report


Business Divisions




The Bank’s USD interest rate risk management efforts are determined by the relevant exposure to Russia and the basis interest rate level in the global markets. USD interest rates in the global market and with regard to Russia-related risk margin were going down throughout 2019. Decrease of the risk component allows for favorable projections with regard to the Bank’s financial results. The share of USD-denominated loans with floating interest rates in the loan portfolio structure is negligible, which will not lead to a significant deterioration of financial results in the view of reducing interest rates in global markets. EUR interest rates in global markets remained flat throughout 2019.

Stock Market Risk The risk of losses due to adverse changes in the market quotations of trading securities and derivatives.

To manage the stock market risk, the Bank uses:

— Open and total position limits for investments in the securities of various issuers, and on groups of securities;

— Limits on sensitivity to stock market risk factors;

— Limits on maximum daily transaction valuations;

— Option position limits;

— Stop-Loss limits for groups of securities;

— VaR limits;

— Daily monitoring of the stock market risk and compliance with the fixed limits.

In building its securities portfolio, the Bank continues to maintain a conservative approach. The volume of limits on equity securities remains small relative to the total limits on securities. REPO transactions represent a significant proportion of securities transactions. As of January 1, 2020, the share of bonds amounts to 97% of the Bank’s securities portfolio (total volume of trading and investment securities). In forming its bond portfolio, the Bank gives preference to first-class credit quality securities. The share of bonds included in the Lombard List of the Bank of Russia amounts to 83%.

Currency Risk The risk of losses due to adverse exchange rate fluctuations.

Currently, management of the currency risk is carried out on a daily basis. The Bank monitors compliance with open currency position limits, as regulated by the Bank of Russia, and calculates the value of currency risk in accordance with procedures established by the Bank of Russia.

To manage the currency risk, the Bank uses:

— Limits on sensitivity to risk factors of currency and money market;

— Open foreign exchange position limits;

— Forward foreign exchange position limits;


— VaR limits;

— Stop-Loss limit.

The principal volume of limits is set on hard currencies. Limits on other currencies are negligible.


Commodity Risk The risk of losses due to adverse fluctuations of the commodity market instruments prices.

The following measures are applied to limit this risk:

— Limits on sensitivity to risk commodities market;

— Open and aggregate position limits on investments in certain types of underlying assets and on investments in underlying assets with certain specifications;


— Stop-Loss limits on commodity market instruments;

— VaR limits;

— Daily commodity risk and limit compliance monitoring.

The majority of the limits were established for oil-related instruments.

Operational Risk The risk of losses due to inadequate or erroneous internal processes, actions of employees and systems or external events.

The Bank’s approach to operational risk management is aimed at reducing the risk to an acceptable level by carrying out measures to prevent situations that could be a source of the risk, as well as by insuring against operational risks that are beyond its control.

In order to minimize the operational risk, the Bank establishes limits of loss from operational risk incidents for its major activities.

A number of measures has been developed to ensure continuity of the bank’s operations and/or recovery of the Bank’s operations in case of critical and emergency situations. The Bank established backup sites, where backup workstations are set up and equipped to ensure continuity of the critical business processes.

Strategic Risk The risk of losses due to errors in strategic decision-making.

In order to mitigate the strategic risk, the Bank has adopted a system of strategic planning and analysis which comprises drafting and approval of the development strategy, ongoing implementation monitoring and, if applicable, adjustment/revision of the strategy.

The Bank’s strategy is drafted in accordance with its strategic development priorities in general and by particular business area, defining specific efforts required to successfully attain the strategic goals. In accordance with the Bank’s Charter, the strategy and business priorities must be approved by the Supervisory Board. To ensure greater efficiency and transparency of strategic decisions, the Supervisory Board has established the Strategy Committee.

Continuous monitoring of the strategy implementation progress includes various feedback tools designed to adjust and revise the strategic goals and priorities, as well as macroeconomic and competitive analysis. To successfully implement the strategy, the Bank has introduced a key performance indicator (KPI) management system designed to support the link between the strategic and operative levels of planning, as well as a strategic projects system channelling major qualitative changes.


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Business Divisions



WORKING WITH FOREIGN TAXPAYING CUSTOMERS

In full compliance with the current legislation, Bank Saint Petersburg makes all reasonable efforts available under present circumstances among its customers to identify legal entities and individuals that are subject to foreign laws on foreign account taxation (for foreign taxpayer accounts), including Chapter 4 of the US Internal Revenue Code of March 18, 2010 (Foreign Account Tax Compliance Act, or FATCA).

Bank Saint Petersburg is registered with the US Internal Revenue Service as a Participating Foreign Financial Institution under the Global Intermediary Identification Number (GIIN) TQQXV5.99999.SL.643.

The Bank has internal regulations in place, including criteria for classifying customers as foreign taxpayers, and methods for obtaining relevant information from them. The Bank conducts its customer identification procedures within the time limits stipulated by the FATCA.

The Bank systematically briefs its employees on various issues related to identifying foreign taxpayers among its customers.

ANTI MONEY LAUNDERING PROCEDURES

The Bank’s policies and procedures for counteracting money laundering are based on the applicable legislation of the Russian Federation. The Bank has developed the necessary internal regulations and procedures to prevent money laundering and financing of terrorism. These procedures are aimed at, among other things, minimizing the risk of the Bank, being used as a money laundering tool, protecting the Bank from financial and reputational risks and increasing the confidence that its banking services are available only to bona fide customers.

The Bank’s procedures for preventing money laundering and financing of terrorism include the Know Your Customer (KYC) procedures, detection of suspicious transactions and information storage. All the information obtained in the process of counteracting money laundering is confidential, except for the cases when it is supplied to the Federal Service for Financial Monitoring, in accordance with the applicable legislation. The Bank’s employees receive training on counteracting money laundering at least once a year.

The Bank’s Financial Monitoring Department monitors customer transactions and the activities of all units with regard to compliance with the applicable Russian legislation on counteracting money laundering and financing terrorism.

As part of its regular risk management, the Bank implemented and operates on the best IT technologies and the best risk management practices. In mortgage lending and car loans 82% – 89% of all credit decisions are made automatically as well as 96% of credit decisions in consumer loans.

The Bank strives for the best experience in the market, so that a credit decision for a client who has applied to the Bank is made in real time (more 90% requests less 60 seconds to make a decision). For this purpose, the Bank uses both a set of traditional customer data and big data analysis tools. The Bank collects a large amount of information from the client’s questionnaire, analyzes the client’s own transactions within the Bank, which is an additional element of behavioral scoring. In addition, the Bank takes into account customer information from government agencies, as well as their credit history.

A high-tech loan conveyor and smart scoring models have maximized the share of robotized decisions in taking on risk.

The Bank actively employs customer Internet activity data, which yet another element of transaction scoring, increasing model predictability. In order to cast away the questionnaire and make the loan approval as convenient as possible for the customer without worsening the accuracy of the estimated losses, the Bank uses both the customer-generated and its own data, as well as the most efficient external data sources.

DIGITALIZATION OF CREDIT RISK ASSESSMENT IN RETAIL LENDING

Mortgages

2016

Automated credit decisions

Credit manager decisions

82 %

2017 2018 2019

Consumer loans

2016



96%

2017 2018 2019

Car loans

2016 2017 2018 2019



89%


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Business Divisions



COST OF RISK DYNAMIC ANALYSIS

The Bank’s risk management system has undergone significant changes, addressing new challenges of the last 10 years.

The period from the early 2000s until 2008 was marked by absence of any considerable defaults in the market and the resulting lack of the required statistics for development of efficient risk management models, thus there was no regular risk management in Russia in those years. The Bank created major part of its provisions on the growth of the loan portfolio, which doubled every year until 2008. High net interest margin excessively covered any risks, for this reason the provisions did not put pressure on the Bank’s financial results.

The crisis of 2008-2009 demonstrated existing problems and the necessity of changes to be introduced into the risk management approach. Problem loans provisions started to contribute a major part of created provisions.

Starting from 2009, a significant work has been carried out for building a new risk management culture, including implementation of the corporate customers ratings model. Within a few years, the best practice was implemented in the daily risk management procedure of Bank Saint Petersburg and started to be used for evaluation of each loan project.

After implementation of leading risk management practices based on the accumulated expertise and loss record, since 2013 a “new” quality of the loan portfolio has been established with an integrated risk assessment system. «Old» problem loans granted before 2013 continued to contribute a major share to the total cost of risk for the last 5 years and kept providing a significant negative impact on the Bank’s financial results.

1% cost of risk on new loans

Risk Assessment Tools In-House vs Outsource

Traditional Data

In-house

In-house

Outsource

Outsource

Questionnaire

Public authorities

Credit history

Transactions

Outsource

Outsource

Internet activities

Geolocations

Big Data

Due to consistent establishment of the new risk management culture, starting from 2013 the Bank has obtained a “new” quality of the loan portfolio, which accounted for 88% of the loan portfolio as of January 1, 2020. To sum up, due to both repayment and writing off of problem loans granted before 2013, their share in the total loan portfolio is decreasing every year (accounted for 6% as of January 1, 2020), and the remaining problem loans were covered by provisions to a great extent.

For four years, starting with 2016, the cost of risk for pre-2013 loan vintages decreased from a peak of 2.7% to 1.0%, while the cost of risk for new loans remains stable at around 1.0%.

The Cost of risk dynamics allow the Bank to be well on the way to considerable reduction of the cost of risk and respective growth of ROAE.

Loan portfolio dinamics

53.8

354.3

91.3

370.3

119.2

343.7

2013 2014 2015 2016

38.1

357.7

2017 2018

146.3

95.0

35.2190.3

31.0

232.9

37.0

246.6

41.4

268.5

35.7

31.1

375.3

303.7

26.9

276.8

Standard pre-2013, RUB bn

Standard post-2013, RUB bn

Problem pre-2013, RUB bn

Problem post-2013, RUB bn

13.5

201922.5

401.4

342.1

25.011.9

15.312.49.13.2

0.4

Cost-of-Risk Dinamics

0.8%

3.4%

1.1%

3.4%

1.0%

2.3%

2013 2014 2015 2016

1.0%

2.7%

2017 2018

0.9%

0.8%1.4%

2.3%2.7%

1.7%

0.9%

1.9%

1.0%

1.7%

Post-2013 loans in CoR, %

Pre-2013 loans in CoR, %

2019

0.8%

1.8%

1.0%


Strategic Report


Business Divisions



The entire business is built on ethical princi-ples and a responsible approach to increasing wealth and maintaining the trust of employees, customers, shareholders, society as a whole.


Stepanova Arina, 8 years old


Customers 62

Colleagues 64

Community 67

Corporate governance 71


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Business Divisions



The technological leadership of the Bank guarantees a high-speed of digital services. All Internet Bank services — loans, deposits, and cards — are easily available to customers in a click. The service is based on the timely creation of personalized offers and pre-completed forms in the channel most convenient for the customer.

HIGH QUALITY SERVICE

Bank Saint Petersburg is striving to become the leading bank in the Northwest Region in terms of service quality and, in view of this strategic goal, continues to improve its procedures for managing service quality. In addition to quality customer services provided by the Bank’s outlets, considerable focus is placed on the technologies that make the Bank’s products and services more user-friendly and accessible to its customers. This convenient service structure spans across the entire range of digital banking channels.

Effective work with the feedback received from customers is the determining element of the Bank’s quality management system. Each customer enquiry has practical value: it carries information about the level of the service provided, ideas for its improvement and helps the Bank to track new requirements and wishes of its customers. The Bank values their suggestions and does its best to follow them.

The Bank continuously works to increase the level of customer loyalty: It implements measures to improve technologies and processes, and conducts a multifaceted analysis of the results. In order to obtain an objective assessment of the service quality, the Bank measures the index of consumer loyalty Net Promoter Score (NPS), which shows the ratio of satisfied customers to those who are not very satisfied with the service for some reasons, measures the consumer’s desire to recommend the Bank’s products or services to his/her acquaintances.

Quality of the Bank’s customer services is reflected in constant improvement of the Bank’s position in the Premier League of the general public’s rating at banki.ru (among the top 50 banks with the highest number of accepted votes). The public rating is based on the feedback left by customers, taking into account the quality of customer care and banking services, response time and the Bank’s ability to settle various issues.

In August 2019 the Bank won in the Banks category of the first rating of St. Petersburg brands organized by the Delovoy Peterburg newspaper. Companies’ value was not taken into account, since the list was drafted from the point of view of a citizen. The editors submitted requests to more than 50 organizations in St. Petersburg. Marketing professionals, sociologists, as well as other specialists provided their assistance in compiling the rating. Media activism of each brand, according to the data from the Medialogia company, was also taken into account. Delovoy Peterburg, which is the most widely recognized newspaper and portal on business and life of the city, sorted 200 St. Petersburg brands based on the point of view of its readers. The journalists short-listed 100 best and most successful trademarks to the Delovoy Peterburg Brand Rating.

In 2019, the Bank ranked 18th among the top Russian banks according to Forbes. Forbes partnered with market research firm Statista, which surveyed 40 000 customers in 23 countries. Customers assessed their overall satisfaction with the banks’ activity, as well as specific characteristics such as trust, fees, terms and conditions, digital services and financial advice. Between 5 and 60 banks were identified as top banks in each country, based on the total evaluations collected.

CUSTOMERS

Bank Saint Petersburg is the largest private bank in Northwest Russia. The financial services provided by the Bank support the local development of the region and its sustainable economic growth, as well as helping individual customers to reach their financial targets.

Services for customers still constitute the core of the Bank’s business. The Bank has 2 232 000 individual customers and 50 000 corporate customers. Its proximity to customers, high processing speed, and flexibility of decisions remain the traditional advantages of Bank Saint Petersburg in the Northwest Region. Combined with the introduction of new quality standards for all operations, settlements and services, these factors determine the Bank’s contribution to the social and economic growth of the Russian Northwest.

PROXIMITY TO CUSTOMERS

The Bank continues to develop its branch network in St. Petersburg, creating the most up-to-date and convenient outlets, lending centers and round-the-clock service locations. As of January 1, 2020, the Bank’s customer service network comprises 64 outlets, 7 Mortgage Lending Centers and 3 Car Lending Centers. The numbers of ATMs and POS terminals amounted to 813 units.

In 2019, the Bank continued to open new offices, in which a new approach to business has been realized via an integrated system of organizational and technological innovations. Open space provides proper attention to each customer, while spatial zoning is fully aligned with the needs of various customer groups. At the office entrance, there is an extended 24-hour self-service zone. The main part of the office is divided into an operational service zone (for quick operations), a zone for more time-consuming operations, and the cash-desk zone. There is a comfortable waiting area between these zones. At the same time, individual

customer services are provided separately, in a designated area away from the main office zones. This Premium zone is for VIP-customer services and there is a special room for confidential meetings.

The Bank is also actively developing its business in the digital environment. 58% of private customers are users of Internet Bank. The key innovation for 2019 is the unique service Exchange Bridge allowing retail exchange of 14 currencies online at a fixed rate. Nowadays, the new service has no equivalent among existing offers on retail market.

Internet Bank i2B is currently used by over 99% of the corporate customers of the Bank Saint Petersburg’s corporate customers, with 99% of payments and FX transactions being made online. The key innovation for 2019 is mobile application BSPB Business where corporate customers can access necessary range of online services for business, make payments and other banking operations quickly and safely.

HIGH SPEED AND FLEXIBILITY OF THE DECISION-MAKING PROCESS

Close proximity to customers, a high processing speed and the flexibility of the decision-making process remain the traditional advantages of Bank Saint Petersburg in the Northwest Region.

The Bank introduced its continuously functioning Loan Factory project by fine-tuning the lending process throughout the entire life cycle of a loan, from application review and disbursement of funds to a loan follow-up for both individuals and legal entities. In view of the fact that loan product automation is a crucial element of the Loan Factory, the Bank standardized the procedure for the automation of newly introduced loan products.

18th PLACEin the world top of Russian banks according to Forbes magazine

58% of private customersare users of Internet Bank

99% of corporate customersare users of Internet Bank


Strategic Report


Business Divisions



HUMAN RESOURCE DIGITAL SOLUTIONS

Digital technologies are penetrating ever deeper into all areas of work with staff. The Personnel Selection and Adaptation Department, improving the recruiting process, uses digital solutions in interviews and candidate assessment. To attract new digital expertise, regional selection, referral programs, and Social Recruitment are used.

At the end of 2019, the Bank launched an internship program called Brain Camp, in which talented students and graduates of relevant universities will gain practical experience from participating in the implementation of projects in the Big Data field, as well as in the development of technical solutions and their testing, system analysis and other areas. The program will continue in 2020, which will strengthen the Bank’s brand as an employer in the IT environment and attract highly potential young specialists to the team.

For the ninth year, the Bank has successfully employed the Future Banker program, aimed at selecting and training graduates of specialized universities in St. Petersburg and young specialists. 108 out of 130 students of the program got job offers from the Bank in 2019.

Generally, in 2019 the Bank hired 1 128 employees, which is 2 times more than in 2018. The growth is associated with the Bank’s participation in the Resident ID Card city project, the attraction of an additional IT resource for digitalization processes, business development in online channels, as well as business development in Novosibirsk and Moscow.

In addition to attracting personnel, special attention is paid to the effectiveness of newly hired employees. As part of onboarding, a chat bot was launched in 2019 for IT block employees in order to scale the resource to the entire pool in 2020. The chatbot allows new employees to find out the information about the Bank as an employer, receive prompt response from an HR specialist and much more.

DIGITAL ACADEMY AND OTHER TRENDS IN PERSONNEL DEVELOPMENT

The Bank pays great attention to the professional development of the team, increasing its potential in different directions: managerial effectiveness, professional expertise, interaction with the client, digitalization of services and solutions.

A cross-functional team approach to solving problems is being scaled to an increasing number of product areas and segments, enabling employees to develop systemic thinking and a pass-through understanding of processes, and the Bank to quickly implement products and services.

Digital Academy, a separate area of personnel development, was created to develop special competencies and flexible response to the needs of the IT function in the HR structure. In 2019, more than 800 employees were trained in 14 new Digital Academy programs. The Bank provides employees with access to the highest level of professional expertise, localized in recognized competence centers. A successful example was the ITMO Summer School organized for employees of the Bank to study technologies for working with big data in the financial sector — over 80 employees attended the course, 44 of them received advanced training certificates. One of the priorities of the Digital Academy in 2019 was to support the introduction of kanban as a method of managing the product delivery process which involved all IT and business units.

COLLEAGUES

Bank Saint Petersburg sees its team as the main drive for the 2018–2020 Strategy. The Bank builds mutually beneficial relations with its personnel, motivating each employee to archive strategic goals and rewards them based on fair estimation.

Bank Saint Petersburg is one of the largest employers in the region with 4 258 employees as of the end of 2019: 31% employees work in branches, 69% — in the Bank’s Headquarters.

Respectful mutually beneficial relations between the Bank and the staff are implemented through development, motivation, and recognition tools for the results achieved. Digital transformation and the continuous search for efficiency gains provide the Bank’s employees with new opportunities to realize their own potential. The implemented practices of kanban and agile, aimed at accelerating the entry into the market of banking products, are gradually becoming a characteristic feature of the Bank’s corporate culture, where an important role is given to team management.

Staff Composition by Business Line, January 1, 2020

11%

26%

4%

31%

1%

1%

2%

3%

1%

1%

5%

13%

1% Top-management1% Finance26% Business departments2% Settlements and accounting 11% IT and optimization3% Risk management1% Control over operations4% Administrative functions1% PR13% Operation support5% Legal support and security31% Branch network

Staff Composition by Age, January 1, 2020

< 24 45 – 54

17%

35 – 44

28%

25 – 34

38%9%

> 55

8%

4 258 EMPLOYEES

800 EMPLOYEEStrained in 2019

14 new trainingprograms


Strategic Report


Business Divisions



COMMUNITY

Bank Saint Petersburg attaches great importance to the successful development of the regions of its presence, strictly adhering to social responsibility principles in its business operations.

The Bank pays particular attention to the following three groups of social responsibility initiatives: supporting underprivileged children, developing the urban environment, and encouraging financial awareness.

CHARITY AND SPONSORSHIP

In 2019, the Bank continued its long-term aid program for Kolpino Family Education Support Center No. 9 (formerly known as Foster Care Center No. 27). The project started in 2006 when the Bank joined the Board of Trustees of this institution. In addition to improving the Center’s facilities and infrastructure, the Bank also offers the children additional vocational training, healthcare and leisure activities, vocational guidance. The Bank is sponsoring study and interest groups, Graduates Club, a range of excursions and trips as well as educational materials and games, facilities and resources. The Bank regularly provides incentives for talented teachers at the Center. In 2019, the Bank presented an automobile to the Center for sightseeing and health improvement trips.

Bank Saint Petersburg is actively implementing socially important charity programs in the city. For 14 years, the Bank has been supporting the Helping Homeless Dogs Charity Foundation. Funds are allocated to shelter 500 stray dogs and 100 cats.

Fittingly for its High Culture Banking slogan, Bank Saint Petersburg continues to support important cultural initiatives in the city. For the fifth time, the Bank sponsored another landmark project of the year — the Opera for Everyone International Festival, which showcased various masterpieces of classical opera. It gave local residents and visitors of St. Petersburg the chance to enjoy open-air performances of some of the world’s most popular operas, against the backdrop of the city’s famous architectural complexes, completely free of charge. The Bank has also supported a vibrant project in the city on the intersection between theatrical and visual arts — Metamorphoses. It is a showcase of great artists — set designers, taking place at BDT Theater in November through December of 2019 and demonstrating changes that occurred in the Russian set design throughout the century.

In 2019 the Bank’s customers transferred RUB 10 mln for charity through electronic channels. This is the total amount of payments that the Bank transferred in 2019 in favour of partner vendors from the Charity category of payments in Internet and Mobile Banking Systems. More than 10 thousand transfers were performed in 2019, which means that the amount of one payment for good cause made up RUB 1 000.

Significant attention, as in the previous years, is paid to the development of the Bank’s management team, which, in 2019, was performed according to the principles of a segmented approach: basic regular management, development of high potential managers, the knowledge management system of experienced recognized internal experts, and an individual approach to developing the potential of top managers. Over 170 executives were trained in management programs using an automated individual development plan. As part of the development of feedback, the Bank launched a project for "360 degrees" evaluation.

The personnel training system is being transformed simultaneously with the processes and structure of the Bank. Regular training programs acquire development and consistency; in response to business requests, new courses, seminars and assessment events start: from assessment to video courses, post-training chats, grocery marathons, and business games. In 2019, over 550 face-to-face training events were held; each employee, on average, completed 9 distance learning courses.

The Bank maintains awareness and involvement of the whole team through regular information campaigns. In 2019, they were dedicated to digitalization, information security, client-centricity of the business, principles of economy.

Employees of the Bank with pleasure and excitement have participated in the digital dictation, in the Digifruits campaign. Almost all employees of the branch network responded to the contest My Favorite Client: each office vied with each other to tell its story about how to make a client happy with Bank Saint Petersburg.

Close communications and partnership principles of employee interaction are supported by the Bank through the organization of informal sports events. Over 70 people participated in the city SUP-festival, and the team of the Bank, under the leadership of the First Deputy Chairman of the Management Board Pavel Filimonenok, was recognized as the brightest. 50 employees participated in the Rautu trail cross-country race, and also the Bank’s employees participated in the White Nights marathon. Over 400 employees participated in summer corporate trips aimed at promoting corporate values and building team unity. The annual bowling tournament, dedicated to the International Day of Quality and Banker Day, brought together as many employees of the front line and the Head Office.

170 executives were traind in management programs


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Business Divisions



SOCIALLY-ORIENTED PROJECTS

In 2019, the Bank won a tender to provide financial services to the State Enterprise Gorelektrotrans. The Bank will issue the institution a non-revolving credit line for RUB 2 bn. The funds will be used to purchase a batch of 21 new Vityaz-M low-floor trams that will serve passengers in the South-West of St. Petersburg.

In the reporting year, the Bank provided a credit line for State Enterprise Center in the amount of RUB 3.0 bn for the purchase of 471 units of snow removal equipment for the needs of the city. This will improve the quality and efficiency of St. Petersburg streets cleaning of.

In 2019, the Bank continued to participate in State programs of concessional car loans within which one may receive a subsidy of 10% of the vehicle value for cost recovery of a down payment for citizens who have two or more minor children or have not previously owned a vehicle. The Bank, participating in the State programs First Car and Family Car, on the one hand, provides support to society, on the other hand, supports domestic automotive industry.

In May 2019, the Bank started issuing the Resident ID Card. The Resident ID Card is a unique offer in St. Petersburg banking services market. It combines functions of the MIR National Payment System banking card, public transport pass, Medical Insurance Policy card and a discount card. The card is issued and serviced free of charge. Moreover, cardholders participate in National Payment System and YARKO loyalty programs. At the request of the cardholder the Bank can affix on the Card an enhanced qualified digital signature.

The Bank is a participant in the implementation of a city Campus Card project for St. Petersburg State University students that has the following capabilities:

— Electronic identification for access to University or equipment (including copying and printing documents), for registration on educational scientific and other events, as a library card;

— Payment certificate with the ability to withdraw all payments to the University via remote service channels (website, mobile application);

— Public transportation payment; — Clinic appointment; — An electronic signature to expand electronic document management without necessity of the “live” signature on documents.

In 2019, the Bank joined the implementation of the Schoolchild ID Card project. In the beginning of the school year, the students of schools, lyceums and gymnasiums received the Schoolchild ID Card enabling them to enter their educational institution and pay at canteens. Details of such operations are transferred to the unified information system and may be accessed by parents through their Profile at St. Petersburg Education portal. Schoolchild ID Cards may be replenished at the Bank, via Internet Bank, mobile application as well as through payment kiosks. No fee is charged. The card is credited instantaneously.

In 2019, the Bank and the Payment System MIR signed an agreement on strategic cooperation for collaborative development and advanced payment technologies introduction in socially significant projects. Under this agreement considerable attention is paid to contactless payment development – both in trade and services enterprises and in transport. In the middle of May 2019, the Bank implemented access to Mir Pay contactless payment service and completed a project to implement the Samsung Pay payment service for MIR cards.

EMPLOYEE VOLUNTEER NITIATIVES

In addition to its traditional charity events, since 2012, the Bank has supported its employees in their volunteer projects. During 2019, the Bank’s employees volunteered for a number of important charity projects, including:

— The White Flower and Dreams Come True projects supporting a children’s hospice in St. Petersburg;

— Supervision of lessons and workshops as well as socialization, adaptation and career guidance classes at Family Education Support Center No. 9. This project has existed in the Bank since 2015. Within this project, the Bank’s employees visit the center, hold workshops, supervise excursions and visits to culture and sport events, and communicate with its children. Career guidance is an important part of the project: The Bank’s initiative to visit enterprises is actively supported by corporate customers. The project aims to assist socialization and prepare children for adult life;

— The Good Deeds New Year Tree campaign organized by the Bank within the Kind St. Petersburg city festival. Around 500 employees of the Bank gathered New Year gifts which amounted to more than RUB 100 thousand for disadvantaged children and families as well as for graduates of Leningrad siege orphanages;

— The Bank’s volunteers helped to reconstruct the historical apple-tree orchard of the Pavlov Institute of Physiology, Russian Academy of Sciences situated in Pavlovo, Leningrad oblast;

— The Bank’s volunteers organize one-off ecological campaigns: Clean up forest areas and parks, plant trees and supervize open air entertaining and educational events for Family Education Support Center No. 9.

ENVIRONMENTAL PROJECTS

In 2019, the Bank issued a guarantee to SSU-5 OJSC to fulfill the contract for an Ecopark construction in St. Petersburg. According to the Improvement Committee under the Government of St. Petersburg, the total area of the Ecopark will be 75 hectares, and its territory will contain a mix of the Forest zone with untouched wildlife, and the Park zone provided with everything necessary for a comfortable stay for residents of all ages. In this part of the Park, there will be sports and children’s playgrounds, areas for quiet stay and an amphitheater where concerts can be held. The natural part of the Park will occupy 54 of the 75 hectares. When it is arranged, the goal is to minimize interfering with the world of flora and fauna. Wildlife will become a «visual aid» for studying plants, birds and other inhabitants of the territory adjacent to the Yuntolovsky nature reserve. In this part of the Park the largest number of rare plant species is concentrated. The new Park is scheduled to open in 2021.

In 2019, the Bank issued guarantees to a number of garden and park enterprises in St. Petersburg in the amount of over RUB 200 mln for the maintenance, development and restoration of green zones, and improvement of the overall environmental situation in the districts of St. Petersburg.

On October 24, 2019, the Bank took part in a worldwide «paperless» campaign, the main goal of which is to show real examples of how people and organizations can contribute to the conservation of natural resources. The uniqueness of the campaign is also in the benefits not only to the nature, but also to the business. The use of electronic document management technologies and optimization of business processes allow organizations to gradually reduce the cost of printing, storing and transporting paper.

75 HECTAR ecopark in St. Petersburg under the guaran-tee of the Bank

2 RUB BNto purchase new trams


Strategic Report


Business Divisions



CORPORATE GOVERNANCE

Upgrading corporate governance in line with the best practice is one of the Bank’s key tasks. Strictly observing the rights of shareholders, internal control and auditing procedures, a high level of transparency and information disclosure, as well as the maintenance of efficient management bodies, ensure customer confidence and the maximum efficiency of shareholders’ investments.

The following internal Bank documents regulate corporate governance:

— The Charter, as approved by a resolution of the General Shareholders Meeting held on May 18, 2017;

— The Policy on the Supervisory Board, as approved by a resolution of the General Shareholders Meeting held on May 29, 2019;

— The Policy on the Management Board, as approved by a resolution of the General Shareholders Meeting on May 29, 2019;

— The Policy on the Strategy Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on July 23, 2015;

— The Policy on the Appointments and Remuneration Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on August 12, 2016;

— The Policy on the Audit Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on August 12, 2016;

— The Policy on the Risk Management Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on July 31, 2014;

— The Policy on the Corporate Secretary, as approved by a resolution of the Supervisory Board on August 12, 2016;

— The Policy on the Revision Committee, as approved by a resolution of the General Shareholders Meeting held on April 28, 2011.

Due to this, over 350 thousand national payment cardholders can pay for their purchases using smartphones with NFC. Payment system MIR and the Bank will continue to work to popularize cashless and contactless payment in St. Petersburg.

In 2019, the Bank, in collaboration with INPAS/ACCEPT A CARD! and Landromat.ru, set up PAX D200 payment terminals in the laundries of four dormitories of the Peter the Great St. Petersburg Polytechnic University. Students can pick any washing machine or dryer, specify its number on the control unit and pay cashless. PAX D200 is an inexpensive, convenient and very popular terminal that is widely used in vending machines and is ideal for self-service devices.

During 2019, the Bank and Internet publisher Paper were developing the Here is The Best collaborative project. It was a series of informal meetings of St. Petersburg entrepreneurs. The meetings were arranged for St. Petersburg businessmen whose business is closely connected with St. Petersburg. There were projects representing different sectors, e.g. garment industry, furniture production, cosmetics production to technology start-ups and restaurant business. The meetings were held in various city locations: museums, theaters,

restaurants. During these meetings, one could hear stories of successful businessmen and communicate with each other in an informal setting.

Being the largest commercial credit organization in the North-West, the Bank traditionally focuses on products and services that are in the community’s highest demand and have a huge social significance.

As part of the implementation of the Strategy for Improving Financial Literacy in the Russian Federation for 2017–2023, the Bank works with citizens of retirement and pre-retirement age to improve their knowledge in the field of financial services and pension provision.

The Bank’s project GENERATION CONNECTION is an event for the pension-aged customers, including face-to-face meetings at Bank’s branches, held with the purpose of increasing the financial literacy levels.

Bank Saint Petersburg is fully aware of the importance of building a healthy social environment and will continue to be actively involved in the social life by implementing its traditional charity projects and encouraging employees’ volunteer initiatives.

Corporate Governance Structure, January 1, 2019

General Shareholders Meeting

Supervisory Board

Strategy Committee

Appointments and Remuneration Committee

Audit Committee

Risk Management Committee

Internal Audit Service

Corporate Secretary Service

RevisionCommittee

Management Board

Auditors


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THE SUPERVISORY BOARD

The Supervisory Board is responsible for the general management of the Bank’s activities, except for issues that fall under the competency of the General Shareholders Meeting. The Supervisory Board determines strategic priorities for the Bank’s activity and controls the functioning of executive management bodies. According to the resolution from the 2019 General Shareholders’ Meeting, the Supervisory Board is made up of 9 members.

Elena V. Ivannikova has been the Chairperson of the Supervisory Board since July 2016 and has worked for the Bank since 2001. Previously, she worked as the Chief Accountant at Petrovsky Commercial Bank and Baltoneximbank. Ms. Ivannikova was born in 1965. She is a graduate of Kiev Institute of the People’s Economy.

Ms. Ivannikova owns 0.58% of the Bank’s ordinary shares.

Her holding in the Bank’s charter capital is 0.55%.

Vladislav S. Guz has been the Deputy Chairman of the Supervisory Board since July 2016. Previously, Mr. Guz has acted as Chairman of the Management Board since August 2014 till July 2016, the First Deputy Chairman of the Management Board since 2009 and the Deputy Chairman of the Management Board since 2004. His previous experience includes working at the St. Petersburg Branch of Alfa-Bank as the First Deputy Director of the branch and its Executive Director (from 1996 until 2003). Mr. Guz was born in 1967. He is a graduate of Leningrad State University. Mr. Guz holds a PhD in Economics.

Mr. Guz owns no shares in the Bank.

Susan Gail Buyske joined the Bank’s Supervisory Board in April 2012. Ms. Buyske was a member of the Board of Directors and chaired the risk and audit committee in a number of banks, as well as consulted on financial sector development issues for the World Bank, IFC, and others. She also worked as the Vice President at JP Morgan Chase. Ms. Buyske was born in 1954. She is a graduate of Middlebury College, Princeton University and Columbia University, and holds a PhD in Political Science.

Ms. Buyske owns no shares in the Bank.

Andrey P. Bychkov has been a member of the Supervisory Board since April 2010. At present, Mr. Bychkov is the Managing Director of the Financial Block at VEB. Mr. Bychkov was born in 1961. He is a graduate of Moscow State University and the Russian Academy of Economics.

Mr. Bychkov owns no shares in the Bank.

Alexey A. Germanovich has been a member of the Supervisory Board since June 2014. He currently acts as a member of the Board of Directors of PJSC Unipro, and PJSC Centrinvest Bank, Komercijalna Banka ad Beograd (the largest bank of Serbia). Mr. Germanovich was born in 1977. He is a graduate of Moscow State University and Cranfield University (UK).

Mr. Germanovich owns no shares in the Bank.

THE GENERAL SHAREHOLDERS MEETING

The General Shareholders Meeting is the Bank’s supreme governing body that decides on key issues related to the Bank’s activities, as established by the Federal Law on Joint-Stock Companies, and the Bank’s Charter.

The shareholders have the option of remote participation in the Annual General Shareholders Meeting by filling out voting ballots in the electronic form and voting via Shareholder’s Online Account available at the web-site of JSC “Independent Registrar Company – R.O.S.T” — rrost.ru. The shareholder’s personal account also contains a message about the Meeting and documents necessary for making a decision on voting, as well as information about all corporate actions of the Bank.

According to the results of 2019, about 300 shareholders of the Bank connected to the personal account of the shareholder.

The Bank is obligated to hold an Annual General Shareholders Meeting not earlier than two months and not later than six months following the end of the fiscal year.

According to the Russian legislation, the Bank may also convene additional General Shareholders Meetings.

The Annual General Shareholders Meeting, held on May 29, 2019, passed the following resolutions:

— Approving the Annual Report, the Annual Financial Statements, and the profit allocation based on the results of 2018;

— Paying 2018 dividends; — Paying remuneration to the members of the Bank’s Supervisory Board;

— Compensation to the members of the Bank’s Supervisory Board of the costs incurred while acting in their professional capacities;

— Approving FBK LLC as the Bank’s auditor for 2019 RAS reporting;

— Determining the quantitative membership of the Bank’s Supervisory Board and electing members;

— Electing the Bank’s Revision Committee; — Approving Amendment No. 2 to the Charter of PJSC Bank Saint Petersburg;

— Approving The Regulations of the Supervisory Board and the Management Board of PJSC Bank Saint Petersburg.


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THE SUPERVISORY BOARD’S SHARE TRANSACTIONS

In 2019, the members of the Supervisory Board did not make any transactions with the Bank’s shares.

DETERMINATION CRITERIA AND LEVEL OF REMUNERATION FOR MEMBERS OF THE SUPERVISORY BOARD

Based on a decision of the General Shareholders Meeting, the members of the Bank’s Supervisory Board may be entitled to remuneration and compensation for costs related to performing their functions as members of the Supervisory Board. The amount of remuneration and compensation is set by the General Shareholders Meeting. A resolution of the General Shareholders Meeting in 2015 approved the Regulations on Remunerations and Compensations Paid to the Members of the Supervisory Board, establishing the terms and procedures for such payments.

According to a resolution of the General Shareholders Meeting held on May 29, 2019, remuneration paid to the members of the Supervisory Board for the years 2018–2019 stood over RUB 66.0 mln. Participation in respective committee meetings was also factored in when calculating remuneration amounts for the members of the Supervisory Board.

THE STRATEGY COMMITTEE

The Strategy Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. The Committee’s current members are: Andrey M. Zvyozdochkin, Alexey A. Germanovich, Vladislav S. Guz (Chairman of the Committee), Elena V. Ivannikova, Alexander V. Savelyev and Alexander I. Polukeyev.

The main task of the Strategy Committee is to assist the Supervisory Board in determining the long- and mid-term strategy of the Bank and its business priorities, as well as to review the Bank’s major innovation and investment projects.

THE APPOINTMENTS AND REMUNERATION COMMITTEE

The Appointments and Remuneration Committee is not a management body of the Bank. Members of the Committee are Vladislav S. Guz, Andrey M. Zvyozdochkin and Pavel A. Kiryukhantsev (Chairman of the Committee).

The main task of the Appointments and Remuneration Committee is to provide recommendations to the Supervisory Board with regard to candidates for key management positions, as well as to establish the principles and criteria for determining the amounts of remuneration for the Bank’s key management and staff.

THE AUDIT COMMITTEE

The Audit Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. The Committee’s current members are: Andrey P. Bychkov (Chairman of the Committee), Alexey A. Germanovich and Pavel A. Kiryukhantsev.

The main task of the Audit Committee is to assist the Supervisory Board in controlling the Bank’s operations. The Committee verifies the integrity and accuracy of financial reporting, and preparation and presentation of the financial statements, examines the functioning of the internal control and audit systems, and issues recommendations to the Supervisory Board.

Pavel A. Kiryukhantsev has been a member of the Supervisory Board since May 2018. From 2007 to 2017, he was the Director of the Department of CJSC Ward Howell International. He has been the CEO of CJSC Zest Leaders since 2010 and Zest Team Development LLC since 2012. From 2017 to June 2019, he acted as a member of the Board of Directors and the Chairman of the Appointments and Remuneration Committee of JSC StroyTransNefteGaz. Since 2018 he acts as a member of the Board of Directors of JSC First Freight Company. Mr. Kiryukhantsev was born in 1964. He is a graduate of Leningrad State University, Michel Institute (Germany) and INSEAD (France).

Mr. Kiryukhantsev owns 0.004% of the Bank’s ordinary

shares. His holding in the Bank’s charter capital

is 0.004%.

Alexander I. Polukeyev was a member of the Bank’s Supervisory Board from December 2005 to April 2008. He has held this position again since June 2014. From May 2006 to February 2009, he held the position of Vice Governor of St. Petersburg. Mr. Polukeyev was born in 1948. He is a graduate of Riga Civil Aviation Engineering Institute and North-West Academy of Public Administration. Mr. Polukeyev holds a PhD in Economics.

Mr. Polukeyev’s holding in the Bank’s charter capital

is 0.0000019%.

Alexander V. Savelyev is the Chairman of the Management Board (from January 2001 to August 2014, and has held this position again since July 2016). Mr. Savelyev has been a member of the Supervisory Board since January 2001; he also acted as the Chairman of the Bank’s Supervisory Board from August 2014 to July 2016. His previous experience includes Deputy Chairman of the Management Boards of Petrovsky Commercial Bank and Baltoneximbank. Mr. Savelyev was born in 1954. He is a graduate of Kazan Aviation Institute.

Mr. Savelyev owns 24.95% of the Bank’s ordinary shares.

His holding in the Bank’s charter capital is 24.13%.

Andrey M. Zvyozdochkin has been a member of the Supervisory Board since May 2017. Mr. Zvyozdochkin is a partner, member of the Board of Directors and the CEO of ATON LLC. His background spans 20 years in investment banking and general banking operations. He headed the Exchange Council of PJSC Moscow Stock Exchange in 2018. He currently acts as a member of the Board of Directors of NAUFOR. Mr. Zvyozdochkin was born in 1973. He is a graduate of Moscow State Aviation Technology University, Financial University under the Government of the Russian Federation and IMD Business School (Switzerland).

Mr. Zvyozdochkin owns no shares in the Bank.

In accordance with corporate governance best practices, the Supervisory Board includes 4 independent directors: Andrey P. Bychkov, Alexey A. Germanovich, Andrey M. Zvyozdochkin and Pavel A. Kiryukhantsev. These directors positively contribute to the Board’s functioning with their experience and professionalism.


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Pavel V. Filimonenok has been the Deputy Chairman of the Management Board since 2003. Mr. Filimonenok joined the Bank in 2001 and worked as the Director of the Retail Business Department from August 2003 until June 2007. In May 2009, he was appointed the Chairman of the Board of Directors of JSC Kompyuterniye Sistemy Dlya Biznesa. His previous positions include the Deputy Director of the Plastic Cards Department at Petrovsky Commercial Bank. Mr. Filimonenok was born in 1971. He is a graduate of St. Petersburg Institute of Precision Mechanics and Optics.

Mr. Filimonenok owns 0.02% of the Bank’s ordinary shares. His holding in the Bank’s charter capital is 0.02%. Mr. Filimonenok also holds a 100% interest in Lazoria Limited, which in turn owns 100% of Zerilod Holdings Limited. Zerilod Holdings Limited owns 26.576% of the charter capital of Verniye Druzya Management Company LLC. Verniye Druzya Management Company LLC owns 25.53% of the Bank’s ordinary shares and holds a 24.72% interest in the Bank’s share capital.

Kirill S. Kuznetsov has been a member of the Management Board since December 2019; at the same time, he is the Vice President, Head of Moscow Branch. Mr. Kuznetsov joined the Bank in December 2018. From 2011 to 2018, he worked in Alfa-Bank (Russia) as the Head of medium corporate business. Mr. Kuznetsov was born in 1980. He is a graduate of the Altai State University.

Mr. Kuznetsov owns no shares in the Bank.

Kristina B. Mironova has been the Deputy Chairperson of the Management Board since September 2013, having joined Bank Saint Petersburg in 2002. Her previous positions include: the Deputy Director of the Moscow Branch, Director of Investor Relations, and the Director of the Customer Monitoring Department. Ms. Mironova was born in 1980 and graduated from St. Petersburg University for Economics and Finance.

Ms. Mironova owns 0.02% of the Bank’s ordinary shares. Her holding in the Bank’s charter capital is 0.02%. Ms. Mironova also holds a 100% interest in Zugradia Enterprises Limited, which in turn owns 100% of Noroyia Assets Limited. Noroyia Assets Limited owns 26.578% of the charter capital of Verniye Druzya Management Company LLC. Verniye Druzya Management Company LLC owns 25.53% of the Bank’s ordinary shares and holds a 24.72% interest in the Bank’s share capital.

Vladimir P. Skatin is the Deputy Chairman of the Management Board, has been a member of the Management Board since 2008. His career at JSC Industry and Construction Bank (which later became VTB North-West) was launched in 1995 as the Deputy Chairman of the Management Board. In 2001, he was appointed the First Deputy Chairman of the Management Board, and during 2006–2007 he served as the Chairman of the Management Board. Mr. Skatin was born in 1956. He is a graduate of Leningrad Polytechnic Institute and St. Petersburg State University for Economics and Finance. Mr. Skatin holds a PhD in Economics.

Mr. Skatin owns no shares in the Bank.

THE RISK MANAGEMENT COMMITTEE

The Risk Management Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. The Committee’s current members are: Susan Gail Buyske (Chairperson of the Committee), Andrey P. Bychkov, and Elena V. Ivannikova.

The principal task of the Risk Management Committee is to assist the Bank’s Supervisory Board in defining the Bank’s priorities related to its exposures and creating the conditions required for proper risk management.

THE MANAGEMENT BOARD

The Bank’s ongoing operations are managed by the Chairman of the Management Board as its sole executive body, and by the Management Board as its collegial executive body. As of January 1, 2020, the Bank’s Management Board is made up of 7 members.

Alexander V. Savelyev is the Chairman of the Management Board (from January 2001 to August 2014, and has again held this position since July 2016). Mr. Savelyev has been a member of the Supervisory Board since 2001; from August 2014 to July 2016, he also acted as the Chairman of the Bank’s Supervisory Board. His previous experience includes Deputy Chairman of the Management Boards of Petrovsky Commercial Bank and Baltoneximbank. Mr. Savelyev was born in 1954. He is a graduate of Kazan Aviation Institute.

Mr. Savelyev owns 24.95% of the Bank’s ordinary shares.


Konstantin Y. Balandin has been the Deputy Chairman of the Management Board since January 2008. Mr. Balandin has worked for the Bank since 2000. From 1996 to 2000, he worked in the Treasury Department of the Industry and Construction Bank. Mr. Balandin was born in 1976. He is a graduate of the Economics Department of St. Petersburg State University. Mr. Balandin holds a PhD in Economics and a Qualification Certificate issued by the Federal Commission for the Securities Market.

Mr. Balandin owns 0.04% of the Bank’s ordinary shares.


Vyacheslav Y. Ermolin has been a member of the Management Board since December 2017; at the same time, he is the Vice-President, supervising the Bank’s corporate business. Mr. Ermolin joined the Bank in August 2017. From 1999 to 2017, he worked for Sberbank as the Head of the Largest Corporates, Deputy Head of the Credit Department and Head of Sales Department for the Large and Middle Corporates of the Head Office in St. Petersburg. Mr. Ermolin was born in 1981. He is a graduate of Arkhangelsk State Technical University.

Mr. Ermolin owns no shares in the Bank.


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Tatiana Y. Bogdanovich was excluded from the Management Board by the Supervisory Board’s decision in May 2019.

Vladimir G. Reutov was excluded from the Management Board by the Supervisory Board’s decision in October 2019.

In 2019, the members of the Management Board made the following transactions with the Bank’s shares:

Vladimir G. Reutov increased his share of ownership of the Bank’s shares as a result of the transfer of ownership of 242 705 shares of the Bank owned by a liquidated company in which Mr. Reutov was the only participant.

Other members of the Management Board did not make transactions with the Bank’s shares.

SHAREHOLDERS EQUITY STRUCTURE

As of January 1, 2020, the Bank’s charter capital was RUB 519 654 000 and consisted of 499 554 000 ordinary shares with a nominal value of RUB 1 per share and 20 100 000 preferred shares with a nominal value of RUB 1 per share. All issued shares have been paid in full.

Shareholders Equity Structure (Ordinary Shares), January 1, 2020

In October 2019, the Bank completed all buy-back procedures in accordance with 72-FZ on Joint-Stock Companies and acquired 11 999 935 ordinary shares at a price of RUB 53.5 per share. The total number of shares acquired by the Bank (in the period 2018-2019) amounted to 23 999 768 units (4.8% of ordinary shares). The Bank confirms the intention to cancel the acquired shares.

REGISTRAR

The Bank’s Registrar is JSC “Independent Registrar Company – R.O.S.T.” (JSC “IRC – R.O.S.T.”).

Location and mailing address of JSC IRC – R.O.S.T.: 18 Stromynka Street, Building 13, Moscow, Russia, 107076

Telephone: +7 /495/ 780 7363

St. Petersburg Branch: 6 Belovodsky Lane, St. Petersburg, Russia, 194044

Telephone: +7 /812/ 424 2122

AeroAvkar Branch: 212A Moskovsky Prospect, St. Petersburg, Russia, 196066

Telephone: +7 /812/ 371 9868

www.nrcreg.ru

License data:

— Number: 045-13976-000001; — Issue date: December 3, 2002; — Issuing authority: The Central Bank of the Russian Federation;

— Term: indefinite.

Shareholders Equity Structure (ordinary shares), January 1, 2020, %

50.6%

35.2%

4.8%4.6%

4.8%50.6% Mr. A.V.Savelyev and Top-management35.2% Free float4.8% European Bank for Reconstruction and Development4.6% East Capital4.8% Treasury shares

http://www.nrcreg.ru


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THANK YOU FOR BEING WITH US!

“BANK “SAINT-PETERSBURG” PUBLIC JOINT-STOCK COMPANY

“Bank “Saint-Petersburg” PJSC 64A Malookhtinsky Prospect, St. Petersburg, 195112, Russian Federation www.bspb.ru

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