The Bank “URALSIB” in 2015, we wrote off everything that was demanded by the auditor, but still got 17 billion rubles net profit in accordance with IFRS. For comparison: following the results of 2014, the Bank reported a net loss of 9.7 billion rubles. the Main contribution to the profit of “URALSIB” last year, contributed two articles not related to its main business is income of RUB 50.2 bn from the initial recognition of loans to financial recovery obtained from the DIA, as well as the income of 21 billion RUB from the write-off of subordinated loans.
The DIA issued the “URALSIB” two loans in November last year, in the framework of financial improvement — a ten year loan at 67 billion rubles. at 0.51% per annum and six years on 14 billion roubles under 6% per annum. The company has put these funds on the balance sheet at fair market value (RUB 30.8 billion), and the difference between the fair and actual cost is recognized as income, as stated in the notes to the financial statements. Another 21 billion rubles. net profit was obtained due to the write-off of various subordinated debt, including 6 billion roubles to JSC “Regional Fund” (owned by the government of Bashkiria), $71.6 million to the former shareholder and others.
“The recognition of the ASV and loan write-off would be brought to the Bank of RUB 71 billion net profit. Without this the Bank would have had a loss before tax of almost 47 billion rubles,” says Moody’s analyst Elena Redko.
In 2015, the Bank has reduced the interest income, but significantly increased the reserves. In particular, almost two times increase in the provision for loan impairment. Sazonov says that the main contribution to the formation of reserves has made retail loans.
In 2015, the Bank wrote off everything that was pointed out by auditor company KPMG, said Sazonov. Signing the annual accounts for 2014, the auditor pointed out in an overestimation of IG URALSIB: KPMG considered the rating of 19.5 billion rubles, according to which “URALSIB” took into account the shares of the insurance group on its balance sheet, inflated. The auditor also wrote about the necessity of impairment of goodwill. In 2015, the Bank established an allowance for impairment of SG “URALSIB” to 19.2 billion rubles. and has fully written off goodwill for RUB 4.5 billion. “last year the auditor pointed to the fact that it is necessary to depreciate goodwill and the investment in SG “URALSIB” in 2015, we did it,” says Sazonov.
However, in the audit report for last year there is a new caveat: it applies to GK “Sign” controlled by “URALSIB” received in August last year. The auditor says that it’s investment property, which is put on the balance sheet at a price of 7.6 billion rubles., and should, according to KPMG, cost more. Disclaimer in the audit report occurs when the auditor cannot give a fully positive opinion, but his disagreements with the management were not significant to admit statements do not comply with standards. “Evaluation of investment land is always subjective, it we discount by the end of 2015, the auditor believes that discounted too much,” explains Sazonov. Redko from Moody’s adds that the auditor normally indicates a discrepancy in the assessment when it differs by at least 15% from what the auditor considers to be fair.
In addition, the auditor wrote in his report that on December 31, 2015 “URALSIB” did not fulfill the standards for capital adequacy and own funds, the maximum risk per group of related borrowers and some others. The auditor refers to the letter of the Bank of Russia where the regulator promises not to apply to the Bank any measures before the end of financial recovery.