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Annual Report Closed Joint Stock Company

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Title: Annual Report Closed Joint Stock Company


1
Annual ReportClosed Joint Stock Company
International Joint-Stock Bank2010
2
General information and position of the Bank in
the banking system
International Joint Stock Bank (hereinafter
the Bank or CJSC IJSB) was incorporated in the
form of a closed joint stock company. The
Memorandum of Incorporation was signed on May 12,
1992. The recent version of the Charter of the
Company was approved by the General Meeting of
the Shareholders on February 27, 2003, Minutes
No. 1 the recent amendments in the Charter were
made by the General Meeting of the Shareholders
on July 04, 2008, Minutes No. 2. The record on
state registration of a credit institution was
made in the Single State Register of Legal
Entities on August 21, 2002, OGRN 1027739097165,
INN 7703025925, KPP 774401001. The Bank has been
a member of the deposit insurance system since
November 18, 2004. The Bank operates on the
basis of 1. General License No. 1987 of
September 09, 2003 to performance of the
following transactions with the finance in Rubles
and foreign currency - Attraction of funds of
physical and legal persons to deposits -
Deposition of the attracted funds of physical and
legal persons by its own means and at its own
expense - Opening and management of bank
accounts of legal and physical persons -
Performance of settlements on instructions from
legal and physical persons, including authorized
correspondent banks and foreign banks, on their
bank accounts - Collection of funds and cashier
servicing of physical and legal persons -
sale-purchase of foreign currency in cash and
cashless forms - Issuance of bank guarantees -
Transfer of funds on instructions from physical
persons without opening bank accounts.
3
2. License No. 1987 of September 09, 2003 to
conduct of the following bank transactions -
Attraction on deposits and placement of precious
metals - Other transactions with precious
metals. 3. Licenses of a professional
participant of the securities market - No.
077-04147-000100 of December 20, 2000 to conduct
of depository activities - No. 077-04006-100000
of December 21, 2000 to conduct of broker
activities - No. 077-04054-010000 of December
21, 2000 to conduct of dealer activities - No.
077-04096-001000 of December 21, 2000 to conduct
of activities in securities management. 4.
Licenses of a stock exchange broker No. 1442 of
September 22, 2009 to make futures and option
deals in the stock exchange trading without term
limitation. 5. Licenses to conduct coding
activities issued by FSS of Russia for a new term
(till 30.12.2015) -No. 9881 ? of 30.12.2010 to
conduct technical servicing of coding
cryptographic) equipment -No. 9882 ? of
30.12.2010 to distribution of coding
(cryptographic) equipment -No. 9883 ? of
30.12.2010 to provision of services in
information codification.
4
The authorized capital of the Bank is formed in
the amount of 300 mln rubles and is divided into
30 million shares with a par value of 10 rubles
each, including, 29,980,000 ordinary shares,
20,000 preference shares. CJSC IJSBANK reveals
steady development pace. The results of CJSC
IJSBANK activities in 2010 prove a steady
tendency of dynamic development. As of December
31, 2010 the owned assets of the Bank made
1,546.7 mln rubles or 33.42 more than of
December 31, 2009. By the results of 2010 the
Bank as before demonstrated a commendable
financial result profit before taxation made
244.9 mln rubles, profit after taxation - 169.2
mln rubles. The key indicators of efficacy of
the Bank activities are Return On Assets and
Return On Equity
Methods for estimating the indicators Return On
Assets (ROA) is estimated as a ratio of the net
profit to the period-average assets. Return On
Equity (ROE) is estimated as a ratio of the net
profit to the period-average capital. ( At
profit estimation before taxation)
5
CJSC IJSBANK demonstrates steadily the positive
dynamics of key financial indicators which was
reflected in the Ratings of major banks published
by the National Rating Agency and
RosBusinessConsulting. In the BRA rating
Major banks by the size of their capitals as of
December 01, 2010 IJSBANK took the 165th
line (http//ra-national.ru/?pagep-4d47f3c4). In
the NRA rating Major banks by the net profit as
of December 01, 2010 IJSBANK took the 101th line
(http//ra-national.ru/?pagep-4d47f526). In
the RBC rating Top500 banks by net assets as of
January 01, 2011 IJSBANK took the 239th line
(http//rating.rbc.ru/articles/2011/02/24/33178170
_tbl.shtml?2011/02/24/33177839). In the RBC
rating Top500 banks by the credit portfolio as
of January 01, 2011 IJSBANK took the 208th line
(http//rating.rbc.ru/articles/2011/02/24/33178170
_tbl.shtml?2011/02/24/33178275). In the rating
of banks Capital as of January 01, 2011
prepared by BANKIR.RU, IJSBANK took the 202th
line (http//bankir.ru/rating/1/2011/20). In
the rating of banks Assets as of January 01,
2011 prepared by BANKIR.RU, IJSBANK took the
240th line (http//bankir.ru/rating/1/2011/19).
6
Priority Directions of Bank Activities.
Development Strategy The strategy of the Bank
is based on the following principles ensuring
steady growth rates, improvement of quality
indicators of activities, harmonious development
of business. Accomplishing its strategy CJSC
IJSBANK is oriented to steady increase of its
assets and growing volumes of transactions. In
this way the Bank consolidates its position on
the market, ensures steady profit and capital
growth which creates conditions for further
development. Within the framework of its
development strategy CJSC IJSBANK identifies
targets and addresses problems of business
diversification, increasing the client and
resource base, development of new segments of
activities, introduction of advanced banking
technologies and extension of the banking product
line. CJSC IJSBANK is a reliable business partner
for its clients, capable to offer wide financial
support and to provide the deserved level of
service to each regardless of the scales of its
activities. Among the main tasks in 2010 there
were maintaining the available clients base and
improvement of service quality. Developing its
clients policy in the post-crisis conditions the
Bank focused on maintenance at the appropriate
level of its own liquidity and financial
stability.
7
The efficiency of the chosen course is confirmed
by the stable clients base. In 2009-2010 when the
economic situation was not simple and when the
banking sector was going out of the crisis the
redistribution of the market participants was
observed in favor of stable and reliable credit
institutions. The quantity of clients legal
persons increased (as was planned) by 5, thus,
one of the key strategic objectives concerning
post-crisis maintenance and gradual extension of
the clients base was accomplished.
The attracted funds on settlement accounts of
clients legal persons and respondent banks, on
accounts of clients for settlements on securities
and foreign currency as of 01.01.2011 have grown
by 15 compared to 01.01.2010.
8
Traditionally CJSC IJSBANK services both
physical and corporate clients providing a wide
range of banking products and services opening
and management of accounts, money transfers,
deposits in rubles and foreign currency, bank
cards, rent of individual safe-deposit boxes,
quality settlement and cash services, crediting,
conversion operations, transactions with
securities and previous metals. Among the
clients of the Band there are enterprises from
various industries and services as well as
individual entrepreneurs and physical persons. In
the past year the greater fraction of the clients
base of the Bank was taken by state and private
enterprises from most important economic sectors,
such as - machine-building enterprises -
prospectors teams - enterprises engaged in
wholesale trade with precious stones and metals -
construction enterprises - enterprises engaged in
metal reworking - development and realtor
companies - financial and investment companies -
publishing and printing companies - recruiting
agencies - law firms - leasing companies - trade
firms
9
For private persons CJSC IJSBANK offers the
classical range of products and services opening
and management of accounts, deposits in rubles
and foreign currency, money transfers over Russia
and abroad, bank cards of international payment
system MasterCard, depository services, broker
services. The financial services to private
clients include instruments for capital
accumulation, storage and accrual. The Bank
offers its clients the classical banking and
investment products, services of bank-managed
mutual fund. In 2010 new types of deposits were
offered, the average fund placement period for
360 days. The mentioned conditions demonstrated
their competitiveness which was proved by 34
growth of funds placed by physical persons on
deposits. The Bank developed the competitive
tariffs, flexible terms of conduct of various
banking operations.
10
The Bank offers its clients the whole complex
of services in international settlements. Being
the participant of the real-time rubble
settlement system and international system
S.W.I.F.T. and having a wide correspondent
network the Bank ensures quick and reliable
settlements. Clients of the Bank can make
settlements both in traditional currencies USD,
EUR and also in JPY, GBP, CHF, SEK and AUD. In
2010 for convenience of the clients and
correspondent banks the Bank opened NOSTRO
accounts in Australian dollars with Westpac
Banking Corporation, Australia, and in Chinese
yuans with OJSC Bank VTB and JSCB
Trade-Industrial Bank of China (Moscow) (CJSC).
The efficiency of the settlement and cash
services in CJSC IJSBANK is confirmed by the
quality of provided services, high automation of
processes, wide possibilities for distant
servicing. CJSC IJSBANK uses the Internet Backing
system the full-functional, convenient and safe
system of electronic document management
permitting the clients to manage their bank
accounts. By the end of 2010 the number of
clients using this Internet Backing system has
grown by 15.
11
As in the past years, the Bank always keeps in
focus the issues of information security. The
growing risks from external and internal sources
in this area require permanent control and
attention. In the past year practically all
clients working with the Bank via the Client-Bank
and Internet-Bank systems were changed over to a
new software supporting the application of
physical devices for secret passkey storage
(USB-tokens and smart cards). Today these
devices certified with FSS of Russia are the
mandatory condition for remote operation with the
Bank. In the same period the Bank received new
certificates from FSS of Russia to operation,
dissemination and servicing of cryptographic
devices for information protection after
fulfilling all required procedures and rules. The
program filters developed in the Bank for check
of payments received via the clients remote
service system counteract effectively the
attempts of unauthorized access to the clients
accounts.
12
In 2010 the Bank continued increasing its
credit portfolio which volume reached 64,22 of
all assets, 22,5 are investments into
securities. In 2010 the Banks portfolio of
securities was formed on the principles of high
liquidity and profitability.
13
Like in the past years, the Bank credited the
real sector of economics the gold-mining,
machine-building, printing and other enterprises.
The share of such credits in 2010 reached 10.35,
or 5.63 more than in 2009. The share of the
credits issued to trade enterprises has increased
considerably to 67.63 having grown in 2010 by
36.15. Among our clients there are companies
trading with building materials, alcohol
products, jewelry, etc. As of January 01,
2011, the total security for the Bank credit
portfolio covered completely the loan
indebtedness limiting significantly the
possibility of financial losses on credit
operations. The credit portfolio as of
01.01.2011 has shown 14.2 growth (credits to
legal and physical persons) compared to
01.01.2010. The reserve for likely losses reached
14 as of 01.01.2011 compared to 13 as of
01.01.2010 due to tougher approach to assessment
of the quality of provided loans in accordance
with the requirements submitted by CB to the
reserve level.
14
(No Transcript)
15
In 2010 the Bank continued operations on the
securities market. The investments at the
purchase price into the securities portfolio has
increased by 13 as of 01.01.2011. At the same
time the portfolio was diversified greater
investments were made into debt financial
instruments with the fixed interest of the
Russian Federation, legal persons residents
denominated in rubles and legal persons
nonresidents denominated in foreign currency and
circulating on the European trading sites. The
portfolio of debt securities increased by 54.
The diversification was conducted, including at
the expense of funds received from sale of a part
of the shares of the portfolio for resale which
market prices exceeded the purchase cost.
16
In 2010 the situation on the domestic money
market was rather stable and characterized by a
high liquidity level of crediting institutions.
Lowering of the refining rate of RF CB was
accompanied by gradual lowering of the short-term
rates on the money market to the level close to
the lower limit of the corridor of interest rates
of the Bank of Russia determined by the fixed
rates on overnight deposit operations. For many
years CJSC IJSBANK has been an active
participant of the interbank market.
Availability of general cooperation agreements
on the MBC market and also a considerable volume
of unsecured limits, including from foreign
partners, facilitate more effective management of
the current liquidity. Gradual restoration of
trust in the Russian banking sector from clients
and financial institutions, including foreign
ones, resulted in the increased volumes of mutual
limits and, accordingly, turnovers of interbank
operations. During 2010 CJSC IJSBANK pursued
further on the conservative strategy of
management of short-term resources on the money
and currency markets. Permanent monitoring of
changes in the economic situation on the domestic
and international financial markets made it
possible for the Bank to control its financial
flows by increasing or decreasing its presence in
due time in various segments of the market.
17
The main income items in 2010 were interest
revenues from loaned funds and also revenues from
operations with securities. The net interest
margin of the Bank estimated in accordance with
Instruction of the Bank of Russia No. 2005-? of
30.04.2008 On Evaluation of Economic Position of
Banks is equal to 5.85 per annum.
18
The structure of Bank expenditures in 2010 did
not alter much. As before, the greatest expenses
were connected with payment for clients funds.
Expenses on creation of reserves were equal to
17.4. The total reserves created by the Bank by
late 2010 corresponded to the actual quality of
the assets and made 808.9 mln rubles.
19
Report of the Bank Supervisory Board on
Results of the Bank Development along Priority
Directions of Its Activities In 2010 the
Supervisory Board of the Bank convened five
meetings that discussed various issues related to
general management of the Bank activities. Perfor
ming as the participant of the internal control
system of the Bank the Supervisory Board
controlled the functioning of this system by
approval of plans of actions of the Internal Bank
Control Department (annual, current, quarter) and
regular consideration of the actions reports .
The reports on the actiivity of the Internal
Control Department provided information to the
Supervisory Board on the conducted checks,
revealed defects, rectification measures basic
financial indicators of the Bank, including
indicators of obligatory norms of the Bank and
their components size of credit risk, market
risk, operations risk. In 2010 within the
framework of internal control of the activities
of the Bank as a professional participant of the
securities market, the Supervisory Board
regularly discussed at its meetings the reports
of the controller of a professional participant
of the securities market.
20
For management of bank risks the meeting held
on 04.02.2010 approved the aggregate risk of the
Bank (credit risk on balance assets, contingent
credit-related liabilities, time transactions,
market risk, operations risk) for 2010. In that
year no excess of the adopted risk was
detected. In addition, the Supervisory Board
assessed the condition of the corporate
management of the Bank concerning activities of
the management bodies and assignment of duties
among them, management of bank risks, regulation
of the conflict of interests and relationships
with affiliated persons, compliance with the
principles of professional ethics, coordination
of information disclosure on the Bank, monitoring
of the internal control system. It was
acknowledged that the corporate management
conforms to the organizational structure and
scale of activities of the Bank. It was decided
to continue improvement of the corporate
management with regard to the established bank
practice, recommendations of the Bank of Russia,
experience of the Bank and its organizational
structure.
21
In 2010 the Internal Bank Control Department
conducted activities along the following
directions 1. Performance of checks on the
basis of the Plan (approved by Supervisory Board
on 12.11.2009, Minutes No. 7), including control
of bank risk management assignment of duties in
execution of transactions/deals and elimination
of a conflict of interests observance of the
adopted limits on execution of transactions/deals
adequacy of the created reserves to the risk
level authenticity, completeness and
objectiveness of the prepared reporting complete
and timely accounting of transactions/deals of
the Bank and also ensuring property safety
conduct of anti-legalization actions by
directions of activities. 2. Rendering
methodological support in execution of actions on
improvement of some bank risk management and also
in development/revision of the local regulatory
acts.
22
The Financial Monitoring Service of CJSC IJSBANK
being the element of the internal control system
of the Bank takes on a regular basis actions on
counteraction legalization (laundering) of
criminal incomes and terrorism financing. The
Financial Monitoring Service takes efforts on
counteraction of the unfair business practices,
on revealing the potential and current risks that
may incur financial and image damage to the Bank
and, accordingly, its shareholders and
clients. In 2010 with regard to the present-day
international tendencies and growing significance
of counteraction of legalization (laundering) of
criminal incomes and terrorism financing the Bank
while analyzing the activities of its potential
and existing partners went on with their careful
study using new opportunities for receiving
additional information about would-be clients. In
particular, regular meetings were held with
financial institutions under the Program Know
Your Client Better, regular questioning and
analysis of financial reporting were conducted,
directions of business development were studied,
additional databases were acquired for study of
Russian and foreign partners and also active
interaction among all Bank divisions was
organized that included methodical support
envisaging study and identification of a credit
institution. The Financial Monitoring Service
focuses attention on qualification requirements
to personnel training. Throughout a year the
specialists of this service and heads of
structural divisions more than once passed
training at external seminars organized by
educational centers with methodical support of
the Bank of Russia and the Federal Service on
Financial Markets and took part in forums of
foreign banks. Qualification advancement of the
personnel of structural divisions is organized by
the Financial Monitoring Service on a permanent
basis in the form of on-bank seminars with the
yearly check of knowledge applying the regularly
updated program Great Bank Tests.
23
In 2010 much efforts were taken for
accomplishment of the requirements of Federal Law
No. 152-FZ On Personal Data regulating
protection of personal data, including full
investigation of the Bank with regard to
compliance with the requirements of this law.
Full implementation of the joint project of the
Bank and its partners on bringing the Bank
activities in compliance with the norms and
requirements of this law is planned for 2011.
For greater flexibility, reliability and
efficiency of operation of the Bank information
infrastructure, active introduction of
virtualization devices continued in 2010.
Transfer of some computer systems into the
virtual environment influenced positively their
accessibility and reliability of performance.
This vector of development of the Bank
information system will be continued in
2011. The Information Security Concept is
operating in the Bank. It is targeted to
protection of information resources from various
threats, external and internal, willful and
unintentional, ensuring business continuity and
minimization of damage that may be incurred as a
result of impairment of information security. The
indirect economic effect here may be the
essential reduction of risks of material, moral,
image and other kinds of damage. The
Information Security Concept is being improved
with regard to the requirements, provisions and
recommendations of basic legislative acts of the
Russian Federation and regulatory-methodological
documents of the Federal Service for Technical
and Export Control of Russia (FSTEC of Russia) on
information security, basic international
standards on safety of information technologies
and also requirements and orders of the RF
Central Bank.
24
Report on Payment of the Dividends on the Bank
Shares According to resolution of the Annual
General Meeting of the Shareholders, the
dividends were not paid the profit of CJSC
IJSBANK by the results of 2009 in the amount of
92.4 mln rubles was divided as follows to the
accumulation fund 90.6 mln rubles, to charity
purposes 1.8 mln rubles. In 2010
out of the funds appropriated to charity purposes
the Bank continued rendering assistance to some
charity institutions, in particular, to the
Regional Charity Public Fund Illustrated Books
for Small Blind Children. This fund was created
for implementation of the like-named UN/UNESCO
Project of the World Decade of Cultural
Development. In 2010 within the framework of the
Fund programs the books were published for
visually impaired children living in Moscow,
Kolomna, Pskov and Sergiev-Posad finance was
allotted to the Orthodox Children Social and
Rehabilitation Center Pokrov at the
Intercession of the Holy Virgin Church in the
village of Yakovlevo of the Moscow Region for
children without parental support.
25
Description of Main Risk Factors Related to
Bank Activities. Risk Management System in CJSC
IJSBANK The risk management system in the Bank
is developed with regard to the regulatory
documents of the Bank of Russia, recommendations
of the Basel Committee on Banking Supervision and
also the world practice for identification of
risks, their analysis and management. The
financial analysis of the Bank activities is
conducted on a monthly basis and includes
comparative analysis of principal financial
indicators of the Bank with the similar
indicators for the banking system in general and
also evaluation of own financial stability in
accordance with Instruction of the Bank of Russia
No. 2005-? of April 30, 2008 On Evaluation of
the Economic Situation of the Bank. Management
of financial risks, including credit and market
ones, is conducted applying the limit system.
Works are in progress on improvement of the
methods for evaluation of a financial position of
borrowers, counteragents, bill drawers, issuers
of securities. The system for liquidity
management operating in the Bank is helpful for
taking weighted and validated decisions on
placement of funds in long-term assets with the
minimum risk of loss of liquidity. Apart from
daily estimation of obligatory liquidity norms
(according to the method of RF CB), the Bank
undertakes to analyze permanently the perspective
liquidity with a view to ensure solvency of the
Bank at all time horizons in combination with the
most efficient use of resources.
26
The values of the liquidity norms of the Bank
in 2010 were far from the maximum admissible
investments and by the end of the year they were
as follows ?2 instant liquidity indicator of
the Bank - 109.9 (at the norm no less than 15
), ?3 current liquidity indicator of the Bank
142.3 (at the norm no less 50 ), ?4 long-term
liquidity indicator 82.6 (at the norm no more
than 120 ). The capital sufficiency norm by the
end of the year was 22.8 (at the norm of 10
). In the past year the focus of attention was
on improving the system of operations risk
management in the Bank which is connected with
likely defects, failures in the systems and
procedures of management and control of bank
processes as well as systems mistakes.
Operation of the internal control system
included control of compliance of the Bank
personnel with the internal provisions, order and
procedures as well as principles of sharing the
authorities, procedure of approval of executed
operations and transactions. The capabilities of
the applied information, technological and other
systems were assessed regularly if necessary,
they were updated or substituted. Special
attention was drawn to observance by all Bank
divisions of the code of business practices and
principles of professional ethics.
27
Information about Bank Compliance with the
Corporate Behavior Code The Bank pursues its
statutory activities guided by the provisions of
the Corporate Behavior Code approved at the
meeting of the Government of the Russian
Federation No. 49 of November 28, 2001 with
regard to the specifics of internal documents and
the established practice. Apart from those
contained in other sections of the report, the
Bank observes the following provisions of the
Corporate Behavior Code. The Shareholders of the
Bank have the right to get acquainted with a
list of persons entitled to participation in the
General Meeting of the Shareholders beginning
from the date of notice on holding of the General
Meeting of the Shareholders and till closing of
the attended General Meeting of the Shareholders
and in case of distant General Meeting till the
last date of receiving voting ballots to
suggest items for putting on the agenda of the
General Meeting of the Shareholders or to demand
convening of the General Meeting of the
Shareholders without provision of an extract
from the register of shareholders. A notice on
holding of the General Meeting of the
Shareholders is directed to the persons included
into the list of persons entitled to
participation in the General Meeting of the
Shareholders of the Bank by a registered letter,
telegram, delivered against a signature or in any
other written form. The information (materials)
to be submitted to the persons entitled to
participation in the General Meeting of the
Shareholders is provided in the Bank
office. The shareholders have the right to
participate in managing the Bank affairs by
taking decisions on the most important issues of
the Bank activities referred to the powers of the
General Meeting of the Shareholders . The
information about the Bank activities is
regularly presented on the web-site in Internet
(www.mab.ru) and, according to recommendations of
the Bank of Russia (Letter of the Bank of Russia
No. 165-T of 21.12.2006 On Information
Disclosure to Credit Institutions and Letter No.
72-T of 25.05.2010 On Information Disclosure to
Credit Institutions by Forms 0409134 ? 0409135),
on the respective web-site in Internet
(www.cbr.ru ). In places of clients servicing
the Bank provides the information subject to
Instruction of the Bank of Russia No. 2172-? of
20.01.2009 On Publication and Presentation of
Information about Activities of Credit
Institutions and Bank (Consolidated) Groups
28
For confirmation of the financial situation of
the Bank the annual General Meeting of the
Shareholders approves every year the auditing
organization. In 2010 the auditor of the Bank was
Limited Liability Company JUKIS CONSULTING that
audited the accounting statements of CJSC IJSBANK
and also the financial statements of the Bank
prepared in accordance with the international
standards. No affiliation and property interests
(except payment of auditing services) exist
between the auditors organization and the
Bank. In 2010 the Supervisory Board of the Bank
assessed the corporate management of the Bank,
including such issues as organization of
activities of the management bodies and
assignment of duties among them, management of
bank risks, regulation of the conflict of
interests and relationships with affiliated
persons, compliance with the principles of
professional ethics, coordination of information
disclosure on the Bank, monitoring of the
internal control system. It was acknowledged that
the corporate management was satisfactory and
conforms to the organizational structure and
scale of activities of the Bank.
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