Business hours of Khreschatyk Bank branches are unique for Ukrainian banking sector: we stay open late every day, and are not closed even on weekends and holidays
01001 Kyiv, vul. Khreschatyk 8-A Tel. +380 044 490-52-30, fax: +38 044 270-72-28 E-mail: firstname.lastname@example.org S.W.I.F.T.: KHRCUAUK Telex: 631349 ZGODA UX Reuters: KRES www.xcitybank.com.ua 24-hour contact center +38 044 490-52-31, 0-800-305-505 (toll-free in Ukraine) Information service +38 044 490-25-00, 0-800-500-212 (toll-free in Ukraine)
For interactive contact with Khreschatyk Bank professionals, answers to all banking questions, or solutions of problematic situations, please check out the main page of our website http://www.xcitybank.com.ua/askquestion/
This annual report is available in Ukrainian and English languages. In the event of any discrepancies between the two-language versions, the Ukrainian-language version has priority.
ÂŠ Khreschatyk CB PJSC, 2014 ÂŠ Design and layout by Anton Drazhenko Graphic Design Studio, 2014
01 02 03 04 05 06 07 08 09
A greeting word from Khreschatyk Bank Supervisory Board and Management Board............................................................ 05 2013 economic realities: steep decline.................................................................................................................................. 06 2013 banking system: unstable liquidity and devaluation expectations.................................................................................. 07 Khreschatyk Bank: stable positions, positive dynamics.......................................................................................................... 08
Staking on efficiency
Strategic line: customer orientation........................................................................................................................................ 12 Bank capitalization: prudence and responsibility.................................................................................................................... 13 Financial statements: figures prove........................................................................................................................................ 15
Resource management: strategy for the future, controlling the present.................................................................................. 18 Risk management: responsibility of all and everyone............................................................................................................. 21 Internal audit and control: preventing and protecting.............................................................................................................. 23
Customer orientation: market leadership................................................................................................................................ 26 Efficient communications: strong brand and stable reputation............................................................................................... 28
A bank for banks
Clearing center: justifying the partner trust............................................................................................................................ 32 International relations: integrating in the world financial system............................................................................................ 35
Rules of business
Corporate business: high quality, long-term potential............................................................................................................ 38 Stock market: prudent management and many years of experience....................................................................................... 41 Bank metals: noble investments and eternal values............................................................................................................... 43 Retail business: a step towards.............................................................................................................................................. 44 Payment cards: driving the banking........................................................................................................................................46
The art of innovations
Regional branches: leading channels of banking service....................................................................................................... 50 Information technologies: a source of competitive advantages............................................................................................... 51
Corporate management: playing by rules............................................................................................................................... 54 Personnel: our most important asset...................................................................................................................................... 57 Social responsibility: the trust of society................................................................................................................................ 58
The future is here
2014 prospects: synergy of efforts......................................................................................................................................... 62 About us . .............................................................................................................................................................................. 63
Dear customers, partners and shareholders: 2013 was a significant year in Khreschatyk Bank’s history: our bank has turned 20! In the run-up to our anniversary we have reached a new level of development, as the bank’s 2013 financial results prove. We laid the foundation for future growth; in particular, we have completed the bank’s organizational restructuring geared toward two-tier management, support of fundamentally different vision of key business processes: continuous purposeful financial support of the real sector of economy, specialization in the small and medium business segment, improving efficiency of retail products and services, etc. The identified priorities helped Khreschatyk Bank formulate, despite high volatility of domestic financial market and difficulties in the country’s political and social environment, the principles of modern prudent risk management and internal control and devise a special customer-oriented strategy based on the optimal network of front offices and minimized operating expenses, and provide our customers with financial opportunities based on their individual needs and status. Out today’s stance is leadership and innovativeness. We want to shape and forecast trends, not just follow them; integrate innovative elements of efficient solutions and applied research in business processes, implement innovative comprehensive approach to all banking transactions. Our desire is to create bright, attractive offers that will be truly appreciated by the financial community and our customers. Our main goal is supporting long-term stability, and our balanced investment policy, reasonable conservatism, diversification of liabilities, improvement of capital sufficiency and quality of assets are all geared toward achieving this goal. The foundation of our positive development dynamics – customer and partner trust – also remains unchanged, and to keep it that way we continuously improve our products and services and introduce a new format of relations with all stakeholders in the conditions of inflation waves. We understand that stability and reliability, combined with professional service provided to our regular and new customers, are the key factors regardless of what product or service they need. That’s why we shift the focus of our efforts to new basic principles of interacting with customers, colleagues and partners, the most important of which are quality, responsibility for the end result and efficiency of all actions and operations. After all, our strategy is aimed at maintaining high level of competitiveness based on financial strength achieved by employing prudent policies, stability thanks to thoroughly thought-out interest policy, and profitability achieved by active operations in all segments of financial market. All prospective transformations in Khreschatyk Bank’s 20-year history were driven by the consistent and efficient teamwork, where personal and overall success for every member is measured not by money and positions in various ratings but, first of all, by customer and partner satisfaction; and where team members not only trust each other but bear responsibility for the job they do. The most important features of the Khreschatyk team (whose incomplete list is available in the interactive version of this Annual Report) include high professionalism in combination with the ability to inspire oneself and work associates for creativity and innovativeness to do with pleasure a complex and very responsible job at one of the most stable and socially-oriented financial institutions in the country. In doing so, the cementing factor of success has been improvement of corporate management and effectiveness of interaction among all administrative bodies of Khreschatyk Bank, its subdivisions and regional branches. Our team is strong with every player, and therefore, some of our key transformations include personnel management, implementation of advanced forms of training and skill improvement, career planning, supporting students and young specialists. We are confident that the Khreschatyk Bank team will successfully fulfill any task, overcome all risk challenges and respond to any most daring expectations. We do not rest on past achievements: the new Khreschatyk Bank Strategy was adopted till 2020. The Strategy’s leading markers are improvement of performance efficiency, innovation management, global customer orientation and technology-based modernization of the bank’s organization. On the other hand, Khreschatyk Bank’s support by shareholders and customers help us devise daring plans, foresee market trends and position Khreschatyk Bank as a bank for modern, energetic and successful people.
2013 economic realities: steep decline ‘God, let us not live in interesting times!’ – that was the ancient Chinese proverb that was on everyone’s mind last year. The nation was shaken, thrown in the waves of crisis like a sailboat in a raging sea. In political life, the country tried to continue its traditional policy of balancing between the European Union and Russia. But by the year’s end the standoff the Ukraine and Russia has deepened after the government of the ‘brotherly people’ has introduced informal trade barriers for Ukrainian goods and threatened to tear up the free trade and industrial cooperation agreement between the two countries. The EU has refused to soften its requirements before signing the Association Agreement. As a result, on 28 November the ex-president did not sign the Agreement at the EU Eastern Partnership Summit in Vilnius, which sparked the largest protests among Ukrainian population since the 2004 Orange Revolution. In 2013 the real GDP remained at the 2012 level. In terms of spending, the real private end consumption kept domestic demand afloat, whereas the real accumulation of fixed capital went down. The negative contribution of net real export to 1% economic growth was explained by the higher decline rate of real export vs real import. In terms of production output, the real gross added value has substantially grown in agricultural sector. Manufacturing output has declined due to low foreign demand and weak consumer demand for Ukrainian-manufactured goods. The decline in investment inflow has impeded future economic growth. Moreover, during 2013 the government did not implement a single reform aimed at achieving fiscal consolidation and improving business climate. As a result, the arrangements with IMF as regards a new program ended up in a fiasco. The government stumbled upon a large gap in liquidity by the year’s end, which resulted in the delays in financing all expenditures, even wages and social benefits. And agreements on closer cooperation with Russia only fueled the political crisis in the country. The only market segment to experience positive dynamics in 2013 was agriculture, where production output has increased by almost 14% thanks to excellent harvest. At the same time, export of agricultural products and foods went down by almost 5% (to US 17 billion), mainly due to the falling world prices for grain, oil crops and their processing products in the second half of 2013. Budget revenues and expenditures have been substantially underachieved in 2013 because of the ill-considered and overly optimistic plan and economic decline in all sectors. Difficult financial situation in many companies, which had its mark on the wages and purchasing capacity of population, combined with high fiscal pressure, translated into slowdown in the growth rate of household income by 5% in nominal and 5.3% in real terms. The Industrial Production Index fell by 4.7%, the worst indicator among the 11 CIS states
Government debt has grown by 7% to US 68.6 billion
Ukraine sold abroad US 11.5 billion less worth of goods than it bought
The growth of retail turnover slowed down to 9.5%
16% less of housing was built than in 2012
Inflow of foreign investments in Ukrainian economy has decreased by 15% to US 3.7 billion
Gasoline and diesel fuel consumption went down by 5.8% and 2.7%, respectively
The principal investors in Ukrainian economy were the Republic of Cyprus and the British Virgin Islands
Ukraine went 11 rungs down in the competitiveness rating
Real wages have shrunk by 6%
In terms of the level of corruption Ukraine was ranked 144th among 177 countries
Key world events in 2013 • • • • • • •
End of recession in the European Union Economic growth in the U.S. and curbing of FRS economic stimulation program Economic slowdown in BRICS states Modernization of development model in China Economic deceleration in India A step toward establishment of the Banking Union in EU Development of the most radical reform of international taxation and intensification of clampdown on offshore jurisdictions
7 2013 banking system: unstable liquidity and devaluation expectations For the most part of last year Ukrainian banking system functioned in the conditions of relatively stable hryvnia liquidity and moderate devaluation expectations. The cost of hryvnia resource was relatively stable as well, which helped intensify bank financing of both corporate and private customers. Significant excess of the credit portfolio growth rate (12.4%) over increase of nominal GDP (3.2%) led to the growing indicator of economy’s saturation with borrowed funds: 62.6% by the end of 2013 vs 57.4% as of the end of 2012. The aggregate assets of Ukrainian banking system have grown by 13.4% vs +7% in 2012. The dynamics of assets of banks with different forms of ownership were uneven: state banks experienced asset growth at the average market level of 13%; assets of banks with Russian capital did not change in absolute terms vs 2012; while assets of Western banks have shrunk by 14%. The leading institutions were banks with Ukrainian private capital, which experienced a 28% asset growth thanks to both organic growth and the ‘absorption’ of other financial institutions and/or buyout of credit portfolios. Deposit market remained the main source of funding in 2013, showing an 18% growth. The excess of the growth rate of this indicator over loans bore upon the continuing decrease of the loans-deposits ratio to 136% by the end of 2013 vs 143% in 2012 and the peak level of 205% observed in 2008. The bulk of the banks’ demand on deposit market was concentrated in the short-term hryvnia segment. The terms and cost of resources, combined with economic uncertainty and negative business expectations, shaped the trends in credit portfolios of Ukrainian banks in 2013. Thus, the growing amount of loans issued by Ukrainian banks was driven, to a substantial degree, by short-term loans (72% of the total growth), hryvnia loans (71% of new loans), loans to legal entities (94% of the growth) and financing of current operations. The largest portion of financing went to wholesale and retail trade (39% of new loans) and processing industry (20%), whereas financing of construction industry accounted for mere 6% of the portfolio’s total growth. According to official statistical reports of the National Bank of Ukraine, overdue accounts amounted to 7.7% as of the end of 2013, which is 1.2 pp less than in 2012. The amount of problematic debts has decreased thanks to the growth of credit portfolio of the system on the whole, on the one hand, and to sale of problematic assets from the banks’ balance, on the other (the amount of loan and customer debt reserves has decreased by 7% during the year, from UAH 132.1 million to UAH 122.4 million). During the year, capitalization of the banking system went up by 13.8% in natural terms, reaching UAH 192.6 billion, whereas the capital adequacy ratio (N2) remained approximately the same as it was as of the end of 2012: 18.3%. The ratio of capital to assets did not change as well, staying at 15.0%. In 2013 the net interest income of the banking system remained almost at the same level as during the previous period (UAH 51.5 billion vs UAH 51 billion in 2012), while net fee income went up by 13% (to UAH 19.1 billion vs UAH 16.9 billion). At the same time, the growth of the banking system’s assets and the threefold decrease of the banks’ net profit comparing to 2012 led to declining profitability of assets to 0.12% vs 0.45% and profitability of capital to 0.81% vs 3.03% in 2012. The NBU’s international reserves have declined, because the US 2.0 billion consolidated surplus of the balance of payments was insufficient to support repayment of debt to IMF. The deficit of the current and capital accounts (9% of GDP) was lower than the amount of borrowed financing (6% of GDP) because of the deficit of financial account.
The banking system’s financial result has been Dynamics of the banking system’s positive for the second year in a row, UAH billion deposit portfolio 0 —————————————————————————————————————————————————————————————————————————— 5
0% ———————————————————————————————————————————————————————————————————————— 20%
Structure of the banking system’s credit portfolio 0% ——————————————————————————————————————————————————————————————————————— 100%
0% ——————————————————————————————————————————————————————————————————————— 100%
Banking system’s assets by structure of ownership, % 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
18% State banks
15% Western banks
11% Russian banks
56% Banks with Ukrainian private capital
Khreschatyk Bank: stable positions, positive dynamics During 2013 Khreschatyk Bank continued to stand fast its ground on Ukrainian financial market, achieving positive dynamics of its key performance indicators.
As of 01.01.14, Khreschatyk Bank was ranked among 180 Ukrainian banks: 1 ————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 180
in terms of capital in terms of assets
in terms of credit and investment portfolio in terms of corporate deposits
in terms of individual deposits
Khreschatyk Bank’s competitive advantages in key market segments • • • •
strength and stability promptness and flexibility quality and reliability synergy of business processes
2013 achievements Among the best again • Stable, positive development dynamics of our bank’s all key performance indicators, improvement of management and procedures, implementation of innovative products and services allowed Khreschatyk Bank to double improve its ranking in the independent research 50 Leading Ukrainian Banks, climbing to the 13th position in the overall rating of Ukrainian banks vs the 26th position in 2012, and become a leader in three nominations at once: Servicing Corporate Customers, Servicing Individual Customers at the Branch, and Overdrafts. In each of these ratings our bank was ranked among the five leaders. • The unique business hours of Khreschatyk Bank’s branches and the bank’s undoubted customer orientation became some of the decisive factors which elevated Khreschatyk Bank to the top ten most comfortable banks in Ukraine in 2013 according to Focus magazine. • Khreschatyk Bank is ranked among the top 20 most efficient banks of domestic financial market according to Forbes. It gives our bank confidence in the future performance, because, as the magazine’s experts noted, ‘efficient banks are more viable and have better capacity to withstand upheavals, they have better chances to survive the crisis and their customer have more reasons to trust them. • Khreschatyk Bank was traditionally ranked as the leader of Ukrainian market of precious metals at the V International Scientific and Practical Conference on Money Transfer, Bank Metals and Cash Markets organized by the international money transfer system AVERS, and also named 1st among corporate bond traders at PFTS Stock Exchange in 2013. • In 2013, our bank was included to the rating of the most secure banks in Ukraine (ranked 22th among 35 banks) by Correspondent magazine and the rating of the 20 largest electronic banks by Investgazeta business weekly. • On the eve of its 20th anniversary Khreschatyk Bank has received, for the third year in a row, a worthy professional award from the foreign colleagues: Deutsche Bank AG has awarded Khreschatyk Bank for achieving high quality of US dollar transactions in 2012 (the 2012 USD STP Excellence Award). Deutsche Bank’s representatives have noted that the share of transactions with the highest quality of documentation received from Khreschatyk Bank during reporting period has exceeded 99.8%. From now on, all payments made by our bank are SPT rated, which means ‘green channel’ for foreign economic transactions of our customers. • Khreschatyk Bank’s specialists received deserved rankings among the six best legal departments of Ukrainian banks and among the 50 best legal departments of companies of various industries (34th rank) in the Best Legal Departments rating by Legal Practice newspaper.
Customer-oriented = competitive • For almost 12 years in a row Khreschatyk Bank has been a reliable partner of the Pension Fund of Ukraine, serving as a PFU agent for payment of pensions and social benefits. During the entire period of cooperation Khreschatyk Bank has never been late on payments, always fulfilling its obligations with the ‘excellent’ mark. As of 01.01.14, over 47 thousand pensioners put their trust in our bank as a reliable partner, choosing Khreschatyk to receive pension and social assistance payments from PFU.
• Mortgage loans occupy a deserved place among the credit products for private customers: as part of cooperation with the State Mortgage Institution, we offer specific-purpose (under Khreschatyk Bank’s joint investment projects with property developers) and special loan programs to finance purchase of mortgaged property posted to Khreschatyk Bank’s balance. Our bank’s ability to provide help in solving a housing problem received worthy recognition from the nationwide trademark contest 2013 Favorites of Success, where our bank was ranked 1st in the Mortgage Loan nomination. If addition, for several year our bank has been consistently ranked among the five leaders in mortgage financing by the State Mortgage Institution. • For the fifth year in a row Khreschatyk Bank has been appointed an Individual Deposit Insurance Fund agent for payment of compensations to depositors of bankrupt banks, which proves our bank’s stability and high liquidity and the status of reliable partner. Khreschatyk Bank and IDIF have signed an appropriate agreement for 2013-2014. During this time, compensations to depositors of 23 liquidated banks were paid via Khreschatyk Bank. Out of the total payout amount (which reaches almost UAH 1.3 billion), 12% was deposited with Khreschatyk Bank, which became possible thanks to not only advantageous and flexible terms of the loyalty program specifically devised for depositors of this type but the high degree of trust in Khreschatyk Bank. • The large-scale social project The Kievite’s Card received the highest award at the annual Visa forum Go Together! • Simple, convenient and affordable – that’s the online banking philosophy lying at the core of Khreschatyk Online system. Today, this service for private individuals launched in January 2013 is also accessible from Khreschatyk Bank’s website. • Our bank has expanded its own CashTan ATM network to almost 80% of Kyiv Metro stations, thus providing reliable payment services to holders of Khreschatyk Bank cards. Khreschatyk Bank ATMs are available at 45 Kyiv Metro stations, and the total number of our ATMs in Kyiv’s subway has reached 50. • Khreschatyk Bank’s modern contact center opened in 2012 has received a new functional. In 2013, our bank has introduced an interactive information support system IVR, which facilitates prompt and quality servicing of the growing number of customers. Today, one doesn’t have to wait for an available contact center operator to receive information about our products and services: IVR system will provide automatic response to the most frequently asked questions. • The opening of the new option ‘Feedback’ on Khreschatyk Bank’s official page on Facebook became a logical step in creation of an open, customer-oriented bank. The new functional enables users to go to the ‘Ask our expert’ page of Khreschatyk Bank’s website and leave a comment or ask a question without exiting Facebook.
We are social and communicable • Khreschatyk Bank’s status of an open institution is proved by the results of the Goodwill-factor reputation study by the independent public opinion research company NOKs Fishes. Khreschatyk Bank was ranked 9th in the overall reputation rating of Ukrainian banks and among the leaders in terms of dynamics of approval rating (ranked 1st) and dynamics of bank awareness rating (ranked 4th). Also, our bank was named among the five leaders in the rating of openness and systemicity in CSR sphere according to the rating by GVardia`500. Rating of Socially-Responsible Ukrainian Companies 2013 and among the ten leaders in openness and transparency according to the Ukrainian Credit Rating Agency (UCRA) and IBI-Rating agency. • NOKs Fishes experts have noted the unique structure of Khreschatyk Bank’s media field, ranking our bank 2nd among Ukrainian banks in 2013 in terms of quality of resonance of publications in mass media, 4th in terms of probability of contact with target audience, and 5th in terms of mass media’s loyalty to the bank. • Khreschatyk Bank’s readiness to frank dialogue and provision of credible information were also noted by representatives of the ‘fourth branch of power’ in Ukraine. According to the survey of almost 30 leading financial journalists conducted in late 2013 by the independent public opinion research company NOKs Fishes which asked the journalists to evaluate performance of banks’ press offices, Khreschatyk Bank’s press service was ranked 2nd in the overall rating. • In the Annual Report nomination at the nationwide contest The Best Corporate Media in Ukraine in 2013 our bank received the highest award, the Grand Prix.
Dmytro Grydzhuk, Chairman of Khreschatyk Bank Management Board • Named among the ten leaders of financial sector according to the nationwide rating Top-100. The Best Managers of Ukraine 2013. • Named among the three most stable bankers in The Best Banks and Bankers of Ukraine 2013 rating by Contracts weekly.
Strategic line: customer orientation Confidence, reliability and stability are the best features of Khreschatyk Bank whose mission remains the same for many years and reflects profound understanding of the fact that banking business is based not only on capital but involves, first of all, people, their needs and expectations.
Mission • • • •
Banking products and services of the highest quality for every corporate and private customer Diversified business Innovative technologies as the basis for improved efficiency Guaranteed security and continuous increase of customer and shareholder funds
Values • • • • • •
Customer trust is the greatest virtue for us Reliability is the guarantee of our strength and stability Openness: transparent and understandable for the society relationship with the environment Universality: comprehensiveness of offers for every industry, solution of any financial problem for the public Team: knowledge, potential, energy and creativity of everyone make the team strong Business’s social dimension: social responsibility in every operation and every action
Key strategic areas: • • • • • • • • • • •
improvement of customer-oriented business model; bank’s capitalization and maintenance of required level of liquidity and optimal ratio of resource base’s elements; continuous actualization of the bank’s management system and proactive changes in risk management considering market processes; continuous development of product line geared to meet the needs of various business and private customer categories; implementing competitive pricing policy simultaneously with achieving maximum possible profitability of our operations; enhancing sales technologies: algorithms and business processes, providing support and continuous implementation of remote service channels; supporting regional outlets in comprehensive sales of Khreschatyk Bank’s products and services with centralization of decision making at the headquarters and preservation of competitive advantages in regions; improving effectiveness of all operations and optimizing expenses; encouraging teamwork and strengthening corporate spirit; improving brand awareness and approval ratings, protecting reputation gains; establishing efficient communications on the basis of openness and transparency principles, providing prompt and comprehensive information to all audiences.
Khreschatyk Bank has proved the efficiency of its business model whose main elements include universality and effectiveness in various sectors of economy, prudent risk management, diversified funding, high-tech infrastructure and extensive regional network.
Bank capitalization: prudence and responsibility A bank’s capital – the basis of the financial institution’s strength and stability – sets the maximum amount of operations with assets, amount of deposit base, ability to borrow on financial markets, maximum loan amounts, amount of open currency position and a number of other important indicators which have substantial bearing upon a bank’s performance and increase of its profits and income of its shareholders.
Growth of Khreschatyk Bank’s authorized capital, millions of UAH, as of 01.01 of relevant year 0 ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 1 000
2008 2009 2010 2011 2012 2013
540 540 617.76 728.86 828.83 828.83 Khreschatyk Bank’s authorized capital is divided into 724 500 ordinary shares with the nominal value of UAH 1 144 each. Khreschatyk Bank’s shares are serviced by the National Depository of Ukraine PJSC, and operations with Khreschatyk Bank’s shares on securities accounts of shareholders are handled by Khreschatyk Bank and other depositary institutions with which shareholders have separate agreements.
The structure of Khreschatyk Bank’s authorized capital is maximally public and prudently diversified. Structure of Khreschatyk Bank’s shareholders as of 01.01.14 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
Finance Department, Kyiv City State Administration Ukrfinkom LLC Market Invest Group LLC Finval Group LLC Summermar Investments Municipal utility companies Other corporate shareholders Individual shareholders
0.0605% 0.1264% 0.0391%
As of 01.01.14, the total number of shareholders was 37, including 12 corporate (of which 1 was a nonresident) and 25 individual shareholders. Legal entities held 99.8736% of Khreschatyk Bank’s shares, while individuals held 0.1264% of our bank’s stock. Khreschatyk Bank’s management holds 0.0766% of the bank’s stock. Up-to-date information about Khreschatyk Bank’s major shareholders is available at: http://www.xcitybank.com.ua/akcionernyy-kapital/
As of 01.01.14, Khreschatyk Bank held minor stocks in the following companies: • All-Ukrainian Securities Depository PrJSC: 0.2155% of authorized capital; • PFTS Stock Exchange PrJSC: 0.0625% of authorized capital; • Visa Inc.: US 0.1421, or UAH 1.11. Khreschatyk Bank PJSC has no subsidiaries but is the sole founder of Khreschatyk Open Nongovernmental Pension Fund which has the status of nonprofit organization. For detailed information about Khreschatyk ONPF, click here: http://www.xcitybank.com.ua/pro-fond/
Regulatory capital sufficiency norm (N2), as of 01.01 of relevant year 0% ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 20%
2006 2007 2008 2009 2010 2011 2012
13.73% 17.69% 16.19% 15.72% 17.73%
During 2013 Khreschatyk Bank has never fallen below the regulatory capital sufficiency norm, with the minimum and maximum values of this parameter being 11.28% and 13.62%, respectively. For detailed information, click on the links below: http://www.xcitybank.com.ua/zagalni-zbori-akcioneriv/ http://www.xcitybank.com.ua/zvitnist-emitenta/ http://www.xcitybank.com.ua/osobliva-informaciya/
Ratings by authorized rating agencies National ratings The high quality of Khreschatyk Bank’s assets and our bank’s liquidity and solvency are proved by the key ratings assigned by the independent rating agency Credit Rating: • Khreschatyk Bank’s long-term credit rating uaA, stable forecast (last updated on 27.02.14) • long-term credit rating of debt obligations uaA, stable forecast (last updated on 27.02.14)
Deposit security rating:
• independent rating agency Credit Rating: level 4 (last updated on 28.08.14) • independent rating agency Standard Rating: the highest security level ua.1 (рі) (last updated on 11.06.14).
Khreschatyk Bank’s independent audits are carried out by experienced professionals
• independent audit firm RSM APiK: according to the International Financial Reporting Standards on the basis of accounting data kept in accordance with NBU regulations.
Audit summary Khreschatyk Bank’s financial statements accurately reflect, in all essential aspects, the bank’s financial standing as of 31.12.13, its financial results and cash flows for the past year as of the above date in accordance with the International Financial Reporting Standards and requirements of the National Bank of Ukraine concerning disclosure of information in annual financial statements, set out in Resolution of the Board of Directors of the National Bank of Ukraine No 373 of 24.10.11 On Approval of the Instruction on the Procedure of Filing and Publishing Financial Statements of Ukrainian Banks (with the exception of potential effect on financial statements of the matter dealt with in the paragraph ‘Reason for expressing a conditionally positive opinion’). To receive a hard copy of the report of the independent auditors, please contact the Khreschatyk Bank’s international clearing center at: (+38 044) 536-97-17. Electronic copy of the independent auditor’s report is available here: http://www.xcitybank.com.ua/finansova-zvitnist/
Financial statements: figures prove Dynamics of financial results, increased business turnover, enhancing technology basis and improving quality of service, availability of required level of liquidity and solvency, and stability of competitive advantages all proved effectiveness of Khreschatyk Bank’s performance in 2013.
Main sources of increased profitability • • • • •
centralization of the bank’s management development of investment and retail (including card) business growth of documentary and custodial services improvement of asset quality optimization of expenses by reengineering the bank’s organization
Dynamics of the key performance indicators, growth rate 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 120%
113.3% 117.6% 116%
113.4% 13.9% 12.8%
Credit and investment portfolio
112.3% Khreschatyk Bank
2013 financial result: UAH 7.7 million The share of noncommercial operations within the structure of Khreschatyk Bank’s income (+29.4%) has increased 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
69.0% interest income
Khreschatyk Bank’s 2013 financial statements are available here: http://www.xcitybank.com.ua/finansova-zvitnist/
11.7% other income
Resource management: strategy for the future, controlling the present Efficient resource management at Khreschatyk Bank is seen in the quality, steady, ever-growing inflow of net interest income with simultaneous maintenance of adequate liquidity and acceptable level of all risks. In 2013, Khreschatyk Bank’s balanced resource base became the foundation for consolidation of our bank’s positions on financial market, enhancement of the bank’s competitiveness and consistently high degree of trust in it.
Li a + bili 4. tie 2% s
share of assets: credit portfolio and customer accounts receivable:
A + sse 4. ts 2%
share of customer funds in liabilities:
Khreschatyk Bank’s key resource performance indicators, millions of UAH 0 —————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 10
2.39 Individual funds
3.5 3.38 8.45
8.11 Credit and investment portfolio 2013
During 2013, net liabilities have increased by 4.2% or UAH 329.8 million.
The structure of Khreschatyk Bank’s liabilities proves the high degree of customer trust in our institution.
Structure of Khreschatyk Bank’s funding base 0% ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 35%
8.4% 7.3% Individual call deposits 6.9% 34.2% 34.8%
Individual term deposits
3.4% 3.7% Subordinated debt 3.8% 0.8% Other liabilities 0.9% 2013
Khreschatyk Bank’s interest policy on borrowing customer liabilities was in line with the trends in the banking system, which helped increase the amount of customer resources by UAH 541 million.
During 2013 the net assets have increased by 4.2% or UAH 337.3 million. The structure of assets is based on weighted risks and sufficient diversification.
Structure of Khreschatyk Bank’s assets 0% ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 60%
16.16% Cash and cash equivalents 18.2%
Loans and customer accounts receivable
56.14% Securities in the bank’s portfolio for sale
17.89% 9.84% 7.76% 2013
Fixed and other assets
The share of problematic debts does not exceed the banking system’s average, while the amount of reserves for operations with assets is 2.7 times lower. 0% ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 13%
Share of overdue accounts in credit portfolio
Share of reserves for operations with assets in credit and investment portfolio Khreschatyk Bank
During 2013, Khreschatyk Bank maintained strict compliance with economic and mandatory reservation norms.
Norm Regulatory capital, N1 Regulatory capital/solvency adequacy norm, N2 Regulatory capital to aggregate assets ratio norm, N3 Regulatory capital to bank’s liabilities ratio norm, N3-1 Instant liquidity norm, N4 Current liquidity norm, N5 Short-term liquidity norm, N6 Norm for maximum amount of credit risk per counteragent, N7 Large credit risks norm, N8 Norm for maximum amount of loans, guarantees, and sureties issued to one insider, N9 Norm for maximum aggregate amount of loans, guarantees, and sureties issued to insiders, N10 Securities investment norm per each issuer, N11 Total investment amount norm, N12
at least UAH 120 million at least 10% at least 9% at least 10% at least 20% at least 40% at least 60% not exceeding 25% not exceeding 800%
923.4 11.89 10.94 - 41.06 69.71 80.71 18.34 470.23
980.44 11.82 10.71 12.02 32.37 53.28 73.43 21.80 524.34
not exceeding 5%
not exceeding 30% not exceeding 15% not exceeding 60%
2.24 0.04 0.05
2.50 0.04 0.05
Limits on the bank’s currency position are always at a secure level: • general long open currency position: 1.5% (normative value: not exceeding 5%); • general short open currency position: 6.11% (normative value: not exceeding 10%).
Liquidity management helps Khreschatyk Bank: • preserve reputation of a solvent, stable financial institution capable of settling all its debt obligations in due time; • fulfill current obligations to customers and continuously meet their needs in borrowed funds; • avoid losses caused by unjustifiably expensive borrowings on the market or urgent sale of assets at a price lower than their real value.
Risk management: responsibility of all and everyone Khreschatyk Bank continuously controls possible threats that occur in the ever-changing environment of the world and Ukrainian economy. Therefore, the key principles of risk management include advanced banking experience and the principles accepted in international practice and set out in recommendations of the Basel Committee for Banking Supervision and Regulation.
Strategic priorities of risk management: • unconditional and timely fulfillment of all our contractual obligations; • efficient use of our bank’s resources while avoiding mistakes; • minimization of losses from operations with assets via individual assessment of every customer’s risks and individual responsibility for risks; • balanced structure of assets and liabilities; • controlling capital sufficiency level; • accepting the risk and receiving appropriate compensation (economic benefits).
Khreschatyk Bank’s risk management system has the following main levels:
Risk Management Committee under the Supervisory Board
Credit Committee for Individual Financing
Credit Committee for Corporate and Sole Proprietorship Financing
Asset and Liability Management Committee
Risk Management Department
• The Supervisory Board is represented by the Risk Management Committee to which the rights and duties of implementing and controlling observance of the risk management policy are delegated. • The Management Board partially delegates its responsibilities to specialized collegiate executive bodies concerned – permanent committees. • The Risk Management Department is a Khreschatyk Bank’s subdivision which has the following key responsibilities: -- identification, monitoring, and analysis of banking risks; -- timely response to risks inherent in new products and operations; -- improvement of existing banking risk identification, monitoring, and analysis methods considering legislative and regulatory acts, external and internal factors affecting the bank’s performance in order to improve the risk management system. • The bank’s financing and investment operations represent the main source of credit risk. Efficient management envisages assessment of concentration and diversification of the bank’s assets and control over timeliness and completeness of fulfillment of contractual obligations. • The bank continuously controls concentration risk by maintaining diversified structure of its assets at the level of every separate contract and at the level of interrelated suppliers. Insurance of particular risks represents an additional risk minimization instrument.
• To minimize market risk we employ one of the most commonly-used market risk identification and assessment methodologies in the world banking practice, the VaR methodology, and the appropriate software. The above methodology helps aggregate various market risks into one amount (maximum amount of losses), expressed in monetary terms. • Foreign exchange risks are managed by setting and periodically revising limits on the open foreign currency and bank metal positions. When processing foreign exchange transactions, Khreschatyk Bank uses Reuters Dialing and Telex systems. All agreements are registered via Val-Cli system. • Minimization of interest risk is guaranteed by continuous monitoring and adjustment of interest rates on operations with assets and liabilities by banking products and terms. Performance efficiency is maintained by using efficient internal pricing system based on a special methodology of determining transfer price for resources, which has at its core the principle of centralized model of managing the bank’s liquidity. • In order to efficiently manage and minimize liquidity risk the bank determines, on the daily basis, and adjusts own liquid position. A special action plan was developed for crisis conditions and the necessary reserves were created to maintain the bank’s uninterrupted performance with the preset level of liquid assets should amount of borrowed resources suddenly shrink. • To minimize legal risk the bank has efficient internal normative framework that covers all areas of the bank’s activities. • The bank’s reputation risk is closely related to reputation of our customers and counteragents and to quality of the bank’s assets. In addition to having specialized subdivisions, security department and financial monitoring department, our bank actively uses special databases containing information about our existing and potential counteragents. The bank’s special internal documents stipulate the list of classified information. • Operational risk is managed by improving internal organization and document flow system, optimizing operational procedures, improving banking software and taking other action. • Minimization of information technologies-related risks is achieved by continuous upgrade of hardware and software systems, creation of backup resources to protect information, using uninterrupted power supply systems and alternative communication channels. Khreschatyk Bank’s information protection system is organized in accordance with regulatory acts of the National Bank of Ukraine and incorporates the best practices of corporate governance related to information technologies.
Khreschatyk Bank’s risk management system includes: • • • • •
list of bank-recognized risks and their significance; methods of assessing the main types of risks which our bank faces; degree of the bank’s tolerance of all types of risks; a system of limits and restrictions, information and analytical support, and pricing for asset and liability operations; controlling observance of existing limitations/restrictions.
Internal audit and control: preventing and protecting The key basis of Khreschatyk Bank’s internal control system is the set of moral and ethical norms, professional performance standards and corporate culture aimed at realization by personnel at all levels of the importance, significance and indispensability of control.
Khreschatyk Bank’s internal control system ensures: • • • • • •
effectiveness of operations; efficiency of asset and liability management, including asset preservation; accuracy and timeliness of financial and managerial information and reports; information security; compliance with requirements of law, rules and standards; management of banking risks on consolidated basis.
Audits are aimed at: • assessing effectiveness and efficiency of internal control and its adequacy to the degree of potential risks to which various spheres of the bank’s activity are exposed; • maintaining ongoing control over the bank’s operations; • controlling compliance with law, regulatory acts of the National Bank of Ukraine and resolutions of Khreschatyk Bank’s administrative bodies; • timely identification and prevention of deviations which obstruct lawful and efficient use of the bank’s funds and property; • reducing risks in operations associated with rational and efficient use of the bank’s resources; • unbiased and objective assessment of the bank’s financial, operating and other systems and controlling procedures, evaluation and analysis of compliance by Khreschatyk Bank’s officials and personnel with the bank’s Charter and internal regulations with regard to conduct of operations within the scope of the banking license or permit to conduct particular banking operations issued by the National Bank of Ukraine.
During 2013 the Audit and Control Department has carried out 12 audits, prepared relevant auditor’s opinions and provided recommendations on the ways of improving internal control system and risk management quality.
Customer orientation: market leadership At Khreschatyk Bank, efficient relationship with any customer category is based on the principle of uniqueness of every one of them, which provides foundation for improvement of our competitiveness, business reputation and positive image.
Main principles of customer orientation: • upholding the image of a truly open bank always fulfilling its obligations; • continuous saturation of the range of products and services with developments that will help, first of all, the customer and also our bank to receive acceptable level of income; • providing personalized customer service and striving to meet their expectations; • improving efficiency of additional and cross-sales of various products; • prompt and flexible decision making; • affordability of banking products and services achieved by applying advanced technologies.
Elements of the mechanism of implementing Khreschatyk Bank’s customer orientation • • • • •
In-depth understanding of customer needs Ability to offer optimal and mutually-beneficial package of products and services Loyalty programs Strict performance of duties by Khreschatyk Bank’s managers and front office specialists Efficient use of Terrasoft CRM software
Understanding business and personal preferences of our customers and helping them succeed in their business and life are the levers that work to boost customer trust in our bank and, therefore, increase their number regardless of the form of ownership. Dynamics of customer number growth, % to relevant year 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
2,8% 11.2% 93.4%
2013 0.6% Corporate
In 2013, almost every fifth business customer began doing business with our bank at recommendation of a partner which is either a Khreschatyk Bank customer or has business relationship with our customers.
Correctly devised customer orientation strategy envisages comprehensive use of various communication channels to interact with customers. In 2013, the main area of our efforts to improve customer service quality was a thorough study of customer needs and opinions. We have implemented a uniform system of handling customer inquiries, where the main element is review of customer inquiries in the shortest possible time involving subdivisions and regional branches concerned.
Key principles of operation of Khreschatyk Bank’s contact center: • • • • • •
24/7/365 mode; minimizing time spent by the customer to receive answers to his inquiry; minimizing the order of connection to customers on the line; routing incoming calls to operator groups depending on their qualification; optimal IVR menu for calls to contact center’s any number; efficient conversation recording system enabling to search for, listen to and copy any conversation to resolve difficult, controversial situations; • disseminating knowledge of our bank’s new products and services, possibility of calling Khreschatyk Bank’s customers, partners and regional branches to notify about, survey and promote product promotions, advertising campaigns, etc. (telemarketing).
Since the operational launch in August 2013, Khreschatyk Bank’s 24-hour contact center received almost 232 thousand calls with inquiries concerning various aspects of service. The number of questions to Khreschatyk Bank’s experts asked via the interactive communication form on our website has increased by 53%, reaching almost 1 230. The opening of the new option ‘Feedback’ on Khreschatyk Bank’s Facebook page became a logical step in the formation of an open, customer-oriented bank. The new functional enables users to go to the Ask Our Expert page on Khreschatyk Bank’s official website and leave a comment or ask a question without leaving Facebook. During 2013, Khreschatyk Bank took special efforts to improve financial literacy of the broad public in general and our customers in particular by: • our experts commenting on the state of domestic and world economies in general and banking sector in particular, certain events occurring in financial sphere and reported by nationwide and regional mass media; • issuing the corporate magazine Khreschatyk Bank Bulletin intended, first of all, for our customers and partners; • maintaining the interactive column Financial Advisor on Khreschatyk Bank’s corporate website; • participating in nationwide and regional events, in particular, scientific and practical conferences, business forums, round tables with participation of mass media, practical seminars featuring civic and specialized organizations, such chambers of commerce and industry, institutions of higher education, etc.; • PR support of Khreschatyk Bank’s specialized programs for private individuals, in particular, financial education program A Step Into Life, large-scale social project The Kievite’s Card, etc.
Efficient communications: strong brand and stable reputation Brand and communications management is an important area of our work on increasing Khreschatyk Bank’s value, strengthening its image and reputation on the market. At the same time, communications policy is determined, first of all, by business engagements which shape the principles of a successful brand strategy.
Principal reputation formation factors in 2013: • • • • •
guaranteed quality of service, personnel loyalty and high level of service; strict fulfillment of our obligations to customers and the market; highlighting a socially-significant idea lying at the core of our bank’s activity; Khreschatyk Bank’s praise in mass media, approving public attitude toward our institution; high business and personal reputation of the top managers, staff of the head office and representatives of the bank’s regional branches.
Market experts regard social orientation and honesty as our bank’s strengths: • in terms of customer policy: as a loyal bank respecting the customer; • in terms of business: as a consistently conservative and advantageous bank; • in terms of image presentation: as a public and open, i.e., transparent bank.
In terms of reputation characteristics, Khreschatyk Bank has for several years in a row been consistently ranked among the ten leading Ukrainian banks. Our bank devotes substantial attention to timely, accurate and complete informing of customers, partners and all stakeholders as the basis for efficient dialogue with the society, as proved by the low amount of information with negative tonality in mass media mentioning of Khreschatyk Bank in 2013. In terms of the number of positive mentions in mass media this year, Khreschatyk Bank is ranked 1st on the market.
Tonality of mass media resonance: 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
Key indicators of quality of Khreschatyk Bank’s media activity in 2013 • • • • • • •
ranked 1st in terms of the number of positive mentions ranked 1st in terms of the media presence of Dmytro Grydzhuk as the bank’s CEO ranked 2nd in terms of abundance of mass media mentioning causes ranked 2nd in terms of the number of publications with event presence, i.e., market news ranked 3rd in terms of the ‘Speakers in Mass Media’ indicator ranked 5th in terms of the loyalty of mass media toward the bank’s mentioning causes ranked 4th in terms of the quality of contact with the bank’s target audience
In 2013, Khreschatyk Bank was mentioned 7 393 times in mass media, or almost 20 times a day. The aggregate monetary equivalent of the media resonance in 2013 amounts to UAH 154.178 million.
Khreschatyk Bank continuously takes care of modernization and improvement of its communication channels, including corporate publications. The main objective of upgrading our corporate website www.xcitybank.com.ua and integrating in it a unique project featuring our bank’s own TV channel Khreschatyk TV launched in early 2014 was to establish efficient, virtually online-type communication with customers regardless of where they are. For the first time in the history of Ukrainian banking market, such a channel of communicating with customers as webpage has attained a modern adaptive solution, which means that Khreschatyk Bank website does not lose any of its elements on any advanced gadget connected to the Internet: laptop, tablet, mobile devices, etc.
During 2013 the number of visitors to Khreschatyk Bank’s corporate website has increased by 12.31%, with the number of unique visitors among them growing by 22.61%. Over 2 million pages were viewed, which is 17.8% more than in 2012. The average duration of visit to our website has also grown (by 8.41%). The number of active users during a day is 801. These website viewing dynamics proves that its informative content meets the customer needs. Khreschatyk Bank’s presence in the social networks Facebook and Twitter proved itself among our customers and new media users as a source of credible information about our bank, contemporary market issues and useful advices for any occasion in life and as an instrument of communication with our representatives who will provide extensive comments and share experience. http://www.facebook.com/xcitybank.com.ua http://twitter.com/xcitybank
High quality of our corporate publications stems from their objectives: • maintaining business reputation of a successful bank; • helping customers with information on a whole number of financial matters; • cultivating loyalty to our bank among mass media. Khreschatyk Bank’s 2012 Annual Report Thoughts Aloud, or Elements of Existence has won the Grand Prix at the nationwide contest The Best Corporate Media of Ukraine 2013. Khreschatyk Bank’s corporate daybook Wisdoms and Sapience. Important Rules from Childhood and a special issue of the Khreschatyk Bank Bulletin received second prizes at this contest. The Diploma for Professionalism and Formation of Quality Communication Standards in Banking Sphere of the nationwide contest The Best Corporate Media of Ukraine 2013 went to our Wallet payment card, while the 2013 calendar Great Words about Great Cities received the Diploma for an Original Idea and Professional Implementation. All Annual Reports of Khreschatyk Bank are available here: http://www.xcitybank.com.ua/richni-zvity/ All issues of the Khreschatyk Bank Bulletin: http://www.xcitybank.com.ua/visnik-banku-khreshchatik/
Clearing center: justifying the partner trust In 2013, despite the difficulties experienced by the world and national economies, Khreschatyk Bank retained at the proper level its stable position of a market maker for key financial products, including on the interbank foreign exchange market.
Factors behind Khreschatyk Bank’s successful performance on the interbank market: • availability of General Agreements; • adherence to risk limits; • controlling risk levels.
During 2013, our bank made conversion payments on the domestic and foreign financial markets for the total of UAH 41.2 billion. In 2013, Khreschatyk Bank had General Agreements on interbank and conversion transactions in the national and foreign currencies with 176 counteragent banks. In order to improve quality of our services and expand the list of new services offered to customers and partner banks, during 2013 Khreschatyk Bank continued to actively develop relations with Ukrainian and foreign financial institutions. The extensive network of nostro- and loro-type correspondent banks allowed our bank to create optimal conditions to handle the customer service-related matters, in particular, prompt and interrupted processing of payments in all directions, and to support operations of the bank’s treasury department by short-term borrowing and investing, currency purchase-sale transactions and operations with securities.
As of 01.01.14, Khreschatyk Bank had 97 nostro-type correspondent accounts in 25 currencies opened with 49 banks. As of 01.01.14, the number of loro banks serviced by Khreschatyk Bank reaches 116 financial institutions, including 14 nonresidents; 692 loro-type correspondent accounts are opened in 24 currencies.
Thanks to active cooperation with nostro banks: • the nostro bank network has grown by 5 correspondent accounts, nostro accounts were opened at 19 Ukrainian banks; • the average daily balance of nostro accounts amounted to the equivalent of UAH 921 million, which is 1.2 times more than in 2012; • number of transfers: 62 thousand, which is 2.8 times more than in 2012.
Structure of nostro account balances 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
73.21% US dollar
14.89% Bank metals
10.01% 1.17% 0.72%
For the list of main nostro-type correspondent banks, click here: http://www.xcitybank.com.ua/cuprovodzhennya-zovnishnoekonomichnoi-diyalnosti-/
Factors behind Khreschatyk Bank’s successful performance as a clearing center: • • • • • •
individual approach; comprehensive service; full range of interbank services; competitive fees and interest rates on correspondent account balance; same-day, quality processing of payment transactions; loyalty program for loro banks.
Indicators of successful business with loro banks: • the loro network has expanded by 8 banks and 81 accounts; • the aggregate balance of loro accounts has exceeded UAH 893 million; • credit turnover has increased: -- in US dollars: 1.26 times; -- in British pounds: 1.71 times; -- in Swiss francs: 4.41 times; -- in gold: 3.03 times. • number of transfers: over 35.9 thousand, which is almost 59% more than in 2012; • debt settlement transaction fee revenues: UAH 2.45 million, almost doubling the last year’s indicator.
Structure of loro account balances 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
83% US dollar
A Bank for Banks, a comprehensive service program for financial institutions is aimed at: • optimization of service costs for Khreschatyk Bank’s partners; • application of a flexible individual approach, particularly when setting interest rates and fees for existing services.
During 2013, Khreschatyk Bank has introduced new and improved existing products for partner banks: • the process of generating statistical reporting files, form 1-PB was automated; • OUROUR transfers, processing of customer US dollar-denominated money transfers by Khreschatyk Bank without incurring fees charged by U.S. banks were activated; this service guarantees that the payee receives full amount of a customer’s money transfer in US dollars; • a direct correspondent account in Kazakhstani tenge was opened at Kazkommerzbank JSC (Almaty, Republic of Kazakhstan) with the appropriate regulation of money transfers in this currency; • MoneyGram money transfers are now available not only in euros but also in US dollars; • effective September 2013, interest rates on US dollar and euro correspondent account balances of correspondent banks were upped, and the interest rate applicability scale was changed; • new services were implemented: sponsoring and processing servicing of loro banks’ payment card transactions and connection of POS terminals, issuance and servicing of payment cards from international payment systems, and serving as a guarantor bank for these systems to apply for the status of a MasterCard Worldwide affiliated member and a Visa International associated member, support of partner banks’ membership in these systems. Everything about cooperation with financial institutions: http://www.xcitybank.com.ua/finansovim-ustanovam/
International relations: integrating in the world financial system Khreschatyk Bank’s transformation into a European financial institution stems from our bank’s strategy on international capital markets and high business reputation in the world financial community.
Cooperation continued with the world financial community: • with the international money transfer systems MoneyGram, Western Union, UNIStream, Anelik; • with international financial institutions, in particular, Priority Pass Limited providing access to premium lounges in most airports across the world, Corporation Service Company (USA) providing Registered Agent services in the United States for existence of direct correspondent accounts with three U.S. banks.
With international payment systems During 2013, cooperation continued with Visa International and MasterCard Worldwide, as well as the work on implementation of various joint projects, including merchant acquiring of payment cards, sponsorship support of partner banks’ applications for membership in international payment systems as affiliate/associated members. At the same time, our bank provides a complex of services required for our partner banks to operate on the payment card market: • package of information and consulting services and methodological support; • assistance in developing card design and selecting a manufacturer of plastic card blanks; • training the partner bank’s personnel on interacting with payment systems and card issuance technology-related matters; • acting as a clearing bank for settlement of debt to customers and international payment systems; • representing partner bank’s interests before international payment systems; • technological servicing of payment cards; • 24/7 consulting support and transaction monitoring. In addition, when servicing our partner banks via Khreschatyk Bank’s processing center we also offer maintenance of terminal hardware, 24-hour customer support, SMS banking, licensing and certification, complaint handling, etc.
With other international institutions • An agreement was signed with American Express (USA), enabling Khreschatyk Bank to distribute payment cards from this international payment system (Green Card, Gold Card, Platinum Card) and offer our customers exclusive cards of the highest class, Centurion Black Card with the unique package of additional services and loyalty program. • An agreement was signed with Deutsche Bank Trust Company Americas (USA) and Сommerzbank AG (Germany) to enable direct cashing of personal and traveler’s checks drawn on Khreschatyk Bank in seven world currencies at competitive rates. • We regularly update information about Khreschatyk Bank for our partner banks and international financial institutions in the world’s leading financial and economic publications, such as Thomson Financial Publishing, The Banker, Bureau van DIJK, SSI Publishing, The Global Banking Resource (TGBR), Bankers Almanac concerning our bank’s financial performance indicators, cover information about the bank’s organization, top management and shareholders, the bank’s ratings, etc. Every year Khreschatyk Bank participates in The Banker Awards contests, Bank of the Year and Financial Inclusion Awards, and in the nomination International WHO’S WHO of Professionals by the international publication WHO’S WHO. Khreschatyk Bank’s active membership in S.W.I.F.T. enables prompt processing of customer and interbank transactions worldwide while offering high transaction security and lower transaction costs in any currency.
The total number of financial institutions with which Khreschatyk Bank has SWIFT keys has reached 440. Everything you want to know about our cooperation with financial institutions: http://www.xcitybank.com.ua/finansovim-ustanovam/
Corporate business: high quality, long-term potential In the corporate segment of market, Khreschatyk Bank’s strategic focus is aimed at providing comprehensive and flexible service to every customer, individual approach and continuous improvement of their quality.
Khreschatyk Bank’s key competitive advantages: • • • •
wide product range; preciseness and promptness of high-quality services; application of advanced banking technologies; vast industry experience, including in cooperation with public and civic organizations, bodies of local self-governance and municipal companies.
Main development priorities in 2013: • improved effectiveness of interaction with customers of various forms of ownership based on their life cycle, and signing up new customers; • diversification of customer base to reduce risks, intensification of work on strengthening customer trust in our bank; • development of new products on customer requests, intensification of cross-sales; • increasing the number of wage project, expansion of acquiring network.
Corporate funds, millions of UAH 0 ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 3 000
684 2 824
1 936 term
In 2013 the aggregate amount of corporate funds has grown by 29.8%. Structure of customer funds by areas of business 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
3.85% Finance Extractive industries Construction Agriculture, forestry and hunting Trade and service sphere Processing industry Transportation and telecommunications Other sectors of economy
In 2013, positive dynamics of corporate business-generated fee income in the structure of Khreschatyk Bank’s revenues remained stable: UAH 3.5 million, or + 5.1%. Business services: http://www.xcitybank.com.ua/forbuisness/
In 2013, corporate financing was aimed at: • • • • •
search of new, economically prospective borrowers; increasing financing limits for existing borrowers showing positive business growth dynamics; developing individual package of credit services for every borrower; developing standard products for corporate financing; improving financing-related services to expedite review of loan applications and ensure timely and quality satisfaction of customer needs in credit resources.
Main principles of corporate financing: preservation of quality and yield rate of credit portfolio. When reviewing financing applications, the main attention was focused on studying the borrower’s creditworthiness, analysis of its financial and business standing, effectiveness of business plan and development prospects, availability of steady account activity.
Corporate loans issued, millions of UAH 0 ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 8 000
6 149 406
7 551 392
7 159 hryvnia
The amount of corporate financing has grown by 22.8%. Khreschatyk Bank continued to adhere to conservative principles in formation of the credit portfolio structure to diversify risks by sectors of economy.
Structure of loans by areas of business 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
7.5% 3.7% 3.4%
Public administration Construction Real estate, lease, engineering and services Food industry Extractive industries Textile industry Trade and service sphere Agriculture, forestry and hunting Transportation and telecommunications Finance Education Other
6.9% 5.7% 1.9%
Khreschatyk Bank continues servicing Kyiv’s municipal programs: • financial support of business entities: UAH 1.3 billion in financing was provided since 2001 for: -- development of export-oriented products, services and technologies; -- modernization, upgrade and purchase of production fixed assets; -- financing of energy-saving and environmentally-friendly technologies implementation projects; • financial support of Kyiv’s municipal utility companies, public transport and rapid transit systems, municipal pharmacy chain and bakeries: UAH 188 million was provided in 2013.
Despite the economic and social problems, our bank continued implementing the program of long-term financing of customers’ import operations using funds provided by foreign banks under agreement with Lundes Bank Berlin. As of 01.01.14, the outstanding accounts payable under this program amounted to EUR 1 154 thousand.
During 2013, Khreschatyk Bank issued: • UAH 299 million in overdrafts; • UAH 188.9 million in guarantees; • UAH 3.69 million in promissory notes endorsements.
Handling problematic assets Considering the problems at companies which were unable to repay their loans by the due date, Khreschatyk Bank focused its efforts on economically substantiated restructuring or prolongation of existing accounts payable by these borrowers. In 2013, the share of overdue accounts amounted to 7.6% of the bank’s total credit portfolio, and the amount of reserves to cover possible losses from credit operations of corporate customers was reduced by 11%. Business loans: http://www.xcitybank.com.ua/krediti-dlya-biznesa/
Cash transactions and cash collection services In 2013, turnover of cash transactions remained at the last year’s level, amounting to UAH 67.0 billion. This year’s income from cash transaction processing services was UAH 32.6 million. In 2013, cash collection department’s efforts were aimed at optimizing cash transportation cost price and reducing unproductive travel of armored vans.
In 2013, actual income from cash collection and valuables transportation services amounted to UAH 4.05 million. Cash transaction processing and cash collection services for businesses: http://www.xcitybank.com.ua/rozrakhunkovo-kasove-obslugovuvannya-biznes/
Stock market: prudent management and many years of experience Khreschatyk Bank’s stock market strategy is based on its competitive advantages and effectiveness of investments in highly-liquid securities as a respectable asset.
Investment principles: • • • •
investing in liquid securities from reliable issuers; optimizing the ratio between securities yield and associated risks; diversification of securities portfolio; maintaining an optimal ratio between investments in securities of various sectors of economy: public, municipal, financial and nonfinancial.
During 2013, turnover of operations with securities amounted to UAH 7.54 billion and US 25 million. In 2013, Khreschatyk Bank received UAH 348 million in income from operations with securities, which is 3.7 times more than in 2012. Sufficiently diversified structure of securities portfolio 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
82.41% corporate bonds
government bonds and government-backed securities
For the entire period of Khreschatyk Bank’s operation on stock market not a single instance of default was recorded. Khreschatyk Bank has all licenses required to provide brokerage and dealer’s services • 1 064 brokerage service agreements were signed during 2013; • the total amount of agreements made by Khreschatyk Bank as a securities trader exceeds UAH 9.15 billion, including over UAH 7.38 billion in agreements as a dealer; • amount of brokerage agreements: UAH 1 762.6 million.
Khreschatyk Bank remains one of the most active leaders among depository banks according to rating by the Professional Association of Registrars and Depositories Factors behind the increase of depositary assets despite the decline of stock market indexes: • signing up issuers from depositories which ceased depositary operations; • handling the floating of securities from the State Property Fund of Ukraine: -- depositary servicing of agreements made on the stock exchange orders market; -- providing services to value added tax payers on VAT reimbursements with domestic government loan bonds; • servicing operations with government securities issued in US dollars.
Dynamics of Khreschatyk Bank’s depositary activity indicators 0 ————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 1.5
depositary assets number of securities accounts number of depositary operations
Everything you need to know about Khreschatyk Bank’s operations on stock market: http://www.xcitybank.com.ua/operacii-z-cinnimi-paperami-dlya-biznesa/ http://www.xcitybank.com.ua/operacii-z-cinnimi-paperami/
+ 1.15 + 1.1
Bank metals: noble investments and eternal values Operations with bank metals are an integral part of Khreschatyk Bank’s diversified investment portfolio and the leadership in this segment of banking market.
In 2013, income from operations with bank metals reached UAH 1 204.4 thousand. Strategic areas of market activity: • signing up new customers – resident banks, legal entities and individuals; • cooperation on international markets with the renowned refining companies Argor Heraeus S.A. (Switzerland), Umicore AG & Co KG (Germany), Standard Bank Plc (London, UK), Commerzbank International S.A. (Luxembourg); • activity on the interbank foreign exchange market with and without physical delivery of bank metals; • ensuring operation of Khreschatyk Bank’s branches as numismatic centers selling NBU-minted commemorative coins and investment coins from Ukrainian and foreign mints; • successful cooperation with and exclusive distribution of coins struck by mints of Australia, New Zealand, United Kingdom, Poland, the Netherlands, Germany and other world-renowned mints.
Dynamics of turnover of operations with bank metals in 2013 0 —————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 30
operations with bank metals on the interbank foreign exchange market purchase of bank metals with physical delivery
0 ————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 600
deposits in bank metals to deposit accounts 235.5 kg gold
Khreschatyk Bank is one of the few banks distributing Ukrainian commemorative coins, NBU souvenirs and accessory products under a relevant agreement. Everything you wanted to know about bank metals and coins: http://www.xcitybank.com.ua/bankivski-metali/ http://www.xcitybank.com.ua/bankivski-metali-biznes/ http://www.xcitybank.com.ua/moneti/all/all/all/
Retail business: a step towards In 2013, Khreschatyk Bank continued improving existing and implementing new products and services, launching various promotion and sales channels. The key feature was enhanced customer orientation achieved thanks to individual service and competitive rates. This product line helps accommodate interests of all customer categories, and creation of market-balanced products understandable for consumers translates into respectability and social orientation of our bank.
Key factors in retail business: • • • •
flexibility in customer service and accommodation of their needs by optimizing the rate policy; intensification of regional branches’ activity as the leading front offices; development of remote service channels; further implementation of lifestyle management and luxury-segment services with emphasis on increased integration of traditional banking products and services with investment banking offers; • expansion of self-service points – ATM and POS terminal network and merchant acquiring; • fundamentally-different level of customer communications; • formation of loyalty programs and discount programs. Individual services: http://www.xcitybank.com.ua/privatnim-osobam/
Deposit operations Introduction in 2013 of attractive deposit programs with flexible, competitive terms and conditions, combination of various interest rate assessment methods and prompt response to market demand helped Khreschatyk Bank retain customer trust in the financial institution and become the leader among secure and comfortable Ukrainian banks.
In 2013, the total portfolio of individual deposits has grown by 3.6% and reached almost UAH 3.5 billion as of 01.01.14. The amount of individual term deposits with our bank has increased by 2.2%, presently accounting for 49.5% of our individual deposit portfolio. Hryvnia deposits continued to dominate the structure of term deposits: during 2013, hryvnia deposits amounted to twice as much as foreign currency and bank metal deposits combined. Therefore, the share of hryvnia deposits in the total deposit portfolio went up by 1.3% and reached 69.5% as of the end of reporting period vs 68.2% as of 01.01.13.
Structure of deposit portfolio in terms of interest assessment method 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
32.1% with capitalization
65.5% with monthly payout
For the sixth year in a row Khreschatyk Bank has been an Individual Deposit Insurance Fund agent. During this time, Khreschatyk Bank paid out compensations to depositors of 23 liquidated banks for the total amount of almost UAH 1.3 billion, including UAH 265 million in 2013. Almost 12% of compensation payouts made in 2013 were deposited with Khreschatyk Bank. Our bank continuously launches deposit promotions which brought in 40% of the total amount of deposits. It was helped, among other, by prompt and timely responses to market challenges. Thus, during the reporting period when NBU has imposed limitations on cash transactions, we have launched Rozrakhunkovyi (Debt Settlement) deposit program offering a comfortable way of settling debt under purchase-sale agreements that require notarization, and also a service of opening letters of credit for individuals to boost cashless debt settlement transactions. Everything about individual deposits: http://www.xcitybank.com.ua/vkladi/
Consumer financing In 2013, our main objective in retail financing sphere was to increase our credit portfolio and improve its quality through collection of problematic assets, by preventing further growth of problematic debts and loan restructuring, if borrowers were paying loan interest. Consequently, we standardized to maximum extent all individual financing processes, and developed efficient scoring models and other credit risk management instruments. Therefore, we regard the 7.6% decrease of individual credit portfolio as a positive trend. We devoted special attention to mortgage loans, particularly within the framework of cooperation with the State Mortgage Institution (SMI). Special-purpose loans under Khreschatyk Bank’s joint investment projects with property developers and special credit programs of financing purchase of mortgaged property posted to our bank’s balance also enjoyed popularity.
167 loans worth the total of UAH 42.77 million were issued since the beginning of our cooperation with SMI. As of 01.01.14, our bank services 128 mortgage loans with the total outstanding amount of UAH 23.03 million. During the reporting period, we continued our unique program of reduced-rate housing financing for Kyiv’s young families and single young people. 1 210 customers took advantage of this program since 2005 and, using loans from Khreschatyk Bank, financed purchase of apartments worth the total of UAH 262 million. Everything about individual loans: http://www.xcitybank.com.ua/krediti/
Nontrade operations Fee income increase factors: • • • •
customer-oriented strategy; flexible fee policy; service infrastructure; innovative technologies.
Structure of Khreschatyk Bank’s fee income 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
15.8% 0.6% 1.1%
cash and debt settlement transactions financing services instant money transfer systems operations with traveler’s and personal checks individual safe box rental other income
Khreschatyk Bank is the only Ukrainian commercial bank to offer exchange of 18 foreign currencies. The Chinese yuan and the new Israeli shekel were added to that list in 2013. Khreschatyk Bank became a true center for instant money transfers: US 3.22 million and EUR 1.27 million in Western Uinion, MoneyGram, UniStream and Anelik money transfers to CIS states and other countries of the world was processed during 2013. During 2013, 1 334 persons took advantage of Khreschatyk Bank’s intrabank transfer system Greenwich, with the total amount of transfers during the reporting period reaching UAH 6.95 million. Services for private customers: http://www.xcitybank.com.ua/rozrakhunkovo-kasove-obslugovuvannya/ http://www.xcitybank.com.ua/groshovi-perekazi/ http://www.xcitybank.com.ua/dorozhni-ta-imenni-cheki/
Payment cards: driving the banking Khreschatyk Bank continuously develops its card business, first of all through expansion, using our processing center, of payment options offered by payment cards from MasterСard Worldwide, Visa International and the National System of Mass Electronic Payments (NSMEP).
Advantages of cards issued by Khreschatyk Bank: • • • • • • •
multilevel protection; prompt management of accounts and mobile control of card account activity; availability of remote service; possibility of setting a credit limit; experience in servicing wage projects; participation in Khreschatyk Bank’s and payment systems’ promotions; discounts on payments for goods and services offered by our bank’s partners.
The total number of payment cards issued in 2013 has increased 2.4 times. Khreschatyk Bank’s card products: • for individuals: -- payment: personal card, wage card, Wallet wage card, deposit card (for interest paid on deposits), E-Pay (for online transactions); -- saving: League of Success; -- social: pension card, Children Above All! card, A Step Into Life financial education card, The Kievite’s Card; -- premium offers: Platinum+, Visa Infinite, Centurion from American Express; • for businesses: -- corporate payment card; -- corporate payment card for correspondent bank’s authorized representatives.
During the reporting period the number of wage projects has increased from 1 676 to 1 949. Overall payment card usage strategy: increase of cashless transaction turnover.
Payment card transaction turnover dynamics, millions of UAH 0 ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 3 000
Card present and online transactions
2 842.35 2 681.27
Card account balances
Structure of card business fee income 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
20.38% issuance and transaction fees merchant acquiring
23% cash transaction fees
Payment cards and card products: http://www.xcitybank.com.ua/platizhni-kartki/ http://www.xcitybank.com.ua/kartkovi-produkti/
29.8% wage project fees
24.02% ATM cash withdrawal fees
Card business infrastructure Another important component of Khreschatyk Bank’s strategy on the payment cards market is associated with development of own processing center and ATM and POS terminal network.
Dynamics of expansion of Khreschatyk Bank’s ATM and POS terminal network 0 ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 3 000
Own ATM network CashTan
Combined ATM network of partner banks
2 621 457
211 223 204 2013
POS terminal network
Terminals at Khreschatyk Bank branches
Dynamics of merchant acquiring operations 0 —————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 5
+ 4.0 times
+ 3.4 times
number of transactions income received
+ 3.2 times
Focus control: payment card security During 2013, substantial attention was given to payment card security, which was greatly helped by coordinated performance of our customer support service for cardholders and the 24-hour contact center. Our customers may contact Khreschatyk Bank’s customer service representatives any time, day or night, and receive a professional consultation, request timely blocking of a lost or stolen card, receive card account balance information, activate the sms notification service, etc.
In 2013, Khreschatyk Bank spent UAH 3.43 million to enhance information security of its ATM network ATM and POS terminal network of Khreschatyk Bank and partner banks: http://www.xcitybank.com.ua/viddilennya-ta-bankomati/
Regional branches: leading channels of banking service During 2013, we continued to work on implementation of the new, centralized model of managing our regional network, aimed at reducing the number of administrative chains and optimizing the costs. The key idea behind these changes includes optimization of the number of personnel (first of all administrative) and centralization of administrative and ancillary functions. All Khreschatyk Bank branches became its front offices – the leading outlets selling banking products and services close to customers, distinguishable for their flexibility, mobility and effectiveness and serving as the basis for further development of cross sales. In addition, this model allows for prompt adaptation of our network to market changes; in particular, it enables fast and substantial reduction of its maintenance costs in the event of economic crisis.
The new network management model helps: • • • •
assess the number of workplaces necessary to achieve our business objectives; improve labor effectiveness of every employee at every Khreschatyk Bank branch; model the optimal location of service outlets on regional markets from the standpoint of economic viability; determine service outlet formats which can facilitate efficient service to customers from various sectors of economy and private individuals; • implement the uniform system of information and marketing support of our regional branches.
As of 01.01.14, Khreschatyk Bank had 142 offices, including the head office, 25 regional and 116 local branches. Key performance indicators of Khreschatyk Bank network in 2013 0 ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 30 000
8 521.6 30 839.1
financial profit freed reserves
To increase profitability of our branches, in 2013 we suspended operation of three low-profit branches and closed five branches which became economically inexpedient to operate.
Khreschatyk Bank remains the only bank in Ukraine to have unique business hours of its branches that stay open late every day and on weekends and holidays. Khreschatyk Bank network in all regions, including contact information and business hours: http://www.xcitybank.com.ua/viddilennya-ta-bankomati/
Information technologies: a source of competitive advantages The goal of Khreschatyk Bank’s IT strategy is to create a technological landscape which allows to build perfect algorithms of supporting all business procedures: corporate, retail, and operation blocks, generate end-to-end reporting and accounting systems, manage customer relations at the Know Your Customer level, consistently improve package offers and increase product and service sales, improve quality of customer service. At the same time, development of remote service channels remains a strategic priority, for which purpose our bank continues optimization of architectural IT solutions, their internal processes and regulations.
When developing information technologies, we focus special attention on formation of our bank’s unique competitive advantages on the basis of: • preserving existing automated banking systems and evening out their characteristics to create preconditions for transition to a uniform information platform; • ensuring reliable, stable and uninterrupted performance of all systems and applications; • expanding secure functioning of all technology-based systems.
Dynamics of the number of customers using remote service 0 ———————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 4 000
3 443 3 208 2013
Our 2013 achievements: • centralization of operation functions and creation of an operational vertical to optimize and achieve transparency of operational processes; • standardization of same-type processes, optimization and automation of processes; • replacement of obsolete server hardware, where server upgrade was based on Hewlett-Packard с7000 blade platform and Hewlett-Packard — 3PAR StoreServ 7200 data storage system; • technical certification at MasterСard Worldwide and implementation of the new card product MasterСardDebіt; • data processing and issuance of the Kievite Cards under a large-scale social project; • certification and connection of Khreschatyk Bank’s processing center to the new payment system, NBU National System of Mass Electronic Payments on open international standards (NSMEP-2).
In 2013, the total amount of investments in development of information technologies exceeded UAH 10.5 million. In 2013, Khreschatyk Bank’s processing center reached a new level of quality and technology thanks to upgrade of its software system which allowed to start signing up other banks for processing service.
Number of transactions that went through processing center 0 ————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 20 000 000
19 026 555 16 732 003 2013
In 2013 we continued to enhance our private online banking system Khreschatyk Online whose solutions and functional incorporate the best achievements of Ukrainian and foreign experts which remote banking service market offered during the reporting period.
In 2013 the number of Khreschatyk Online users has increased by 7.33%. Everything you need to know about Khreschatyk Online banking service: http://www.xcitybank.com.ua/pro-internet-banking-khreshchatik-online/
Corporate management: playing by rules Competent and expedient corporate management plays an extremely important role in bringing investments in our bank and strengthening its market competitiveness. Therefore, Khreschatyk Bank strives to implement a bank management system that meets today’s international standards, in particular, the Corporate Management Principles of the Organization for Economic Cooperation and Development (OECD), principles of the Basel Committee for Banking Supervision concerning improvement of corporate management at banking institutions, the world’s best practices and the National Bank’s regulatory documents in this sphere. Khreschatyk Bank’s integrity, unity and strength are achieved by its organization based on the principle centralization with vertical subordination.
General Meeting of Shareholders
Risk Management Committee
Audit and Control Department
Committee for Bank Development Strategy
Management Board Tender Committee Credit Committee for Corporate and Sole Proprietorship Financing Tariff Committee Credit Committee for Individual Financing
Asset and Liability Management Committee
Objectives of Khreschatyk Bank’s corporate management: • ensuring increase of business value and strengthening its reputation; • achieving financial stability; • efficient use of existing potential to achieve strategic goals and protect shareholder and customer interests.
Main principles of Khreschatyk Bank’s corporate management: • efficient management: the management’s policy has long-term benchmarks and is aimed at improving efficiency of the bank’s performance; • reporting and control: organization of corporate management distinguishes between the general management carried out by shareholders – the General Meeting and the Supervisory Board, and operating management of day-to-day activities carried out by the bank’s executive body, the Management Board; • guarantee of shareholder rights: equal treatment of the bank’s major and minor shareholders; • legality and ethics: the bank operates strictly in accordance with Ukrainian law and corporate and business ethics; • informational transparency: disclosure of complete and accurate information is unconditional and timely.
The General Meeting of Shareholders is the bank’s supreme administrative body responsible for overall management of the bank’s activities and determining the main areas of its development. The 2013 meeting was reporting and held with 99.95% quorum. Minutes of the General Meetings of Shareholders and Audit Commission reports and opinions are available here: http://www.xcitybank.com.ua/zagalni-zbori-akcioneriv/
In 2013, Khreschatyk Bank’s Supervisory Board, an administrative body representing shareholders’ interests in-between the General Meetings and is responsible for controlling the Management Board’s performance and protecting the rights of all shareholders, held 79 meetings. The meetings were held in the joint presence form and discussed 112 matters dealing with various aspects of the bank’s activity. Information about Khreschatyk Bank’s Supervisory Board members can be found here: http://www.xcitybank.com.ua/sposterezhna-rada/
Khreschatyk Bank’s Management Board, the executive collegial body responsible for management of the bank’s day-to-day operations and efficiency of its performance, held 49 meetings in 2013 and discussed 1 387 matters concerning all strategic and current areas of the bank’s activity. Information about Khreschatyk Bank’s Management Board members can be found here: http://www.xcitybank.com.ua/pravlinnya-banku/
The Code of Corporate Management was developed in accordance with Ukrainian law, Khreschatyk Bank Charter and the Corporate Management Policy and incorporates to the maximum extent the world’s best practices. It is aimed at implementation of civilized, fair norms of business relationship in the bank’s operations to: • increase our bank’s investment attractiveness and gain investor confidence and trust; • create favorable conditions for the bank’s development and boost its competitiveness; • increase efficiency of capital use; • harmonize relationships among participants of corporate management: shareholders, administrative bodies, personnel, and other stakeholders; • create a team of like-minded persons who will work only in the bank’s interests and for the benefit of our shareholders. The purpose of the Khreschatyk Bank Code of Corporate Behavior and Ethics is to provide behavior and performance standards for all stakeholders and the bank’s employees, aimed at improving service quality, increasing financial strength, transparency and effectiveness of banking processes, creating impeccable business reputation and image of a reliable and highly spiritual bank to boost the bank’s competitiveness on the banking services market. Today, it has no lesser importance than increase of the bank’s profits.
The main objectives of the Code of Corporate Behavior and Ethics include: • setting out the principles of the bank’s relationship with shareholders, customers, business partners, public authorities and the bank’s employees; • protection of interests of the bank’s shareholders, customers, and business partners. To view Khreschatyk Bank’s regulatory documents on corporate management, go to: http://www.xcitybank.com.ua/korporativna-politika/
Personnel: our most important asset Khreschatyk Bank’s business success is based on the respect of law, strict compliance with requirements of instructions and regulatory acts, observance of banking traditions and rules, understanding responsibility, performance discipline and positive attitude toward customers and partners. This foundation was laid by the people who make up the bank’s team. They are the value that bears upon the increase of Khreschatyk Bank’s business value and achievement of strategic objectives.
Main principles of Khreschatyk Bank’s personnel policy: • • • • •
flexibility combined with stability and dynamicity; economic viability; individual approach to and equality of employees; fairness and absence of discrimination on any grounds; professionalism and personal competence.
Employment at Khreschatyk Bank provides the opportunities: • for professional development and career growth at one of the most successful banking institutions in Ukraine; • to use a wide range of training programs, comprehensive support and encouragement of self-training and self-improvement of employees; • to receive legal protection via our bank’s compliance with the norms and requirements of Ukrainian labor laws regarding labor conditions and remuneration; • to work together with a great team of professionals; • to earn deserved income for one’s work; • to work in comfortable conditions in properly equipped work places; • for active lifestyle outside the bank.
As of 01.01.14, the total number of Khreschatyk Bank personnel was 1 751, of whom 70% were working at regional branches. To ensure continuous improvement of professional skills our bank has introduced a system of attestation and continuous training at two levels: internal (career development program) and at other educational institutions, skill improvement courses, scientific and practical conferences, business forums and symposiums. We offer full-time and distance training under specialized programs distinguishable for their diversity: courses, seminars, trainings, master classes, etc.
Share of personnel with higher education 0% ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— 100%
88% Five top managers have a PhD degree. In 2013, Khreschatyk Bank’s specialists have attended 7 international scientific and practical conferences on various aspects of banking business. We at Khreschatyk Bank continuously work on bringing in young cadres. During 2013, students from the nation’s leading universities of economics underwent production and pre-graduation training at our headquarters and other branches. The best of them received employment offers from our bank. Formation of strong corporate culture is helped by motivation of personnel for particular achievements, corporate parties, and spending time together outside the work. Substantial attention is also devoted to scientific organization of labor and maintaining at a proper level psychological climate within the employee team.
Social responsibility: the trust of society Khreschatyk Bank has traditionally been deeply involved in public life and social institutes and has always realized its responsibility before the society and the nation.
Interests of society
Khreschatyk Bank’s social responsibility
Khreschatyk Bank’s business reputation
Khreschatyk Bank’s financial result
Khreschatyk Bank’s key social programs translate into socially-oriented banking products and services, which means that they are specifically adapted to particular categories of population, thus improving the public trust in our bank and strengthening its reputation.
Khreschatyk Bank’s key socially-oriented programs • The program of financial support to small and medium businesses in Kyiv Focused on the projects involving implementation of energy-saving and environmentally-friendly technologies, development of export-oriented products and social infrastructure, modernization of production facilities and creation of new jobs. Compensates up to 70-80% of loan interest. For the duration of this program, almost 500 agreements were made for the total amount of over UAH 1 200 million. • Reduced-interest housing financing program for young families and single young residents of Kyiv Devised to provide social protection to the youth, improve living conditions of young families and enable them to buy own housing. The total of 90.98 thousand sq.m of housing space was purchased under this program.
• Large-scale social project The Kievite’s Card The goal is to provide social protection to Kyiv’s families with many children, pensioners, the disabled, etc. The Kievite’s Card is a full-fledged Visa payment instrument containing social and transportation applications. As of 01.01.14, almost 400 thousand Kievites have received this card. At the same time, it not only provides social preferences to the holder but allows to take advantage of a multifunctional financial instrument for card present transactions, online services via Khreschatyk Online system, make fee-free cash withdrawals at Khreschatyk Bank’s CashTan ATMs and ATMs of our partner banks, and receive substantial discounts from the ever-growing number of partners to this social project, including retail establishments, commercial drugstores, electronics stores, bookstores and other. By the end of 2013 we began issuing the Kievite’s Card for those employed at Kyiv’s budget-financed and municipal enterprises to credit their wages. • Nationwide financial education program A Step into Life The program is devised for secondary school, college, lyceum, vocational school and other graduates. Free opening and maintenance of a Visa or MasterCard card account; E-Pay card for online transactions may be issued free of charge at any Khreschatyk Bank branch in Ukraine. In 2013, almost 500 graduates from Kyiv and Ukraine’s 16 regions – Kherson, Ivano-Frankivsk, Lutsk, Uzhhorod, Mykolaiv and other cities – received A Step into Life payment card, diplomas from the Chairman of the Management Board Dmytro Grydzhuk and valuable gifts. Overall, almost 2 200 young men and women from 23 regions of Ukraine have already participated in A Step into Life program since its inception. • Charitable payment card Children Above All! A fully functional chip Visa card with an additional option: charitable deductions to orphans, children from low-income families and families with many children, and the talented youth. Note: the cardholder selects the amount of deduction at own discretion. • Healthy Lifestyle loan The Healthy Lifestyle project provides reduced-interest loan to Kievites to finance purchase of medicinal products and medical devices at Kyiv’s Pharmacia municipal drugstores. A holder of a Khreschatyk Bank card (including the Kievite’s Card) is provided a credit limit or opened a free Visa Healthy Lifestyle card. As of 01.01.14, this program was available at 66 municipal drugstores where Khreschatyk Bank has installed 68 POS terminals. • Reduced-interest financing program for pensioners under Khreschatyk Bank’s Pension Program Credit limit of up to average monthly pension amount. No loan issuance fee applies.
Among the main social events of 2013, support of the following events received resonance: • To Be Oneself photo exhibition by the renowned Kyiv photographer Arsen Fedosenko, held on the eve of the International Children’s Day; • premiere exhibition of the popular-science film about Olha Kobylianska Valse Brillante at Ukrainian universities, in particular, University of Chernivtsi, Ostroh Academy, Lviv Polytechnic University; • sponsorship, jointly with MasterCard, of the children’s national team at the 47th Summer International Children’s Games in Windsor, Canada; • sponsorship of the children’s football team of Kyiv’s children’s and youth sports school No 14.
Khreschatyk Bank is a responsible taxpayer which in 2013 remitted UAH 69.7 million in taxes. Khreschatyk Bank and society: http://www.xcitybank.com.ua/bank-i-suspilstvo/
2014 prospects: synergy of efforts Khreschatyk Bank’s strategic development vector for 2014: focusing efforts on the most marginal segments of banking market, improvement of operating efficiency, integration of new assets and stable funding, improvement of centralized management structure of our bank as a worthy financial institution.
ds dar ts an ce rvi se
private custo mer s
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Key objectives for 2014
Stead y de v e l o pm ent o f info rm
t of sales channels lopmen Deve
Focus on customer orientation and traditional products and services
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Sup por t
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Stren gthe ning bus ine p , i c h r s o r s ss e s n t sales Par re and cus tom er rec Helping real sect or o fe c
ns atio d n me om
Prud ent r isk ma nag em en t
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ability ogniz c e r d bran
• commercial operations: -- active development of all business areas; -- further augmentation of resource base and diversification of its structure; -- improvement of market positions by increasing turnover of sales via the bank’s network; -- increasing financing according to market demand with diversification of portfolio by customers and industries; -- active development of investment business; -- enlargement of customer base thanks to new products and increased customer loyalty; -- improving existing products and facilitating development of new, innovative products and services; -- development of cross sales in corporate and retail business; -- rapid development of alternative service channels (online banking, mobile banking, contact center, self-service kiosks, etc.); • improvement of asset quality: -- active work on reducing problematic debts and selling mortgaged property posed to the bank’s balance; -- improving credit portfolio by reducing nonworking debts; • optimization of processes and improvement of performance efficiency: -- automation of processes and technologies and completion of centralization of back office functions; -- implementation of electronic document flow; -- improvement of operating expenses to operating income ratio; • qualitative indicators of a stable bank: -- improving quality of customer service, focusing on boosting their loyalty; -- improving corporate culture aimed at increasing performance effectiveness and self-improvement, increasing brand recognizability and strengthening business reputation.
Successful achievement of strategic objectives will translate into the bank’s growing market capitalization and propel it to the segment of Ukraine’s leading financial institutions.
About us Khreschatyk Commercial Bank, a universal systemic credit institution. Form of ownership: public joint-stock company. Our licenses: • registration by the National Bank of Ukraine No 172 dated 19.05.93; • banking license of the National Bank of Ukraine No 158 dated 11.10.11 to provide banking services under Article 47 (3) of the Law of Ukraine On Banks and the Banking; • general foreign exchange license of the National Bank of Ukraine No 158 dated 11.10.11; • licenses of the National Securities and Stock Market Commission of Ukraine: -- dealer license series AB No 580075 dated 30.12.11; -- broker license series AB No 580074 dated 30.12.11; -- underwriter license series AB No 580076 dated 30.12.11; -- depository license series АЕ No 263320 dated 17.09.13; -- mutual investment institute assets custodian license series АЕ No 263321 dated 17.09.13; -- securities management license series AB No 263193 dated 16.08.13; • certificate of member of the Individual Deposit Insurance Fund No 19 dated 02.07.10 on registration of Khreschatyk Bank in the Register of IDIF Member (Provisional Member) Banks, registration No 20 dated 02.09.99. Foundation date: 19 May 1993. Registered as Zgoda Commercial Bank for Development of Entrepreneurship, Limited Liability Company. In August 1998, pursuant to resolution of the Meeting of Members, the bank’s Charter was amended and the bank’s name was changed to Khreschatyk Commercial Bank for Development of Municipal Economy and Entrepreneurship. Since 2000: Khreschatyk Commercial Bank Open Joint-Stock Company, since May 2010: Khreschatyk Commercial Bank Public Joint-Stock Company.
• • • • • • • • • • • • • • • • •
Membership in professional organizations: Ukrainian Credit and Banking Union (UCBU); Ukrainian Interbank Currency Exchange (UICE); Ukrainian Stock Exchange (USE); Stock Partnership Association; PFTS Stock Exchange, Private Joint-Stock Company; Professional Association of Registrars and Depositories (PARD); Ukrainian Stock Traders Association (USTA); The Society for Worldwide Interbank Financial Telecommunication (S.W.I.F.T.) and Reuters’2000; MasterCard WorldWide and Visa International (Principal Member); American Express Travel Related Services Company, Іnc.; Ukrainian Union of NSMEP Members; UkrSWIFT Association; First All-Ukrainian Credit History Bureau; EMA Ukrainian Interbank Payment Systems Member Association; All-Ukrainian Securities Depository PrJSC (AUSD PrJSC); Kyiv – Beijing Association for Business Cooperation; Bankers Club.
Business hours of Khreschatyk Bank branches are unique for Ukrainian banking sector: we stay open late every day, and are not closed even on weekends and holidays
01001 Kyiv, vul. Khreschatyk 8-A Tel. +380 044 490-52-30, fax: +38 044 270-72-28 E-mail: email@example.com S.W.I.F.T.: KHRCUAUK Telex: 631349 ZGODA UX Reuters: KRES www.xcitybank.com.ua 24-hour contact center +38 044 490-52-31, 0-800-305-505 (toll-free in Ukraine) Information service +38 044 490-25-00, 0-800-500-212 (toll-free in Ukraine)
For interactive contact with Khreschatyk Bank professionals, answers to all banking questions, or solutions of problematic situations, please check out the main page of our website http://www.xcitybank.com.ua/askquestion/
This annual report is available in Ukrainian and English languages. In the event of any discrepancies between the two-language versions, the Ukrainian-language version has priority.
ÂŠ Khreschatyk CB PJSC, 2014 ÂŠ Design and layout by Anton Drazhenko Graphic Design Studio, 2014