2.2. Analysis of the profit and loss report

on IFRS (See the appendix 3)

The net profit for 2014 made 21,6 billion tenge. Interest income in a year increased by 43,3% and made 78,5 billion tenge against 54,8 billion tenge for 2013. The increase in interest income occurred generally due to growth of the income on a credit portfolio, the gain in comparison with the similar period of last year made 43,9%. Percentage expenses for 2014 increased by 47,4% or for 10,3 billion tenge in comparison with 2013 and made for reporting date 32,1 billion tenge. The share of expenses on the raised funds of clients made 79%, having reduced by 0,6% in relation to last year. The share of expenses on means of banks made 14% (14,5% for 2013); on the issued bonds expenses grew by 995 million tenge, their share made 7% (5,9% for 2013).

The net commission income of Bank grew by 44,2% or for 3,6 billion tenge and made 11,7 billion tenge for January 1, 2015. The main sum of the commission income is the share of settlement operations of clients and cash operations.

In 2014 there was an increase in the income by all types of commission operations. Considerably the gained income by documentary calculations increased by 1,9 billion tenge in comparison with last year.

Not interest income of Bank grew by 36,6% or for 1,5 billion tenge. The income on operations with foreign currency for 2014 increased by 27% or 1,081 billion tenge and made 5,1 billion tenge.

Operating expenses of Bank for the reporting period grew by 40,4% or for 7,5 billion tenge and made 25,9 billion tenge for January 1, 2015. Growth happened at the expense of increase in expenses on the personnel of 14,8 billion tenge (a gain of 41,9% in comparison with last year) and administrative expenses of 7,3 billion tenge (a gain of 28,8% in comparison with last year) that is caused by increase in number of the personnel.

The relation of operating expenses to the operating income to reserves made for reporting date 40,7% against 40,8% in 2013.

2.3. Risk analysis

Risk management

In the conditions of the growing business the Bank attaches the extreme importance to risk management, inherent in bank activity.

The main objectives of risk management are: identification, classification of risks of Bank, definition and use of effective tools of an assessment and risk management, establishment of limits on the admissible level of risks, monitoring and taking measures to decrease and control of the risks connected with the operations performed by Bank.

In Bank the monitoring system, monitoring and risk management based on requirements of authorized bodies of the Republic of Kazakhstan, recommendations of Basel committee on bank supervision and the auditor companies operates.

Today the SB of JSC «Sberbank» participates in processes of integration of JSC «Sberbank of Russia» Group within risk management, projects in the field of a risk management are actively implemented.

The bank defines for itself essential the following types of risk: credit, market, risk of liquidity and operational risk.

Credit risk

Management of credit risk is defined by requirements of authorized bodies, policy of Bank on risk management, and also the internal normative documents regulating credit risks. Independent approach to an assessment and the analysis of the credit risks connected with the loan operations performed by Bank is the cornerstone of management of credit risks. For decrease in credit risks the Bank in the activity applies the following main methods and techniques:

• Joint decision-making at establishment/change of financing terms of borrowers;

• Restriction of credit risk by establishment of limits;

• The analysis of dynamics and quality of a credit portfolio, elaboration of actions for decrease in risks of a credit portfolio;

• Monitoring of observance of prudential standards and threshold values.

Market risk - risk of emergence of expenses (losses) connected with adverse changes of market parameters (an exchange rate, a remuneration rate, cost of financial instruments). Within market risk the Bank allocates currency, percentage and price risks.

The purpose of management of market risk is optimization of a ratio risk/profitability, minimization of losses at realization of adverse events and decrease in size of a deviation of the actual financial result from expected.

The currency risk represents risk of the currency losses connected with a change in the exchange rate of one foreign currency in relation to another when carrying out the external economic, credit and other currency transactions.

The bank is subject to currency risk which arises in connection with existence of open positions on foreign currencies and adverse changes of market rates. Within system of limits and restrictions. The bank sets limits of a total open currency position, limits of an open position in separate foreign currencies, limits of the maximum losses (stop-loss) on arbitration operations and a limit of losses of currency risk. These limits are reconsidered at least once a year.

For management of currency risk the Bank carries out process of identification, limitation of risk, and also its subsequent monitoring. As a result of conservative policy of Bank on management of an open currency position, the level of currency risk is estimated as low.

Percentage risk - risk (opportunity) of emergence of financial losses (losses) because of adverse changes of interest rates. The percentage risk can be caused by discrepancy of terms of claiming (repayment) of requirements and obligations, and also unequal extent of change of interest rates for requirements and obligations.

Because of susceptibility Bank to percentage risk, first of all as a result of investment of funds in the credits to clients and in securities on the fixed interest rates, in the sums and for terms, different from the sums and terms of deposits, and also other borrowed funds with the fixed interest rates, the Bank operates percentage risks by means of improvement of procedures of the analysis, forecasting and planning of interest rates. For reporting date the level of percentage risk in Bank remains at a low level.

Price risk - the risk of emergence of expenses (losses) owing to change of cost of a portfolio of financial instruments arising in case of change of conditions in the financial markets.

For control of level of price risk the Bank carries out monitoring such risk – metrics as VaR, DV01, carries out stress testing. VaR allows to estimate the maximum volume of the expected financial losses for a certain period of time with the set level of confidential probability. Stress testing can be defined as an assessment of potential impact on a financial condition of a number of the set changes in risk factors which correspond to exclusive, but probable events. DV01 determines the average size of the change of cost happening owing to change of profitability on 1 basic point.

Operational risk

Control of operational risk is exercised according to requirements of National Bank of the Republic of Kazakhstan, recommendations of Basel committee on bank supervision and is defined according to requirements of internal normative documents of Bank for management of operational risks.

Management of operational risks is directed on the prevention and/or decrease in the risks connected with possibility of losses as a result of shortcomings of the organization of activity, the used technologies, functioning of information systems, inadequate actions or errors of the personnel, inadequate construction business – processes, and also as a result of influence of external events.

In a control system of operational risk, in connection with susceptibility to operational risk of any activity, in Bank all structural divisions, branches and employees of Bank are involved. Control of operational risk is exercised them indissolubly from execution of the main functions.

For effective management of operational risk and calculation of size of operational risk the Bank uses the following elements of management of operational risk: collecting internal data on incidents of operational risk, collecting external data on incidents of operational risk, a self-assessment on operational risks, monitoring of key indicators of risk and indicators of control, the scenario analysis and mapping of risks. For ensuring complete and comprehensive management of operational risks elements of management of operational risks are used in a complex and is interconnected.

For regular monitoring of operational risk the Bank uses system of reports for the management of Bank and joint bodies involved in processes of management of risks.

For January 1, 2015 the level of operational risk (a share of expenses on a covering of losses of the realized operational risk in expenses of Bank) made 0,1%. Thus, the level of operational risk is estimated as accepted and is in limits of the set limit.

Today in Bank the system of limits allowing to provide the acceptable level of concentration of risks on a credit portfolio in a section of branches of economy works. For January 1, 2015 the greatest share of a loan portfolio is the share of such branches as branches Trade – 25,8% and Construction and operations with real estate – 12,3%. (See the appendix 4).

Quality of a credit portfolio of Bank following the results of 2014 remains at the acceptable level. The indicator of a share of loans, with arrears over 90 days for January 1, 2015 made - 2,2%. This indicator is much lower than an average value on the banking market (an average value on BSL for 01.01.2015 – 31,1%).