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Gazprombank, its branches andsubsidary banks
JOINT STOCK COMPANY GAZPROM
ORDER(extract)
September 21, 1998 No.122
On the authorized bank for OAO Gazprom
Finding it necessary to secure stable operating of financialfunds for the gas industry, reliable and timely banking for indus-try’s enterprises
I ORDER
to give the status of the authorized bank for OAO Gazpromto the Commercial Bank for the Gas Industry Gazprombank inthe following principal directions of banking services for OAOGazprom and its enterprises:
- integrated cash and settlement services;- different types of crediting;- banking services for rouble and currency transactions, and
foreign loans for Gazprom;- service and financial management for investment projects;- depository services to set off schemes for the gas industry;- debt restructuring;- transactions with securities;- depository services to shareholders of Gazprom;- banking of Gazprom’s agreements with governments
of Russian Feneration constituents;- banking services to customers, working, old stagers
and retired personnel of the gas industry.
Chairman of the Board of Gazprom
R.I.Vyakhirev
ADDRESS TO THE PARTICIPANTS, PARTNERSAND CUSTOMERS OF GAZPROMBANK
29
The August crisis can be onfull grounds considered anew starting point in the
development of the banking systemin Russia. There is no doubt thatsuch a development will be reliableand irreversible if commercialbanks stand in close relations withindustrial production. There is noother choice for the banking systemexcept priority services to the realeconomy.
As the main banking link of the gasindustry Gazprombank was amongthose few institutions that survivedand grew stronger in spite of insta-bility of Russia’s economy. Experi-ence shows that integration ofindustrial and banking capitalswithin one branch of industry formsa stable, invulnerable and flexiblestructure as an industrial andfinance group.
Gazprombank considerably enhan-ced its positions in the crucial con-ditions of 1998. By the end of thatyear the Bank was among the topfive Russian banks with regard tothe basic indices of banking activi-ties and efficiency. In the post-cri-sis period Moody’s Interbank Cred-it Service Ltd, and Russian ratingagencies positioned the Bankamong the three most stable Russ-ian banks.
In 1998 Gazprombank as theauthorized bank of OAOGazprom, which covers all themajor spheres of banking activi-ties, concentrated most of thecash flows of the gas industry.The Bank became the mainbanking institution servicingMezhregiongaz Company whichsupplies gas to consumers inmore than 60 regions in Russia.
Operating settlements for the gasindustry and crediting enterprisesof the real sector of economy,the Bank ensures rapid settle-ment services and high reliabilityof payments due to its widelyspread branch network which
services all the main regions ofgas exploration, transportationand consumption along the gaspipeline.
Particular emphasis is put onintroducing modern banking tech-nologies and novel methods ofcustomer servicing. Along withreliability and high growth ratesthese are the reasons for a steadyinflow of new customers to theBank. During the period betweenAugust and December 1998 aloneabout 2 thousand organizationsand enterprises became new cor-porate clients of Gazprombank. A substantial amount of cus-tomers’ account balance moneyensured additional investments inthe gas industry.
Experience of operating for 9 yearsenables Gazprombank to furtherdevelop its activities in the regionsof Russia and abroad.
We wish to thank all our share-holders, customers and partnersfor their confidence in Gazprom-bank, to wish them every success,and we look forward to continu-ing and developing our fruitfulcooperation.
Chairman of the Board
V.I.Tarasov
V.I. Tarasov,
Chairman of the Board
of the Commercial Bank
for the Gas Industry
Gazprombank,
Vice President of the Association
of Russian Banks
Reference
information
Commercial Bank for the Gas Industry1998
Annual Report «Gazprombank»
GENERAL INFORMATION ON THE BANK
31
FULL NAME: Commercial Bank for the Gas Industry Gazprombank
ABBREVIATED NAME: Gazprombank
BEGINNING OF ACTIVITIES:July 31, 1990
LICENSE:General License of the Bank of Russia No.354
BANK ADDRESS:117420, Moscow, Nametkina St., 16-B
TELEPHONE: (095) 718 1697 (automated inquiry service)
FAX: (095) 719 1686
TELEX: 412027 GAZ RU
E-MAIL:[email protected]
INTERNET:www.gazprombank.ru
SWIFT:GAZPRUMM
REUTERS: GZPM
CORRESPONDENT ACCOUNT:3010181020000000023 in GRKC GU CB RF in Moscow
INN:7736011540
BIK:044583823
Code OKONKh:96720
Code OKPO:90807684
32
Reference
information
COUNCIL OF GAZPROBMANK
CHAIRMAN OF THE COUNCIL:Vyakhirev Rem IvanovichChairman of the Board, OAO GAZPROM
DEPUTY CHAIRMEN OF THE COUNCIL:Rodionov Petr IvanovichDeputy Chairman of the Board, OAO GAZPROM
Rakhimkoulov Mikhail NikolaevichDirector General – President,
General Banking and Trust Co. (Hungary)
Tarasov Viktor IvanovichChairman of the Board,
Commercial Bank for the Gas Industry Gazprombank
MEMBERS OF THE COUNCIL:Bezroukova Marina AnatolievnaDeputy Director General, MEZHREGIONGAZ
Dubinin Sergei KonstantinovichMember of the Board, OAO GAZPROM
Dokouchaev Mickhail VadimovichMember of the Board, OAO GAZPROM
Klochkov Fedor VladimirovichDeputy Director General, YAMBURGGAZDOBYCHA
Kozachenko Aleksander NikolaevichDirector General, MOSTRANSGAZ
Podyuk Vasily GrigorievichMember of the Board, OAO GAZPROM
Selikhova Evguenia KonstantinovnaAdviser to Chairman of the Board, OAO GAZPROM
Semenyaka Aleksander NikolaevichMember of the Board, OAO GAZPROM
Souleimanov Rim SoultanovichDirector General, URENGOIGAZPROM
Chichelov Viktor AleksandrovichDirector General, PERMTRANSGAZ
BOARD OF GAZPROMBANK
CHAIRMAN OF THE BOARD:Tarasov Viktor Ivanovich
FIRST DEPUTY CHAIRMEN OF THE BOARD:Sereguin Valery AleksandrovichChernoivan Aleksander Vasilievich
DEPUTY CHAIRPERSONS OF THE BOARD:Lisovaya Lidiya NikolayevnaPrimak Aleksander GrigorievichOutkin Pavel Vladimirovich
MEMBERS OF THE BOARD:Mouraviyev Aleksander ViktorovichOlenev Nikolai Ivanovich
GAZPROMBANK SHAREHOLDERS
33
● JOINT STOCK COMPANY GAZPROM
● PRODUCTION ASSOCIATIONS, ENTERPRISES
AND ORGANIZATIONS OF THE GAS INDUSTRY:
TUMENTRANSGAZ
MOSTRANSGAZ
URENGOIGAZPROM
NADYMGAZPROM
SEVERGAZPROM
YAMBURGGAZDOBYCHA
ZAPSIBGAZPROM
MEZHREGIONGAZ
VOLGOTRANSGAZ
LENTRANSGAZ
ORENBURGGAZPROM
KUBANGAZPROM
ASTRAKHANGAZPROM
TATTRANSGAZ
VOLGOGRADTRANSGAZ
PERMTRANSGAZ
SURGUTGAZPROM
YUGTRANSGAZ
URALTRANSGAZ
GAZEXPORT
INTERPROCOM
GAZKOMPLEKTIMPEX
TOMSKTRANSGAZ
KAVKAZTRANSGAZ
DAGESTANGAZPROM
SAMARATRANSGAZ
VOLGOGRADNEFTEMASH
SPETSGAZAVTOTRANS
TSENTRGAZ
TUMENGAZSVYAZ
TUMENGAZSNABKOMPLEKT
SG-TRANS
GIPROGAZTSENTR
SPETSKOMPLEKTGAZ
GAZKOMPROMSELSTROI
GIPROSPETSGAZ
GAZENERGOSERVICE
ORGENERGOGAZ
BURGAZGEOTERM
KOSTROMATRUBINVEST
GAZSTROIDETAL
SEVEROGAZTORG
GAZINTERPRIBOR
SEVERGAZBANK
Reference
information
REGIONAL INFRASTRUCTURE OF GAZPROMBANK
34
BRANCHES
Astrakhan, 414057, Vorobjeva Prospect, 12-2, tel. (752-2) 34-07-88
Beloyarsky, Tyumen Region, 626818, Molodosti St., 7a, tel. (346-70) 2-15-32
Volgograd, 400074, Kozlovskaya St., 34, tel. (844-2) 93-00-05
Izhevsk, Udmurt Republic, 426039, Votkinskoje Shosse, 182, tel. (341-2) 20-72-82
Kostroma, 156000, Sovetskaya, 9a, tel. (094-2) 31-39-49
Krasnodar, 350051, Dzerzhinskogo St., tel. (861-2) 54-22-16
Lipetsk, 398059, Nedelina St., 25, tel. (074-2) 77-04-18
Makhachkala, Republic of Dagestan, 367025, Ermoshkina St., 24, tel.(872-2) 67-53-59
Moscow, 115230, Varshavskoje Shosse, 45-2, tel. (095) 111-02-77117415, Vernadskogo Prospect, 41, tel. (095) 355-99-82
Nadym, Tyumen Region., 626711, Orudzheva Nab., 53, tel.(345-95) 2-00-20
Nizhny Novgorod, 603005, Piskunova St., 3/5, tel.(831-2) 34-01-47
Novy Urengoi, Tyumen Region, 627718, 26th Party Congress St., 4, tel. (345-49) 3-19-32
Orenburg, 460021, Turkestanskaya St., 161, tel. (353-2) 72-98-17
Rostov-on-Don, 344024, Sokolova St., 80. tel.(863-2) 34-33-74
Sankt-Peterburg, 193148, Sedova St., 15, tel. (812) 567-61-83
Saratov, 410052, 50-letiya Oktyabrya Prospect, 118-a, tel.(845-2) 12-57-88
Stavropol, 355012, Lenina St., 419/2, tel. (865-2) 76-27-99
Tomsk, 634050, Lenina Prospect, 49, tel.(382-2) 41-53-58
Tula, 300904, Lenina Prospect, 108-a, tel.(087-2) 33-35-29
Tyumen, 625026, Respubliki St., 62, tel. (345-2) 22-84-15
Ufa, Republic of Bashkortostan, 450022, Mendeleeva St., 138, tel. (347-2) 52-28-00
Ukhta, Republic of Komi, 169400, 30-letiya Oktyabrya St., 22/12, tel. (812-47) 4-17-34
Chaikovsky, Perm Region, 617740, Primorsky Blvd., 30, tel.(342-41) 6-46-51
Yugorsk, Tyumen Region, 627720, Sovetsky District., Lenina St., 31, tel.(346-75) 2-04-75
Office of the Gazprombank
branch in Ukhta
35
REGIONAL INFRASTRUCTURE OF GAZPROMBANK
REGIONAL OFFICES
Yekaterinburg, 620063, 8 Marta St., 66, tel. (343-2) 29-75-31
Kazan, Republic of Tatarstan, 420021, Kirova St., 64, tel. (843-2) 57-96-17
Kursk, 305045, Sovetskaya St., 3a, tel. (071-22) 4-78-72
Salekhard, Yamal-Nenets Autonomous Territory, 626603, Aviatsionnaya St., 22, tel.(345-91) 4-78-15
SUBSIDIARY BANKS
General Banking and Trust Co., LtdBudapest, Hungary, H-1055, Marko St., 9, tel. (103-61) 269-14-73
GazenergoprombankGazoprovod, Moscow Region, Leninsky District, 142770, tel.(095) 420-55-67
CB SochigazprombankSochi, 345000, Navaginskaya St., 14, tel. (862-2) 92-65-47
CB SibirgazbankSurgut, Tyumen Region, 626407, Svobody Blvd., 12, tel. (346-2) 24-06-06
BANKS WITH AUTHORIZED SHARES OF GAZPROMBANK
BelgazprombankMinsk, Belarus, 220000, Pritytskogo St., 60/2, tel. (375-17) 259-40-24
ICB EvropeiskyKaliningrad, 236010, Kutuzova St., 39, tel. (011-2) 22-19-00
CB SevergazbankVologda, 160000, Blagoveshenskaya St., 3, tel. (817-2) 72-70-83
CB IntrastbankMoscow, 117333, Gubkina St., 3g, tel.(095) 132-69-93
Office of Belgazprombank
in Minsk
Principal
Business
Commercial Bank for the Gas Industry1998
Annual Report «Gazprombank»
COMMERCIAL BANK GAZPROMBANK AS THE AUTHORIZED BANK FOR OAO GAZPROM
37
The main directions of bank-ing services for the gas indus-try as assigned to Gazprom-
bank are shown in the diagrambelow.
In the General Agreement onstrategic partnership between OAOGazprom, Mezhregiongaz Compa-ny and Gazprombank specialemphasis is put on elaborating andoptimizing schemes of payment byRussian consumers for natural gas
supplied by the Company, and onconcentrating cash flows withinGazprombank system.
Last year all the major gas industryenterprises were transferred to theBank. At present Gazprombankservices about one thousand enter-prises of that branch of industry.
Most of the export contracts ofOAO Gazprom are also serviced byGazprombank.
Integrated cash
and settlement
services
Settlement center
for the gas industry
and for the banking group
Banking services
to rouble
and currency contracts,
and foreign loans
for OAO Gazprom
Banking services
to OAO Gazprom
agreements with
the governments
of the Russian Federation
constituents
Crediting
and debt
restructuring
Services
and arrangement
of finance
for investment
projects
Different
types
of crediting
Debt
restructuring
Depository services
and operations
with securities
Depository
services to Gazprom
shareholders
Depository
services to various
offset schemes
Operations
with Gazprom
securities
Services
to note-linked
settlements
Services to retired
workers and employees
of the gas industry
Banking
and depository
services
Non-cash
settlements
based
on plastic
card
Call
for funds
as deposits
FUNCTIONS OF GAZPROMBANK
MAIN INDICES FOR 1998
38
Principal
Business
AUTHORIZED FUND
(mln. RUR)
4000
3000
2000
1000
01.0
1.96
01.0
1.97
01.0
1.98
01.0
1.99
NET ASSETS
(mln. RUR)
40000
30000
20000
10000
01.0
1.96
01.0
1.97
01.0
1.98
01.0
1.99
EQUITY
(mln. RUR)
8000
6000
4000
2000
01.0
1.96
01.0
1.97
01.0
1.98
01.0
1.99
Head Office of the Gazprombank
in Moscow
Priority services of Gazprom-bank to the real industrialproduction enabled the Bank
to keep up stable rates of growth ofthe basic financial indices andbecome Russia’s largest non-statecommercial bank.
Its assets grew 3,5 times and toppedthe target by RUR 37 bln.
The authorized fund grew 2,3 timeswhich in combination with theprofit received allowed to increasethe equity 3,2 times.
Loans grew 4,3 times and exceededRUR 30 bln.
Restructuring of the securities’protofolio reduced its total vol-ume 1/4 times, the GKO/OFZportfolio was reduced more than6 times.
The confidence of customers in theBank was confirmed by a growth ofbalances in various accounts: thoseof organizations increased 5 times,those of private customers 1,8times.
Despite the crisis the Bank did notclose a single branch, moreover anew one was opened in the city ofUfa. All its branches showed profitat the end of 1998.
Based on the interests of the gasindustry, formation of a group ofbanks in whose authorized fundGazprombank participates was pur-sued. By year end, the group con-sisted of 8 banks, of which 4 beingsubsidiaries.
The main indices of effective perfor-mance of Gazprombank were of thesame level as in the previous year.
RESOURCE BASE DEVELOPMENT
39
RESOURCE BASE STRUCTURE O ver the past year the resour-ce base of Gazprombankgrew 3,5 times. Despite the
financial crisis the Bank succeededin preserving a rational structure ofits liabilities.
Equity increased 3,2 times andtopped the target exceeding RUR6,1 bln. Authorized fund increased2,3 times over the year, which wasparticularly important during theslump and made it possible to pre-serve the customers’ funds as wellas their confidence. Such growth ofthe authorized fund was attaineddue to an additional contributionby OAO Gazprom and by the newshareholders of the Bank. Equitygrew through an increase of theadditional capital 5,4 times, basedon the following important compo-
nents: built-up reserves, revaluationof the currency position and profitgained, thus the additional capitalreached 44% of the equity.
Substantial growth of customers’account balances is due to a steadyexpansion of the customer base.
The degree of customer confidencein the Bank is vividly seen throughthe dynamics of private (retail)deposits. In the year of unprece-dented financial upheaval the 1,8-fold growth of private individuals’deposits is indicative of Gazprom-bank’s high reputation with Russiancustomers. 3/4 of retail deposits areattracted by its branch offices. AsGazprombank fulfils all its obliga-tions, it enjoys the confidence ofWestern creditors.
Office of the Gazprombank branch in
Nizhny Novgorod
16%
33%
12%
39%
Equity 6 145 mln.RUR
Term obligations 14 452 mln.RUR
Balance in the customers’settlement accounts 12 479 mln.RUR
Other obligations 4 319 mln.RUR
Total 37 395 mln.RUR
as of 1.01.99
CUSTOMER BASE DEVELOPMENT
40
Office of Sibirgazbank in Surgut
Principal
Business
Accountbalance
before crisis after crisis
Number of corporateclients’ accounts
NUMBER
OF CUSTOMERS’
ACCOUNTS AND THEIR
ACCOUNT BALANCE
Number of accounts bln. RUR
8000 12,0
7000 10,5
6000 9,0
5000 7,5
4000 6,0
3000 4,5
2000 3,0
1000 1,5
01.0
7.98
01.0
9.98
01.1
0.98
01.1
1.98
01.1
2.98
01.0
1.99
Over the past year the numberof Gazprombank’s cus-tomers grew 57%, the major
growth occurred during the post-crisis period.
At present virtually all enterprisesand organizations of the gas indus-try (about one thousand) are clientsof the Bank. Besides them the Bankserves more than seven thousandother corporate customers, thenumber of personal accounts is over600 thousand. Due to the decisionby the Council of Directors toattract customers from relatedindustries, between August andDecember 1998 two hundred largeenterprises and organizations ofrelated branches of industry such aspower engineering, iron and steel,petrochemical industry, transportand communications came to theBank as customers. The followingcompanies, well-known in Russiaand abroad, are among them, toname just a few: Stankoimport,Transaero, Soukhoi ExperimentalDesigners’ Office, State Research &Production Enterprise Splav,Chocolate and Confectionery Fac-tory Udarnitsa.
Last year customer account bal-ance grew about 9-fold between
September and December whichhighly exceeds the rate of devalu-ation of the rouble. Since duringthe crisis some of the customerswhose accounts had been held inseveral banks chose to move andconcentrate their funds toGazprombank, that growth relatesnot only to the new accounts, butalso to those opened earlier.
The Bank has introduced such ser-vices as setting up settlement cen-ters for corporate clients havingramified networks, and pre-exportproject financing to its customers.
Large corporate clients were pro-vided with personal managerswho work in two shifts receivingdocumentation. Branch officesare setting up divisions for cus-tomer services, new branches arebeing established, in some casesin the territories of major cus-tomers.
Gazprombank not only providespurely banking services to its cor-porate customers, but offers themassistance in resolving a vast num-ber of financial problems, such asacquisition of equipment through aleasing company set up with theBank’s support.
PLACEMENT OF FUNDS
41
A s the Bank is orientedtowards the real or produc-ing economy sector, credit-
ing is traditionally a key field in itsbusiness activities.
The credit portfolio amounted tomore than RUR 30 bln growing 4,3times over 1997.
Overall amount of credits to thegas industry enterprises and torelated industries grew 4 times andreached RUR 20 bln by the yearend. Of the entire credits to non-banking organizations the share ofthose to the enterprises of the gasindustry exceeded 80%, with aconsiderable investment of RUR9,9 bln into long-term projects ofOAO Gazprom (to be completedin 2009-2016). The largest loanswere provided to finance the con-struction of the gas pipe-lineYamal-Europe, and the pipe-lineconnecting continental Europeand Great Britain.
New credit schemes for theemployees of the gas industrywere introduced, including those-based on pledge by real estate,cars, Gazprom shares etc. Toescape possible losses in the inter-bank market, last year the Bankcut loans to resident banks (about 3 times).
Debt overdue to Gazprombankamounted to 0.9% of its assetswhich is 5-20 times less than theindices for the top ten Russianbanks in 1998 (according to Russ-ian weekly ‘Profile’).
Gazprombank maintained a con-siderable part of its assets (13%) asliquidities in order to provide unin-terrupted services to its customers.
Due to a timely cut of the Bank’sholdings in securities from 15% ofits assets (1.01.98) to 3% (1.01.99),the Bank avoided serious lossescaused by the financial crisis.
81%
13%
3%
3%
Credit Investments 30 402 mln.RUR
Cash and correspondentaccounts with banks 4 956 mln.RUR
Investmentsin securities 1 113 mln.RUR
Other Investments 924 mln.RUR
Total 37 395 mln.RUR
Office of the Gazprombank branch
in Yugorsk
NET ASSETS
STRUCTURE
as of 1.01.99
FOREIGN ECONOMIC ACTIVITIES
42
Development of foreign eco-nomic activities and inter-national contacts of
Gazprombank are in direct relationto the banking services to OAOGazprom in Western Europe aswell as in the near abroad.
In the crisis situation the manage-ment of the gas industry decided totransfer most of contracts for sup-plying gas to foreign countries tothe Bank, thus main foreign cur-rency resources of the gas industrywere concentrated in Gazprom-bank.
The Bank provides uninterruptedbanking services to the major for-eign loans and investment projectsby OAO Gazprom and its othercustomers.
As other Russian banks, Gazprom-bank called for funds of non-resi-dents to be placed in the gas indus-try projects. Those were mainlyborrowings from banks includinglarge syndicated loans. In 1997Gazprombank received a USD 60mln syndicated loan from Citibank(USA) and Commerzbank (Ger-many) which was fully paid off inNovember 1998. Credits by Com-merzbank-Budapest (Hungary),Donau Bank and Credit Suisse(Switzerland) were fully redeemedin September, and those of Berlin-
er Bank (Germany) — in Decem-ber 1998. In 1998 Deutsche Bank(Germany) arranged a USD 230mln syndicated loan that is to beredeemed by Gazprombank in May1999. The loan is serviced in strictaccordance with a mutually agreedprocedure.
Last year work was completed toacquire recognition by the Ministryof Industry and Trade of Japan forGazprombank’s financial guaran-tees in the crediting of Russian bor-rowers by Janapese banks andfinancial companies.
Considerable opportunities forensuring financial interests ofGazprombank in the EasternEuropean region are offered dueto the Bank’s participation in thecapital of its subsidiary, GeneralBanking and Trust Co. Ltd.(Hungary), and Belarus-RussianBelgazprombank.
Gazprombank started energeticallyworking with the Euro currency, setup corresponding accounts in Eurowith 10 Western European banks,and since its introduction is one ofthe largest Euro operators in theRussian foreign exchange market.As in 1996-97, Gazprombank wasone of the leading USD and DMoperators at the Moscow InterbankCurrency Exchange.
Principal
Business
Office of the General Banking and
Trust Company Ltd.
in Budapest, Hungary
OPERATIONS WITH SECURITIES
DEPOSITORY SERVICES
43
Placements in securities inGazprombank’s assets werereduced from 15 to 3% over
the past year.
Serious changes were made in thestructure of holdings. Placements inGKOs, OFZs, OGSZs were neverpriority assets of the Bank, but wereused only to maintain its liquidity.
Financial markets being unstable,
decision to substantially reduceGazprombank’s portfolio of theabove securities was made. Its totalvolume was reduced from RUR 521to 104 mln. Foreign currency Gov-ernment securities (OGVVZ) werecut to RUR 502 mln as well.
Securities portfolio basically con-sists of OAO Gazprom shares andother highly liquid corporate secu-rities.
Gazprombank has set up aunique depository networkcovering the European and
Western Siberian regions of Rus-sia. In the year in question depos-itory services acquired a newquality: an integrated system forthe provision of circulation ofaccounts receivable as paymentsfor gas was established. It is basedon the Interregional PromissoryNotes Depository set up in coop-eration with MezhregiongazCompany.
The following positions can beregarded as Gazprombank’s mainachievements in 1998:● organization of a subsidiaryDepository and Settlement Compa-ny that operates securities settle-ments at regional trading units inYekaterinburg, Novosibirsk andNizhny Novgorod;
● setting up of an interregional system of centralized brokerageservice;
● elaboration and implementationof a scheme of interaction with set-tlement depositories in a numberof stock exchanges;
● provision of payments of divi-dends on OAO Gazprom shares for1997;
● call of largest Russian issuers fordepository services, primarily gasindustry enterprises and their part-ners (the number of issues of secu-rities serviced exceeded 60).
Introduction of a ‘Client-Deposito-ry’ electronic system for remoteaccess and a new generation depos-itory hardware/software networkPC IMB AS/400 was carried out.
Office of the Gazprombank
branch in Ufa
RESTRUCTURING OF DEBTS FOR GAS SUPPLIED
44
Principal
Business
PLASTIC CARDS
In 1998 Gazprombank devisedand implemented novel settle-ment schemes for the gas indus-
try enterprises and their debtorsusing promissory notes and otherlong-term financial instruments.Experts of the Bank are seeking opti-mum ways for restructuring debts toOAO Gazprom by analyzing obliga-tions of budgets of all levels, those ofthe debtors and creditors to/of OAOGazprom, Mezhregiongaz Companyand other counterparts. The amountof discountable note-linked obliga-tions topped RUR 4 bln.
Last year Gazprombank’s debt trad-ing unit began operating and an
automated debt discounting andmonitoring system was implemented.
Debt restructuring for gas suppliedis operated both on the Russian andinternational levels. In particular,in 1998 Byelorussian debts ofapproximately RUR 800 mln wereoffset.
Jointly with the Central Bank ofRussian Federation work wasundertaken to assign to Gazprom-bank the status as the authorizedbank for exporters’ promissorynotes revaluation, thus giving wayfor calling a considerable amount ofadditional funds to the gas industry.
In 1998 Gazprombank’s inter-regional plastic card non-cash payment system that
covers essential and subsidiarystructures of OAO Gazprom aswell as the enterprises and orga-nizations contracting and coop-erating with the Company con-tinued its development.
Gas industry payment network isbeing developed since mid-1995in cooperation with Union Cardand based on its long-term deci-sions. The aim of this network isto guarantee payments in the sit-uation of inflation and crisis oftraditional payment instruments
oriented at cash payment. Inaddition non-cash payment tech-nology allows to hold a part of thewage fund and use it as one of thesources for preferential creditingof the gas industry enterprises andorganizations.
At the beginning of 1998 the firstphase of the network began func-tioning effectively. Branches of theBank and banks of the Gazprom-bank group serve 23 regions. 13processing centers are up and run-ning in Moscow, Yugorsk, NovyUrengoi, Astrakhan, Nizhny Nov-gorod, Volgograd, Tyumen, Ukhta,Tomsk, Beloyarsky, Vologda (based
PLASTIC CARDS
45
on Severgazbank), Bryansk (basedon Energoinvestbank), Surgut (ba-sed on Sibirgazbank). The plasticcard system services 90 thousandworkers and employees of 31 com-panies of the gas industry.
By the end of 1998 the system ran350 points-of-sale and 130 ATMs.
Since October 1998 the HeadProcessing Center has been func-tioning in the Head Office ofGazprombank in Moscow. Itstechnological core is the soft-ware/hardware Technique Plus II
hub by IFS International. Whenthe processing Center has beenfully put into operation it will service up to 6 million cardsincluding international paymentsystems.
At present the Center servicesmore than 1000 ATMs and 300thousand points-of-sale.
The Bank is a principal memberof VISA and Europay and issuesand services cards of those sys-tems as well as American Expresscards.
Head Processing Center
Regional processing centers
Issuing banks
Cash points
Operating regional programs. Planning regional programs
Tula
Vologda
Minsk
Ukhta
Tchaikovsky
Beloyarsky
Novy UrengoiNadym
Yamburg
Tomsk
Yogorsk
Volgograd
Stavropol
Astrakhan
Krasnodar
Sochi
St.Petersburg
HUNGARY,Budapest
TyumenOrenburg
Belgorod
Nizhny Novgorod
MOSCOW Kostroma
Saratov
Lipetsk
Rostov-on-Don
Ufa
Izhevsk
Makhachkala
Surgut
BRANCH NETWORK. GAZPROMBANK’S BANKING GROUP
46
Principal
Business
Gazprombank’s position asthe main credit and settle-ment bank for the gas
industry focuses its attention onregional infrastructure develop-ment. Its operating and newbranches, subsidiaries and sub-sidiary banks are situated in everyregion where natural gas is extract-ed, processed and refined.
In 1998 Gazprombank activelyconsolidated and restructured itsbanking group. It increased itsshare in the authorized funds ofsubsidiary and dependent banks.Commercial Bank (CB) Prestige(in Sochi) was transformed intoaffiliated Sochigazprombank. Sibir-gazbank (in Surgut) became anoth-er subsidiary. Moscow Intrastbankjoined the Gazprombank bankinggroup. Severgazbank (in Kostroma)was granted a General License ofthe Central Bank and offered a vastlist of services to its customers. Thelatter as well as Gazenergoprom-bank (in the Moscow region) isactively developing its own branchnetwork. The branch network of Gazprom-bank itself is also being developed.A new branch in Ufa was set upwith an energetic support of Bash-transgaz Company. By the end ofthe year Gazprombank had a vastand efficient network of 24 branch-es, 4 regional offices, 44 operatingcash units and a number of supple-mentary offices (of which 10 wereput into operation in 1998).
Branch network activities werefocused on serving the gas industry
enterprises, with 90% of loansgranted to that industry branch.Despite the lack of trust in region-al banks private investments grewconsiderably.
Each branch, subsidiary or depen-dent bank has its own priority goalsbased on the local financial marketand the specific needs of its cus-tomers for various financial ser-vices, works within the frameworkof a uniform coordinated policypursued by the management of theBank and of OAO Gazprom.
Last year a first pattern of a three-level management system wasintroduced by Gazprombank formanaging its regional infrastruc-ture (Head Office — SubsidiaryBank (Branch of CB Gazprom-bank) — Branch of a SubsidiaryBank (Collector’s Office ofGazprombank). In particular itsaffiliated Gazenergoprombankopened three branches, Sev-ergazbank has seven branch offices.Last year Gazprombank branchesopened 10 additional offices andcollector’s offices.
In 1999-2000 development ofGazprombank’s regional infrastruc-ture will be pursued in accordancewith the agreements on cooperationwhich have already been signed orwill be signed between OAOGazprom and governments of theRussian Federation constituents.Establishment of local joint officesof Gazprombank and Mezhre-giongaz Company is planned forthe future.
Office of Severgazbank
in Vologda
ORGANIZATIONAL DEVELOPMENT OF THE BANK
47
SUPPORT FOR BANKING OPERATIONS
D uring the past three years aprogram of integrated pro-gram-target planning has
been the key to organizationaldevelopment of Gazprombank.
In early 1999 an Integrated Pro-gram of Gazprombank’s develop-ment till the year 2000 wasendorsed by R.I. Vyakhirev, Chair-man of the Council of the Bank. Itcontains strategic regulations andquantitative targets conforming tothe resources, executive staff anddeadlines, as well as a set of agreedupon target-oriented programs.
One of the focuses in the businessdevelopment of Gazprombank wasan improvement of management ofthe Bank as a whole as well as thestrengthening of its most vital links.To attain this goal several depart-ments of the Bank were expandedand transformed into directorates,and a Settlement Center and aTreasury were established.
Compliance with the bankingregulations, accounting andreporting standards as providedby the Standards Acts of theRussian Government, by theBank of Russia and by the StateTax Service was achievedthrough the work of the InternalControl and Monitoring Serviceof the Bank. The Bank carriesout planned regular checks of theoperation of its branches.
The growing scope of activities,establishment of new regionaloffices and an expanded range ofservices to customers are the rea-sons behind the Board’s emp-hasis on staff development. A ‘vacancy data bank’ for topexecutive managers was estab-lished and regular training work-shops for the staff were orga-nized. Special attention is paidto the development of corporateculture, «Corporate Profile ofthe Bank» was drawn.
In 1988 Gazprombank contin-ued developing its integrateddata transfer system. Commu-
nications with the branches areestablished via dedicated satellitechannels and ground-base tele-communications system of the gasindustry. Corporate Intranet net-works are being implemented. In1998 an Internet Web-server of theBank put into operation. Animproved remote Telebank auto-mated inquiry and data system pro-viding customers with necessaryinformation on their accounts isbeing launched. Further develop-
ment of interbank settlements isbased on the REUTERS Dealing2000-2 complex and a new genera-tion SWIFT hardware for interna-tional settlements. An electronicarchive of managerial financialdocuments was introduced which isactively operated. A system of elec-tronic documentation flow cover-ing the entire Bank was experimen-tally launched. Automated systemsfor personnel management, mater-ial and technical resource manage-ment and information and analysissystems were being designed andtested.
Office of the Gazprombank
branch in Volgograd
Financial
Accounts
Commercial Bank for the Gas Industry1998
Annual Report «Gazprombank»
Thousand rublesASSETS
1 Cash and Due from the Central Bank of the Russian Federation 1 414 2882 Government debt securities 605 5413 Due from the credit institutions 3 541 7224 Net trading securities 28 4904.1 Trading securities (balance sheet value) 45 0894.2 Provision for diminution in value of securities 16 5995 Loans and advances to customers 30 402 1355‡ Accrued interest (including overdue interest) 48 4046 Leasing —7 Loan loss provision 596 2518 Net loans and advances to customers 29 805 8849 Loan loss provision required in relation to the 1994 year, but not recorded in the financial statements 20310 Fixed and intangible assets 111 35911 Net securities held for long-term purposes 479 22411.1 Securities held for long-term purposes (balance sheet value) 506 87111.2 Provision for diminution in value of securities 27 64712 Accrued income 11 57413 Other assets 1 348 43014 Total Assets 37 395 119
LIABILITIES15 Due to the Central Bank of the Russian Federation —16 Due to the credit institutions 6 960 31917 Customer deposits and current accounts 18 820 52517.1 Deposits of individuals 1 112 85218 Accrued expenses 219 Debt securities issued by the credit institution 1 321 58420 Other liabilities 3 952 34721 Provision for other assets, risks and other commitments —22 Total liabilities 31 054 777
Partners’ funds 23 Charter capital 3 848 43223.1 Registered ordinary shares 3 653 42623.2 Registered preferred shares —23.3 Unregistered charter capital of the non-joint-stock banks 195 00624 Treasury stock —24‡ Net of the charter capital and partners’ funds —25 Emission income —26 Funds and retained earnings carried forward from the prior period 351 54627 Fixed assets revaluation 6 60128 Profit for the year 2 229 08729 Accrued dividends 10 31230 Profit allocated during the year (excluding dividends) 232 96331 Net profit 1 985 81232 Expenses charged directly to funds –147 95133 Total partners funds 6 145 33634 Total liabilities and partners’ funds 37 395 119
OFF BALANCE SHEET ITEMS, COMMITMENTS AND CONTINGENCIES35 Irrevocable obligations of the credit institution *) 16 748 78436 Guarantees issued 1 276 159
Note: *) Payables under the index forward deals not executed on maturity dates in the amount of 5 444 196 thousand rubles included in the balance sheet item
«Irrevocable obligations of the credit institution.» for the accounting purposes were netted against the receivables at the Central Bank of the Russian Federation
official exchange rate as at contractual maturity dates.
Bank’s receivables under the similar index forward deals which are not a subject for these Financial Statements are 4 718 343 thousand rubles as
at December 31, 1998.
TRUST ACCOUNTS as at December 31,1998Assets
8 Current accounts 2 145 341Liabilities
11 Capital in trust 2 145 341
BALANCE SHEET OF GAZPROMBANK as at January 1, 1999
PROFIT AND LOSS STATEMENTS OF GAZPROMBANK for 1998Thousand rubles
Interests income 1 Placements with the credit institutions 431 2872 Loans to customers 1 400 5433 Leasing —4 Debt securities 164 7665 Other 726 Total interest income (sum of the items from 1 to 5) 1 996 668
Interest expenses7 Loans and deposits from credit institutions 1 075 7578 Customer deposits and current accounts 618 8519 Issued securities 214 22510 Rent 21 27011 Total interest expenses (sum of the items from 7 to 10) 1 930 10312 Net interest income (item 6 - item 11) 66 56513 Commission income 175 33314 Commission expenses 28 03415 Net commission income (sum of the items from 13 to 14) 147 299
Other operation income16 Foreign exchange gains 8 413 03817 Trading operations with precious metals, securities and other assets;
positive revaluation of precious metals, securities and other asset; 472 23418 Dividends received 1 65019 Other income 129 94920 Total operation income (sum of the items from 16 to 19) 9 016 87121 Net income (item 12 + item 15 + item 20) 9 230 735
Other operation expenses22 Salary 147 51023 Maintenance 98 80724 Foreign exchange expenses 3 929 38925 Trading operations with precious metals, securities and other assets: REPO deals,
negative revaluation of precious metals, securities and other assets 1 633 21126 Other expenses 672 75927 Total operation expenses (sum of the items from 22 to 26) 6 481 67628 Net profit before provision and miscellaneous income (item 21-item 27) 2 749 05929 Changes in loan loss provision for the year 502 48630 Changes in provision for diminution in value of securities for the year 17 48631 Changes in other provisions for the year —32 Profit before miscellaneous income (item 28 - item 29 - item 30- item 31) 2 229 08733 Net miscellaneous income —34 Profit before taxation (item 32 + item 33) 2 229 08735 Taxes paid 82 41736 Deferred profit tax —36‡ Miscellaneous expenses after taxation —37 Net profit for the year (item 34 - item 35 - item 36 - item 36a) 2 229 087
Chairman of the Board, Gazprombank V.I.Tarasov
Chief Accountant, Gazprombank G.N.Kozyulina
The audited Annual Financial Statements after the appropriate adjustments are prepared in all material aspects in accordance with the requirements of the
effective legislation of the Russian Federation and the regulatory documents governing accounting and reporting in the Russian Federation. The reliability of
the Profit and Loss Statement is confirmed after the appropriate adjustments made by the Bank in the course of the audit. Without qualifying our Audit Opin-
ion, we took into consideration the note to the Financial Statements.
Without qualifying our Audit Opinion, we draw your attention to the uncertain operating environment in Russia. The operations of the Bank may continue to
be affected for the foreseeable future by the adverse economic conditions in Russia, The ultimate effect of these significant economic uncertainties cannot
presently be determined.
Audit Company: ZAO «KPMG» License No.006315
Date of issue February 18,1998
Director: A.S. Antonov
We performed an audit of the attached Financial Statementsof the Commercial Bank for the Gas Industry ‘Gazprom-bank’ (the Bank) including the Balance Sheet and the Profitand Loss Statement as at January 1, 1999 and for 1998. TheFinancial Statements were prepared by the Board of Man-agement of the Bank proceeding from Accounting Rules forthe credit organizations located on the territory of the Russ-ian Federation No. 61, approved by the Order of the CentralBank of the Russian Federation dated June 18, 1997 No. 02-263(with subsequent additions and amendments), the Regula-tions of the Central Bank of the Russian Federation ‘On theannual financial statements for supervised credit organiza-tions’ dated December 25, 1998 No. 452-U (with subsequentadditions and amendments), the Regulations of the CentralBank of the Russian Federation ‘On the publication purpos-es financial statements of the credit organizations for 1998’dated March 3, 1999 No. 505-U (with subsequent additionsand amendments), the Order of the Central Bank of theRussian Federation ‘On the entry into force of the Instruc-tion ‘On the preparation of the financial statements’ datedOctober 1, 1997 No. 02-429 (with subsequent additions andamendments) and the Instruction of the Central Bank of theRussian Federation ‘On the preparation of financial state-ments’ dated October 1, 1997 No. 17 (with subsequent addi-tions and amendments).The Board of Management of the Commercial Bank for theGas Industry ‘Gazprombank’ is responsible for the prepara-tion of the Financial Statements and for the Company’s Year2000 problem remediation plans. Our responsibility is toexpress an opinion on these Financial Statements in all mate-rial aspects, based on our audit. We performed the audit pur-suant to the Decree of the President of the Russian Federa-
tion ‘Temporary rules for the audit activities in the RussianFederation’ dated December 22, 1993 No. 2263, the Regula-tions of the Central Bank of the Russian Federation ‘On auditactivity in the banking system of the Russian Federation»dated September 10, 1997 No. 64 (with subsequent additionsand amendments) approved by the Order of the Central Bankof the Russian Federation. ‘On the entry into force of theRegulations on audit activity in the banking system of theRussian Federation’ dated September 10, 1997 No. 02-391,the Regulations of the Central Bank of the Russian Federa-tion ‘On the procedure for the preparation and submission tothe Bank of Russia of an audit opinion based on the results ofan audit of the activity of a credit organization’ dated Decem-ber 23, 1997 No. 10-P. Audit Standards, approved by theAudit Commission under the President of the Russian Feder-ation dated December 25, 1996, January 22, 1998 and July 15,1998 (Minutes No. 6, No. 2, No. 4). Audit Standardsapproved by the Expert Committee on banking audit of theCentral Bank of the Russian Federation, International AuditStandards and Internal company Audit Standards.The audit was planned and performed to obtain sufficientassurance that the Financial Statements are free of materialmisstatement. The audit included an examination on a testbasis of the data contained in the Financial Statement. Thereview of the compliance of a number of the financial andbusiness operations performed by the Bank with the effectivelegislation of the Russian Federation was performed exclu-sively to obtain reasonable assurance that the Financial State-ments are free of material misstatement.We believe that our audit provides a reasonable basis forexpressing an opinion on the reliability of these FinancialStatements.
OPINION
of the audit firm ZAO ‘KPMG’ on the Financial Statementsof the Commercial Bank for the Gas Industry ‘Gazprombank’
for the period from January 1, 1998 to December 31, 1998
KPMG
The audited Annual Financial Statements after the appropri-ate adjustments reflected in Attachments No. 1 and No. 2 tothe present Audit Opinion are prepared in all material aspectsin accordance with the requirements of the effective legisla-tion of the Russian Federation and the regulatory documentsgoverning accounting and reporting in the Russian Federa-tion. The reliability of the attached Balance Sheet and Profitand Loss Statement, which are certified for identification pur-poses by the signature of the Director and the seal of the auditfirm ZAO ‘KPMG’, is confirmed taking into account appro-priate adjustments made by the Bank in the course of theaudit to the present Audit Opinion.Without qualifying our Audit Opinion, we draw your atten-
tion to the uncertain operating environment in Russia.
The operations of the Bank may continue to be affected forthe foreseeable future by the adverse economic conditions inRussia. The ultimate effect of these significant economicuncertainties cannot presently be determined.
Moscow April 23, 1999
A.S. AntonovDirector, ZAO ‘KPMG’
O.Y. SokolovAudit Manager