Financial Markets Operations

The year 2010 was marked by excess short-term liquidity across the banking sector. As rouble liquidity accumulated, foreign currency liquidity tended to decline.

Sberbank invested surplus rouble liquidity in rouble-denominated securities, primarily federal loan bonds, Bank of Russia bonds and corporate shares and bonds. Most bonds purchased by the Bank were included in the Bank of Russia’s Lombard List. This materially improved the Bank’s ability to obtain refinancing from the Bank of Russia. In the 2010 results, Sberbank ranked first in the MICEX ratings of the leading stock-exchange operators for non-government bonds in regular trading.

Just as in the overall banking sector, Sberbank’s foreign currency liquidity diminished as a result of large-volume lending and decreases in the share of foreign-currency-denominated deposits in total deposits, a consequence of the strengthening Russian rouble. To cover the deficit, Sberbank raised funds in external markets both by borrowing under the MTN programme and raising syndicated loans, and by means of repurchase transactions with foreign-currency- denominated instruments. In addition, the Bank significantly reduced its portfolio of foreign-currency-denominated securities in the third quarter of 2010 in order to obtain more liquidity.

In 2010, Sberbank expanded into new segments of the securities market, such as Eurobonds issued by sovereign borrowers in the CIS and CIS-based corporate issuers, and sovereign bonds issued by developing economies (Turkey, Brazil). Diversifying its own securities portfolio, the Bank performed transactions with over 450 securities issues of roughly 150 issuers during the year. Sberbank’s aggregate securities portfolio increased by a factor of 1.7 year on year to RUB 1,824bn with the share of securities in the Bank’s assets rising from 15% to 21%.

Transactions on behalf of clients

Client transactions on the financial markets have great capacity for increasing fee and commission income. Commission income from securities transactions conducted on behalf of clients was RUB 1.1bn in 2010, dropping 20.5% year on year. This was primarily composed of income from assisting clients throughout security issues and placement processes and from brokerage and depository services.

Underwriting services

In 2010, the Bank placed or assisted in placing 52 third-party bond issues, including municipal and sub-federal bonds, with an overall participation of RUB 87.2 at par. Sberbank’s share in total rouble-denominated bond placements was 10.2% in 2010. Major bond issuers Sberbank assisted in 2010 include Federal Grid Company of Unified Energy System, ZAO AK ALROSA, Vnesheconombank, Mobile TeleSystems, Russian Railways, Evraz Holding Finance and Mechel.

The Bank arranged some unique transactions in international capital markets. In particular, the Bank acted as a co-arranger in a sovereign bond issue of the Republic of Belarus and participated as a co-bookrunner in UC Rusal’s listing on the Hong Kong Stock Exchange.

Fiduciary management and brokerage services

The Bank continued to promote services relating to the fiduciary management of clients’ funds on the financial markets, with the value of funds managed by Sberbank increasing fivefold to RUB 5.5bn.

The Bank entered the collective investment market in 2010 by creating the Sberbank Management Company and launching a basic range of three mutual funds in December, including funds for shares and bonds and a hybrid fund.

The Bank’s brokerage business using an internet trading service matured in the reporting year. With a view to improving the quality of brokerage services, the Bank, as of 1 July 2010, introduced a new internet trading product based on the QUIK internet system which is dominant in the Russian market. Total internet client sales amounted to RUB 215bn, tripling year on year. There were roughly 12,000 clients.

Depository services

The Sberbank Depository is one of Russia’s largest. It comprises over 240,000 customer accounts with an asset market value of roughly RUB 1,700bn.

In 2010, Sberbank acted as an advisor and issuing depository for the issue of Russian depository receipts for shares in UC RUSAL PLC. The issue was the first in Russian history. By participating in this issue the Bank joined the elite global club of banks issuing depository receipts.

In 2010, the Depository served as the underlying asset sub-custodian for the issue and clearance of depository receipts issued by JP Morgan Chase Bank N.A. for shares in major Russian companies.

Based on client feedback on service quality, Global Custodian named the Sberbank Depository Domestic Commended as the domestic depository of choice for investors in Russia, both local and foreign.

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