37. Principal Subsidiaries

The table below provides details on principal subsidiaries of the Bank as at 31 December 2011:

Name Nature of business Percentage of ownership Country of registration
Subsidiaries:      
OJSC Belpromstroy Bank (OAO BPS Bank) banking 97.91% Belarus
SB JSC Sberbank banking 100.00% Kazakhstan
JSC Sberbank of Russia banking 100.00% Ukraine
Sberbank (Switzerland) AG (former SLB Commercial Bank AG) banking 99.15% Switzerland
CJSC Sberbank Leasing leasing 100.00% Russia
LLC Sberbank Capital finance 100.00% Russia
Troika Dialog Group Ltd. finance 100.00% Cayman islands
LLC Sberbank Investments finance 100.00% Russia
Sberbank Asset Management Company asset management 100.00% Russia
CJSC NK Dulisma oil company 100.00% Russia
LLC Khrustalnye Bashni construction 50.01% Russia
CJSC GOTEK Group Management Company packaging materials 60.00% Russia
Vester Retail N.V. retail trading 54.00% Netherlands

In December 2011, following the binding agreement signed in May 2011, the Group obtained the power to govern financial and operating policies of Troika Dialog Group Ltd. (the Company or Troika Dialog). At 31 December 2011 the Company was consolidated into the Bank’s financial statements as a 100% subsidiary. The documentation on the acquisition of the Company assumes two tranches for the deal settlement: (a) the first payment of USD 1 000 mln for 100% of the shares of Troika Dialog and (b) subsequent payment which is dependent upon the net earnings of the Company for 2011 — 2013.

The first tranche was recorded as a liability amounted to RR 32 196 mln at 31 December 2011 and was settled in January 2012. Refer to Note 20.

The Bank determined that the second part of the payment includes two components. The first component represents consideration for business combination, which is recognised as liability at 31 December 2011 in the amount of RR 3 937 mln. The Bank assessed respective contingent consideration on the basis of the business prospects and synergies of the Company upon its integration to the Group.

The second tranche represents a compensation to the Company’s employees to be accrued over 2012-2013. No accrual of the compensation component was made as of 31 December 2011.

Taking into account different accounting principles of Troika Dialog prior to the acquisition by the Bank, its financial year ends being different from those of the Bank and uncertainties associated with the factors effecting volume of the Company’s business the Bank considers it impracticable to disclose the revenue and net profit of the Group with Troika Dialog for the year ended 31 December 2011 as if the acquisition had occurred on 1 January 2011.

The Bank acquired Troika Dialog following its strategy on the development of diversified product range for corporate, SME and retail customers and the improvement of profitability and efficiency of the Group’s operations.

Founded in 1991, Troika Dialog is one of the leading investment companies in the CIS. The Сompany’s business consists of securities sales and trading, investment banking, private wealth and asset management, direct and venture investments, retail distribution and alternative investment. Troika Dialog’s operations are located in 21 cities across Russia plus offices in London, New York, Kyiv, Almaty and Nicosia.

The goodwill is primarily attributable to the potential synergies and profitability of the business as well as business set up processes. The goodwill will not be deducted for tax purposes in future periods.

For the purpose of determining goodwill from the business combination, provisional fair values of identifiable assets and liabilities of Troika Dialog, based on the results of an independent external appraisal at the acquisition date, were as follows:

In mln of Russian Roubles Note Provisional fair value
Cash and cash equivalents   42,149
Mandatory cash balances with central banks   120
Trading securities   48,997
Securities designated at fair value through profit or loss   1,163
Due from other banks   8,025
Loans and advances to customers   35,602
Securities pledged under repurchase agreements   45,524
Investment securities held to maturity   1,156
Deferred income tax asset   247
Premises and equipment   1,591
Other financial assets   33,245
Other non-financial assets   10,760
Total assets   228,579
Due to other banks   (46,203)
Due to individuals   (4,587)
Due to corporate customers   (49,822)
Debt securities in issue   (1,498)
Deferred income tax liability   (2,063)
Other financial liabilities   (91,007)
Other non-financial liabilities   (4,394)
Total liabilities   (199,574)
Fair value of net assets of subsidiary   29,005
Calculation of goodwill:    
Total purchase consideration 20 36,133
Fair value of net assets of subsidiary   (29,005)
Goodwill on acquisition   7,128

Gross amount of loans and receivables acquired through this business combination amounted to RR 35 945 mln. The amount of cash flows not expected to be received was assessed at RR 343 mln.

Intangible assets recognised on acquisition of the subsidiary comprised core deposit intangibles of RR 4 785 mln and other intangible assets of RR 4 348 mln.

The measurement of outflow of cash and cash equivalents on acquisition is detailed below:

In mln of Russian Roubles
Total consideration paid at 31 December 2011 -
Less: fair value of cash and cash equivalents of subsidiary acquired 42,149
Inflow of cash and cash equivalents on acquisition as at 31 December 2011 42,149

In June 2011 the Group disposed of a 93.44% share in OJSC Pavlovskaya Keramika, a company involved in production and sale of construction materials, and in October 2011 the Group disposed of a 93.44% in LLC Pavlovo-Posadskoe Gornodobyvauchee Obiedinenie for RR 197 mln. The gain from these operations amounted to RR 172 mln.

During the year ended 31 December 2011 the Group acquired or repossessed under the settlement of the loan to its borrowers interests in certain other companies. The details of the fair value of net assets of other companies acquired during the reporting period ended 31 December 2011 are as follows:

In mln of Russian Roubles справедливая стоимость
Fair value of net assets of subsidiaries 3,874
Total purchase consideration 3,837
Non-controlling interest’s proportionate share of net assets acquired 119
Total purchase consideration and non-controlling interest 3,956
Goodwill arising on acquisition 191
Gain from bargain purchase (109)

The Group holds major interest in certain entities but does not have the power to govern the financial and operating policies of those entities so as to obtain benefits from their activities due to legally bound agreements on transfer of management powers and all risks and rewards of the entities for the benefit of third parties. These entities are not included into the Group’s consolidated financial statements.

In December 2011 the Group signed a preliminary agreement on a stage-by-stage disposal of 100% share of OJSC Holding company GVSU Center in a period of less than twelve months after the reporting date as a result of which assets and liabilities of GVSU were classified as assets and liabilities of the disposal group in the consolidated statement of financial position as at 31 December 2011. Refer to Notes 15 and 20.

The share of the subsidiaries of the Bank in the consolidated assets of the Group as at 31 December 2011 was 7.1% (31 December 2010: 4.2%).

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