Investments in Securities
Breakdown of investments between equity and debt instruments
The Group’s securities portfolio totalled RUB 1,823.6bn at 31 December 2010 (including securities pledged under repurchase agreements), which is RUB 759.5bn up on 2009. As shown in the table below, debt instruments comprised 93.7% of the Group’s securities portfolio at 31 December 2010 versus 96.2% in 2009. Investments in equity securities are primarily represented by major Russian companies’ shares.
As of 31 December 2010 | As of 31 December 2009 | |||
---|---|---|---|---|
RUB m | Amount | % of amount | Amount | % of amount |
Debt securities | 1,708,345 | 93.7 | 1,023,183 | 96.2 |
Equity securities | 115,303 | 6.3 | 40,952 | 3.8 |
Total securities | 1,823,648 | 100.0 | 1,064,135 | 100.0 |
Investments in debt securities
The Group’s investments in debt securities predominantly consist of bonds issued by the Russian government and the Bank of Russia. On aggregate these bonds made up 69.4% of the Group’s investments in debt securities at 31 December 2010, having experienced an 85.2% year on year increase to reach RUB 1,185.1bn.
Investments in corporate debt securities and other instruments also saw gains, rising to RUB 373.9bn in 2010 from RUB 277.7bn at the end of 2009, though this growth was slower than that seen in investments in Russian government and Bank of Russia bonds. As a result the share of investments in corporate debt securities and other instruments in the debt securities portfolio slipped to 21.9% at the end of 2010 (at 31 December 2009 the same share was 27.1%).
Breakdown of investments in securities by portfolio
Investment securities available for sale made up 70.2% of the Group’s investments in securities at 31 December 2010 (up 50.8% year on year). This portfolio expanded in the first half of 2010 largely because the Group had excess liquidity. In the second half of 2010, this portfolio shrunk with a corresponding increase in the loan portfolio. The portfolio of investment securities available for sale comprises the following major components: Central Bank of Russia bonds — 33.9%, OFZ bonds — 27.2%, and corporate bonds — 22.6%.
In 2010, the Group started building up a portfolio of investment securities held to maturity. This portfolio includes securities with maturities from one year to seven years. At 31 December 2010, the Group’s investments in this portfolio amounted to RUB 358.2bn or 19.6% of the Group’s securities portfolio. OFZ bonds account for the largest share of the portfolio of investment securities held to maturity (RUB 227.3bn or 63.5%). Sub-federal and municipal bonds make up another substantial share of 24.0%.
The Group’s investments in securities designated at fair value through profit or loss amount to RUB 106.9bn or 5.9% of the Group’s investments in securities. OFZ bonds account for more than half (58.7%) of this portfolio. Their share increased by 0.3 p.p. from 2009. The proportion of corporate shares was up 4.7 p.p. and amounted to RUB 26.7bn at 31 December 2010. Shares are mainly represented by blue chip equity securities.
The Group’s trading portfolio incorporates investments that are essentially short term; investments in this portfolio account for 4.3% of the Group’s securities portfolio.
As of 31 December 2010 | As of 31 December 2009 | |||
---|---|---|---|---|
RUB m | Amount | % of amount | Amount | % of amount |
Investment securities available for sale | 1,280,264 | 70.2 | 848,674 | 79.8 |
Investment securities held to maturity | 358,191 | 19.6 | - | - |
Securities designated at fair value through profit or loss | 106,875 | 5.9 | 124,439 | 11.7 |
Trading securities | 78,318 | 4.3 | 91,022 | 8.5 |
Total | 1,823,648 | 100.0 | 1,064,135 | 100.0 |
Fair value of securities
All the securities the Group holds, with the exception of investment securities held to maturity, are measured at fair (market) value. In most cases, fair value is based on their market quotes effective as of the reporting date. Where market quotes were unavailable, the Group applies appropriate valuation models using both observable market data and judgment-based parameters.
The securities for which the fair value was determined using valuation models and professional judgment accounted for 2.4% of the portfolio at 31 December 2010 (RUB 43.6bn). These securities include unquoted equity instruments issued by companies operating in the oil and gas, transportation, telecommunication and construction industries.