Interest Income

	2019		2018		Change
	RUB bln	% of total	RUB bln	% of total	%
Loans to customers	65.6	44.5%	68.9	50.0%	-4.8
Due from banks, other financial institutions and CBR	67.0	45.5%	58.1	42.1%	+15.3
Debt financial assets and other financial instruments	14.8	10.0%	10.9	7.9%	+35.2
Total interest income	147.4	100.0%	137.9	100.0%	+6.8
Average yield on interest-earning assets (%)Average yields and values are averaged by quarters		7.2%		7.6%

For the year ended 31 December 2019, MKB’s interest income increased by RUB 9.4 bln, or 6.8%,

to RUB147.4 bln

from RUB 137.9 bln for the year ended 31 December 2018.

The interest income growth was mostly driven by the yield on accounts and deposits at other financial institutions and CBR as a result of a general increase in the volume of interbank transactions coupled with an expansion of their rouble-nominated share which generates higher interest income on average. Another driver was the expanding debt financial assets and other financial instruments. The average yield on interest-bearing assets decreased from 7.6% as at 31 December 2018 to 7.2% as at 31 December 2019. A decrease in the average interest yield is due to persistent key rate cuts, higher competition in the banking sector and a greater share of highly liquid assets held pursuant to MKB’s conservative approach to liquidity risk management and lending against a moderate recovery of economic growth.

Interest Income on Loans to Customers

The loan portfolio’s contribution to the total interest income decreased by 5.5 pp y-o-y to 44.5% as at 31 December 2019. In absolute terms, the decrease was RUB 3.3 bln as at 31 December 2019. This was attributable to CBR’s key rate cuts, which put pressure on the market rates, and tougher competition for prime borrowers. MKB’s average yield on loans to customers decreased from 10.0% for the year ended 31 December 2018 to 9.1% for the year ended 31 December 2019 in line with the general market trend to lower interest rates.

Interest Income on Due from Credit and Other Financial Institutions and CBR

Interest income on due from credit and other financial institutions and the CBR represented 45.5% and 42.1% of total interest income for the years ended 31 December 2019 and 2018, respectively.

For the year ended 31 December 2019, interest income on due from credit and other financial institutions and CBR increased by RUB 8.9 bln, or 15.3%,

to RUB 67.0 bln

from RUB 58.1 bln for the year ended 31 December 2018.

A substantial share of interest income on due from credit and other financial institutions and CBR reflects a significant amount of reverse repo transactions, allowing the bank to generate stable income with minimum levels of risk and capital consumption, while maintaining a comfortable “liquidity cushion” for any eventual instability of the financial market.

MKB’s average yield rose from 6.1% for the year ended 31 December 2018 to 6.2% for the year ended 31 December 2019, as a result of repricing and a greater volume of higher-yield rouble-nominated reverse repos.

Interest Income on Debt Financial Assets and Other Financial Instruments

Interest income on debt securities (including trading financial assets and investment financial assets) represented 10.0% and 7.9% of total interest income for the years ended 31 December 2019 and 2018, respectively.

For the year ended 31 December 2019, interest income on debt financial assets and other financial instruments increased by RUB 3.9 bln or by 35.2%

to RUB14.8 bln

from RUB 10.9 bln for the year ended 31 December 2018 as a result of the securities portfolio growth which obliges MKB as a systematically important bank to comply with a mandatory ratio by holding a large amount of highly liquid securities.
The average interest rate earned on debt securities increased to 6.3% for the year ended 31 December 2019 from 6.2% for the year ended 31 December 2018.