Operating Expense

As of 31 December 2018, the bank’s operating expense increased by RUB 1.8 bln, or 9.3%, to RUB 21.2 bln from RUB 19.4 bln as of 31 December 2018. This was primarily due to increases in salaries and employment benefits.

2019 2018
RUB mln % RUB mln %
Salaries and employment benefits 14,167 66.7% 12,290 63.3%
Administrative expenses 5,155 24.3% 6,085 31.3%
Depreciation of property and equipment 1,903 9.0% 1,051 5.4%
Operating expense 21,225 100.0% 19,426 100.0%
Cost-to-income ratio (%) 51.6% 29.8%

Salaries and Employment Benefits

Salaries and employment benefits increased by RUB 1.9 bln, or 15.3%, to RUB 14.2 bln for the year ended 31 December 2019 from RUB 12.3 bln for the year ended 31 December 2018. This increase was primarily due to salary increases resulting from the overall development of the bank’s business and growing competition among employers.

Administrative Expenses

For the year ended 31 December 2019, MKB’s administrative expenses decreased by RUB 0.9 bln, or 15.3%,
to RUB5.2  bln
from RUB 6.1 bln for the year ended 31 December 2018.

The decrease primarily reflects a more than fivefold reduction, by RUB 1.0 bln, in occupancy expenses in 2019 due to the new, IFRS 9-related accounting rule.