PIVDENNYI Bank Annual Report 2006 by wuyunyi

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									                                                                                                                                                  ANNUAL REPORT
                                                                                                                                                       CONTENT




 ANNUAL REPORT 2006
 ADDRESS OF BANK’S MANAGEMENT......................................................................................................................................................................................... 3

 MANAGEMENT......................................................................................................................................................................................................................... 4

 HISTORY OF SUCCESS ............................................................................................................................................................................................................ 5

 ACTIVITY PERFORMANCE ...................................................................................................................................................................................................... 11

 DEVELOPMENT PROSPECTS ................................................................................................................................................................................................... 13

 FINANCIAL STATEMENT......................................................................................................................................................................................................... 14


 BUSINESS CARD
 COMPETITIVE ADVANTAGES .................................................................................................................................................................................................. 16

 RATINGS .............................................................................................................................................................................................................................. 17

 LICENCES ............................................................................................................................................................................................................................. 19

 CORRESPONDENT NETWORK ................................................................................................................................................................................................. 21

 MEMBERSHIP IN INTERNATIONAL AND UKRAINIAN PROFESSIONAL ORGANIZATIONS .............................................................................................................. 22

 MANAGEMENT STRUCTURE ................................................................................................................................................................................................... 23

 GEOGRAPHY OF THE BANK .................................................................................................................................................................................................... 24

 BASIC RATING INDICATORS OF ASSOCIATION OF UKRAINE BANKS ......................................................................................................................................... 25

 BANK AND SOCIETY............................................................................................................................................................................................................... 26


 KEY BUSINESS DIRECTIONS
 SERVICES TO CORPORATE CUSTOMERS ................................................................................................................................................................................. 29

 SERVICES TO INDIVIDUALS ................................................................................................................................................................................................... 34

 SERVICES TO BANKS ............................................................................................................................................................................................................. 38

 FINANCIAL HIGHLIGHTS
 INTRODUCTION .................................................................................................................................................................................................................... 40

 MACROECONOMIC ENVIRONMENT OF THE BANK ................................................................................................................................................................... 41

 BALANCE STRUCTURE ........................................................................................................................................................................................................... 42

 CAPITAL STRUCTURE ............................................................................................................................................................................................................ 43

 INCOME AND EXPENSE STRUCTURE....................................................................................................................................................................................... 44

 OPERATIONAL ACTIVITY DYNAMICS IN 2006.......................................................................................................................................................................... 46


 DEVELOPMENT PRINCIPLES
 RISK MANAGEMENT............................................................................................................................................................................................................... 50

 CUSTOMER BASE DEVELOPMENT............................................................................................................................................................................................ 51

 BRANCH NETWORK DEVELOPMENT........................................................................................................................................................................................ 52

 STAFF POLICY....................................................................................................................................................................................................................... 53


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CONTENT                                                                                                                                                                                   WWW.BANK.COM.UA
                                                                     ANNUAL REPORT
                                                     ADDRESS OF BANK'S MANAGEMENT




Dear Clients, Partners, Colleagues and Employees of
PIVDENNYI Bank.

Last year, 2006, continued a new era of comprehensive           Achievements in the financial and public activity of
development for PIVDENNYI Bank, the largest                     bank marked rewards and diplomas of Ukrainian
commercial bank in Southern Ukraine. Thereby                    and International nominations, ratings and contests.
confirming the stability, universality and strategy of          PIVDENNYI Bank has been awarded a prestigious
successful development.                                         diploma for the creation of the most effective brand
                                                                of Ukraine.
13 years of PIVDENNYI Bank's history - is a fine measure
of success. PIVDENNYI has exhibited the best banking            Economic indicators of bank's activity, stable growth,
traditions, lofty achievements and financial results.           due to the chosen strategy of development, team of
                                                                professionals and high level of customer's services -
All of which are leading indicators of perspective growth       every employee contributes to PIVDENNYI Bank's level
and of the further professional development of the              of development.
bank.
                                                                The status of PIVDENNYI Bank, as a reliable Bank has
In 2006, PIVDENNYI Bank multiplied its branch network           been confirmed by the World Bank.
to 17 branches with 83 divisions in the various regions
of the country. In doing so, PIVDENNYI obtained high            Combined with a flexible leadership policy, concise
marks from world ratings agencies, attracted                    development strategy, and the most highly trained
syndicated credit, and also was reorganized from a              personnel, PIVDENNYI Bank today occupies their well-
closed joint-stock company to a public corporation.             deserved positions among the largest credit
                                                                organizations in Ukraine.
The result of the bank's dynamic development - is
reliability, adjustable strategy, a balanced approach to        Reliability and an impeccable reputation, efficiency
the bank's business, thorough knowledge of the bank             and professionalism, serve as the foundation for
services market, modern advancements of financial               the trust PIVDENNYI Bank Partners and Clients have
science and leading business technologies.                      come to expect.

Nowadays, PIVDENNYI Bank offers the most modern                 These are the principals which guide PIVDENNYI BANK!
banking services and products. Thereby retaining its
traditions and enriching the corporate culture of its
development.




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ADDRESS OF BANK'S MANAGEMENT                                                                  WWW.BANK.COM.UA
                                              ANNUAL REPORT
                                               MANAGEMENT




                   Lyudmila                                    Vadim
                   I. Khudiyash                             V. Mokin

                   Deputy Chairman              Head of treasury and
                   of the Board                 international business
                                                          Department




 Lyudmila                                                                        Valentina
 I. Oliferchuk                                                                  D. Grechko

 Deputy Chairman                                                     Head of Law Division
 of the Board                                                        Member of the Board




                   Liya                                       Elena
                   S. Morokhovskaya                    G. Tsvetkova

                   Deputy Chairman                 Head of Regional
                   of the Board              Network and Accounting
                                                        Department




 Lyudmila                                                                            Anna
 V. Kovalenok                                                                  O. Svoboda

 Chief Accountant                                                        Head of Corporate
 Member of the Board                                                        Service Division




                   Dmitriy                                    Galina
                   G. Zakharov                           V. Chekeres

                   Chief Administrator              Head of Lending
                                                            Division


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MANAGEMENT                                                         WWW.BANK.COM.UA
                                                                        ANNUAL REPORT
                                                                    HISTORY OF SUCCESS




1993
The National Banf of Ukraine officially registers               PIVDENNYI Bank enters 1-st position within Ukraine,
PIVDENNYI Joint-Stock Bank. The creative team of                in terms of the dynamics of capital growth. The Bank
professionals is formed. Ensuring the precise office            enters into the list of top 10 most active stock market
organization from the Bank's inception.                         operators. PIVDENNYI Bank is the 1-st bank in the
                                                                Southern Region of Ukraine to become a member of
The priorities and development strategy of PIVDENNYI            the world-wide organization of Interbank Financial
Bank are determined.                                            Communications, known as S.W.I.F.T.

                                                                The Bank becomes a member of Interbank Currency
1994                                                            Stock Exchange, Professional Association of Registers
PIVDENNYI develops noticeably. Lending becomes its              and Custodians, an associate member of International
main activity. At years end, Yu. A. Rodin becomes               payment system "EUROPAY INTERNATIONAL" and
Head of the Council of Shareholders.                            official dealer of the "THOMAS COOK" Company.
                                                                The Bank obtains permission to perform shareholder's
This talented mathematician, pragmatic financier and            register keeping, and becomes a participant of
progressive businessman not only unifies a team of              "Inter-regional Stock Union".
professionals but charts the course for the Bank's
destiny, as one of the premier Banks in Ukraine.
                                                                1998
                                                                Thorough daily market analysis allows the Bank to take
1995                                                            measures and opportunities to avoid the sharp financial
Assets increase by more than 6 fold, and profits by             crisis which overtook the country and put many banks
more than 11 fold. The bank ranks 6th among                     out of business.
commercial banks in Ukraine in terms of assets growth.
                                                                PIVDENNYI Bank provided customers with safety
PIVDENNYI Bank establishes direct correspondent                 from difficulty by no longer handling State bonds
relationships with A-class foreign banks. The expansion         and changing the assets structure in favor of bills
of the Bank's clientele and the stellar reputation of the       of exchange and credit transactions.
Bank contributes to the beginning of the activity of the
first two branches - in Odessa and Ilyichevsk.                  The Bank started the issue of own bills of exchange,
                                                                bought other bank's and companie's bills of exchange
                                                                and offered to its customers crediting through bills of
1996                                                            exchange acceptance.
The bank becomes one of the leading operators of the
State bond market and actively participates in the              Interest from loans constituted up to 50% of total
market of corporate securities, and acts as broker for          income. More than 98% of total loan portfolio
its customers. "Bank-Client" - the electronic payment           represented loans within one year. Hence, neither Bank
system is introduced.                                           customers nor Banks work suffered under the crisis.

The team of experts consists of 120 employees.                  The new building complex of the Bank's central office
                                                                in historical Odessa - Sabanskiy Lane, was built.

1997                                                            The architectural distinctive features of the new office
PIVDENNYI Bank comes to the top, in the Project of              complex was re-creation of the 19th century building
TACIS and "Price-Waterhouse-Coopers" survey on                  exterior destroyed during World War II, combined with
implementation of international accountancies standards         ultra-modern interior, autonomous engineering and
in Ukrainian banks.                                             technical systems, as well as up-to-date banking
                                                                equipment.

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HISTORY OF SUCCESS                                                                             WWW.BANK.COM.UA
                                                                       ANNUAL REPORT
                                                                   HISTORY OF SUCCESS




1998
The end of the year was marked by the issue of its             JSB "Pivdennyi" is the 1st commercial bank of Ukraine to
own payment cards in International payment system              issue its own bonds.
EUROPAY INTERNATIONAL. And by the start of
cooperation with the leading audit firm                        Most significantly due to the Bank's spotless reputation.
"Price-Waterhouse-Coopers".                                    That combined with convenient repayment terms, three
                                                               series of first issue bonds were completely placed in less
The number of experts exceeds 250 people.                      than a week.

                                                               According to the strategic development policy, the Bank
1999                                                           is focused on retail banking.
In compliance with the National Bank's of Ukraine
criteria Pivdennyi Bank was listed among the first group       Individuals account balances increases by 8 fold during
of financial-stable banks without incumbrances and held        the year and the number of Bank staff exceeds 550
a firm position among the TOP 20 banks of Ukraine.             people.

The total volume of the funds attracted within the
year increases 5 times. Turnover of corporate deposits
                                                               2001
increases by 4 fold, retail deposits - by 3 fold,              According to the rating system of the Association of
customer's accounts turnover - 6 fold. The branches in         Ukrainian Banks, PIVDENNYI Bank ranks 14th in assets
Kiev and Krivoy Rog begin intensive activity.                  volume.

The Bank's portfolio increases by 3 fold. Turnover on          The Bank's loan-investment portfolio continues to grow.
bills of exchange transactions - by 30 times. And the          The share of long-term loans substaintially increases.
Reuters-Dealing system was put into operation in order
to increase the efficiency of transactions.                    4 new branches are opened - in Yalta, Zaporozhie,
                                                               Nikolayev and Kherson. By years end, 2001, Bank
The Bank exchanged telecommunication keys with                 branches account for 33% of the Bank's total assets.
more than 200 banks world-wide. Annual Shareholder's
Meeting elects a new Chairman of the Board -                   Pivdennyi Bank is one of the 1st banks acting as an
Vadim V. Morokhovskiy. An energetic and experienced            underwriter for many of its customers in securities
banking executive. The new Chairman introduces many            transactions.
innovations to the Bank's activities.
                                                               Pivdennyi becomes an associated member of "VISA
                                                               International".
2000
The loan portfolio of Pivdennyi Bank increases by more         The total number of payment cards issued increases
than 3.5 times. The monthly volume of loans exceeds            4 fold during this year.
UAH 300 MIO.
                                                               A new e-bank system is introduced. Allowing customers
The branch network continues its further expansion.            to remotely access to their accounts with "Pivdennyi" via
By years end, 2000, branches made 20% of the Bank's            Internet, telephone and mobile communication.
clientele and 40% of Bank's loan portfolio.
                                                               The number of JSB "Pivdennyi" employees exceeds 650
As an active participant of the Ukrainian stock market,        people.
JSB "Pivdennyi" becomes a member of the Council of the
First Stock Trade System, the largest Stock Exchange in
Ukraine.



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HISTORY OF SUCCESS                                                                            WWW.BANK.COM.UA
                                                                       ANNUAL REPORT
                                                                   HISTORY OF SUCCESS




2002
According to the rating of the Association of the              PIVDENNYI Bank played a vital role in the exclusing of
Ukrainian banks, the JSB "Pivdennyi" ranked 7th with           Ukraine from the International Organization on
respect to the number of corporate deposits, 11th in           Development of Financial Measures blacklist, at the end
credit-investment portfolio, and 12th in net assets.           of February 2004. Contributing to the betterment of
                                                               Ukraine is part of our corporate mission.
Izmail and Simferopol branches expand their clientele.
The Bank's loan-investment portfolio increases more            In 2004 PIVDENNYI Bank was nominated for Brand of
than 2 fold, and exceeds UAH 680 MIO.                          the Year, Gold trade mark, European quality and the
                                                               Best enterprise of Ukraine 2004, and Chairman of the
Frequent visitors to the Head Office are representatives       board Vadim Morokhovskiy was acknowledged as the
of the largest European banks. They come with                  executive of the year.
proposals for cooperation and leave with ready-to-start
international projects. Our team numbers 850                   The third for the last eight years critical economic crisis
professionals.                                                 at the end of 2004 in the next times showed financial
                                                               fixity, stability of indexes and efficiency of bank
                                                               subdivision's program in the conditions of crisis of
2003                                                           market liquidity.
Total net assets of the Bank exceed UAH 1 billion.
                                                               PIVDENNYI Bank consistently is listed among the
For personal contribution to Ukrainian economic                National Bank of Ukraine annual list of the Nations 20
development and supporting integration processes,              most stable banks. Being the largest and most reliable
JSB Pivdennyi is acknowledged the Laureate of the              financial institution in Southern Ukraine the bank retains
International Banking Award, "Gold Mercury".                   the position as one of the largest private banks
Created by the International Corporation of Social             in Ukraine.
Interaction, the "European Business Assembly".
PIVDENNYI is a winner of the International Banking             In 2004 PIVDENNYI Bank opened 2 new branches in
Awards - "Gold Trade Marks - 2003".                            Kharkov and Lugansk, continuing the expansion of the
                                                               branch network in Ukraine.
In conformity with the branch network development
policy, JSB "Pivdennyi" opens 10 representative offices        PIVDENNYI Bank's 2004 review:
throughout Ukraine.
                                                               - leading position in the market of banking services in
                                                                 the Southern Ukraine
2004                                                           - over 1300 highly skilled employees
Analysis of fiscal year 2004's effort proved to be the         - over 70 branches and divisions in all the centers of
best in the Bank's history.                                      business activity in Ukraine
                                                               - over 70 000 clients, whose business, in a number of
January 1st, 2005 showed total Bank Assets of UAH 1,6            cases was built and developed by hands on
billion. Shareholder's capital exceeded UAH 165 MIO and          professional managers and consultants of bank.
customers' accounts exceeded UAH 1 billion.

Th expert Mission of International Organization on
Development of Financial Measures to fight against
money-laundering chose PIVDENNYI Bank to conduct
examinations of the financial system of Ukraine.




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HISTORY OF SUCCESS                                                                             WWW.BANK.COM.UA
                                                                          ANNUAL REPORT
                                                                      HISTORY OF SUCCESS




2005
In 2005, the NSR Corporation, having more than 100                PIVDENNYI Bank is among the leaders "TOP-100" - best
years experience as a leading supplier in the field of            companies of the financial sector of Ukraine.
banking, trade and information technologies solutions,
awarded PIVDENNYI Bank the highest achievement                    As determining criteria of selection, a competitive
Diploma.                                                          commission marked the Bank's progress throughout the
                                                                  year, developed the branch network strategy of Ukraine
In March, 2005 Ukrainian Rating Agency and Publishing             and introduction of the newest types of bank's services,
House "Galitskiye Kontrakti" as a result of the                   the highest level of service, highly skilled and
competition "Gvardiya" acknowleged Vadim                          professional approach to each and every client.
Morokhovskiy, PIVDENNYI Bank Chairman of the Board
- the most successful top-manager in the Ukrainian                The highest level of trust has been maintained by the
economy and awarded him with a diploma "Professional              Bank.
confession 2005".
                                                                  PIVDENNYI Bank is one of only a few banks in Ukraine
In April, new branch of PIVDENNYI Bank was opened in              with a deposit portfolio, exceeding UAH 1 billion.
Sevastopol. Active work on expansion on acquiring                 In October, 2005 the net consolidated assets of bank
network, partner programms, joint projects, new                   exceeded UAH 2 billion.
products of cards and additional services allow for
considerable growth in the credit card sector as well as          Vadim Morokhovskiy, unique from all other Chairmen
promoting the profitability of the credit card business.          of the Boards of commercial banks, is among the
                                                                  "TOP-100" of the most influential people of Ukraine in
The Bank's good dynamics assisted in the acceptance by            the annual rating of "Korrespondent" magazine.
the common meeting of Shareholders the decision about
the reinvestment of dividends in 2004 with an increase            In December, 2005 the rating efficiency trading marks
last to the level of UAH 161,500 MIO.                             of Ukraine "Gvardiya Brendov", PIVDENNYI Bank was the
                                                                  recipient of an award diploma for the most effective
The active voice of the Bank in the International forum           brands of Ukraine.
of investment and innovations, annualy conducted in
Odessa, has effectively assisted the establishment of             In December, 2005 the Bank won a bid from
new business contacts and partners. Banking leaders,              maintenance of payment on pensions of social financial
international investment funds companies, corporations,           aid. The Bank obtained license for maintenance of
legal, consulting and auditing firms, all interested in           accounts of pansioniers and socially unprotected citizens.
investment have taken part in the Bank's forums.
                                                                  Authorized capital of the bank is multiplied to
In July, 2005 PIVDENNYI Bank won a competition by the             UAH 200 MIO in December by decision of meeting
Ministries of Finance of Ukraine on the selection of              of Shareholder's by the additional issue of equities.
banks, having exclusive right of maintenance of projects
of salaries of budgetary establishments, and became the           The team of professionals numbers - 1514 highly skilled
authorized bank of payment of state social help.                  people.

It is documented that, financial indexes, the strategy of
development and the business reputation of Pivdennyi
Bank, conform to all the rigid requirements of Ministry
of Finance of Ukraine, this verifies the stable position of
the bank in the Ukrainian market.




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HISTORY OF SUCCESS                                                                               WWW.BANK.COM.UA
                                                                         ANNUAL REPORT
                                                                     HISTORY OF SUCCESS




2006
In accordance with PIVDENNYI Bank's chosen                       The strategy of diversification in bank's services for
development conception, in January, 2006 the new                 individuals, throughout the history has led to balanced
branch in Odessa was opened on Ekaterininskaya and               growth and high profitability. As well as strong capital
Zhukovskogo streets. PIVDENNYI clients report many               base combined with a high amount of managed assets.
advantages. Including branch office comforts afforded
to the highest European standards.                               Ratings are also grounded by nature of corporate
                                                                 management development of the bank and by
The PIVDENNYI banking experience consists of the most            methodology of risk management.
modern and comfortable branch offices, with a superior
level of services available via our highly skilled banking       The receipt of the international agency Moody's
professionals.                                                   Investors Service's rating is the next stage of Bank's
                                                                 strategic mission, such as:
At PIVDENNYI You will enjoy a personal approach to
efficiently handle all of your banking needs - Branch            - The increasing of trust level to the bank from clients,
advantages include comfortable business hours,                     potential investors, international financial organizations
including weekends, for PIVDENNYI Clients.                         and banks;
                                                                 - The recipient of an independent estimation of bank
PIVDENNYI Bank opened the first deposit ATM complex                business, its financial state and prospects of
in Odessa.                                                         development
                                                                 - The possibility of borrowings at the international
This complex of self-service, the first in Odessa, which           capital markets.
not only dispenses cash, but also accepts it, entering on
a card account of the card holder on-line. Thus, for             As of 01.01.2007:
increasing the account through ATM, PIVDENNYI Bank
does not charge a commission.                                    - assets were UAH 4,038 billion
                                                                 - equity capital exceeded UAH 456 MIO
In March, 2006, The Ukrainian rating agency "Credit-             - customer funds exceeded UAH 2,860 billion
Rating" gave to PIVDENNYI Bank a long-term credit
rating of "uaBBB+" on the Ukrainian national scale. The          PIVDENNYI Bank has become the winner of banking
Bank's high rating is a condition of having one of the           competition for maintenance of international Swedish
largest volumes of assets and deposits.                          agency grant, guided by the Ministry of labour and
                                                                 social policy of Ukraine.
This rating advantageously distinguishes PIVDENNYI
Bank within the Ukrainian banking system and brings              In August, 2006, The International Fitch Rating gives
with it a very stable prognosis, forecasting stability.          PIVDENNYI Bank a "B-" rating of issuer default and a "B"
                                                                 rating of short term credit.
In July, 2006, The International rating agency, Moody's
Investors Services, gave PIVDENNYI BANK B2/NP deposit            Other ratings of a bank were confirmed at followings
rating in foreign currency and E+ rating of financial            levels: rating of support - "5" and individual rating -
stability. Signifying a healthy rating.                          "D/E".

The appropriated ratings reflect extraordinarily strong          The increase of ratings reflects the good indexes of
regional position in the bank's services for corporate           bank credits and proceeding development of its regional
clients and individuals.                                         client network. In addition, ratings are supported by a
                                                                 conservative policy in balances, acceptable level of
                                                                 profitability and limited risks of bank trade operations.




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HISTORY OF SUCCESS                                                                               WWW.BANK.COM.UA
                                                                            ANNUAL REPORT
                                                                        HISTORY OF SUCCESS




2006
In 2006 Chairman of the Board, Vadim Morokhovskiy                   Nowadays, PIVDENNYI Bank offers the most modern
has become a new President of Odessa Chess                          banking services and products. Thereby retaining its
Federation.                                                         traditions and enriching the corporate culture of its
                                                                    development.
The Ukrainian Rating Agency and Publishing House
"Galitskiye Kontrakti" as a result of competition                   Number of highly skilled professionals exceeds 1800
"Gvardiya 500" has acknowledged PIVDENNYI Bank as                   people.
the bank with leading positions in the financial markets
of Ukraine.                                                         We help each of our clients to become more
                                                                    contemporarily and dynamic!
The rating agency "Galitskiye Kontrakti" awarded
PIVDENNYI Bank the certificate granting the Bank the
right to display their logo as rating participant.

50-ty top companies of banking sector have participated
in rating. By a fundamental index, influencing on
awarding of rating there was a volume of assets on
1.01.2006. In opinion of rating agency this index is
reflected by activity of bank establishment and shows
his share at the market. It is already the second award
of Ukrainian Rating Agency and Publishing House
"Galitskiye Kontrakti" for PIVDENNYI Bank.

Confidently confirming its status as a reliable partner
while continuing dynamic development, PIVDENNYI Bank
increases its network to 17 branches with 83 offices in
different regions of Ukraine.

Two new branches were opened in Lvov and Kirovograd,
and a number of unbalanced operational offices in
different cities of Ukraine.

In 2006, PIVDENNYI Bank was reorganized from a
closed joint-stock company to a public corporation.

13 years of PIVDENNYI Bank's history - is a fine measure
of success. PIVDENNYI has exhibited the best banking
traditions, lofty achievements and financial results. All of
which are leading indicators of perspective growth and
of the further professional development of the bank.




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HISTORY OF SUCCESS                                                                                WWW.BANK.COM.UA
                                                                        ANNUAL REPORT
                                                                 ACTIVITY PERFORMANCE




Confidently confirming its status as a reliable partner          Ukrainian Rating Agency and Publishing House
while continuing dynamic development, PIVDENNYI Bank             "Galitskiye Kontrakti" as a result of competition
increases its network to 17 branches with 83 offices in          "Gvardiya 500" has acknowledged PIVDENNYI Bank as
different regions of Ukraine.                                    the bank with leading positions in the financial markets
                                                                 of Ukraine.

                                                                 The rating agency "Galitskiye Kontrakti" awarded
                                                                 PIVDENNYI Bank the certificate, granting the Bank the
                                                                 right to display their logo as rating participant.

                                                                 As of 01.01.2007:

                                                                 - assets were UAH 4,038 billion
                                                                 - equity capital exceeded UAH 456 MIO
                                                                 - customer funds exceeded UAH 2,860 billion

                                                                 PIVDENNYI BANK:

                                                                 - is the authorized bank in all regions of Ukraine for
                                                                   maintenance of accounts, opened for payment of
                                                                   pensions and financial aid

                                                                 - winner of banking competition for maintenance of
13 years of PIVDENNYI Banks history - is a fine measure            international Swedish agency grant, guided by the
of success. PIVDENNYI has exhibited the best banking               Ministry of labour and social policy of Ukraine
traditions, lofty achievements and financial results.
All of which are leading indicators of perspective growth        - is the 1st bank in the Odessa region and enters 10th
and of the further professional development of the                 banks of Ukraine on bringing in of syndicated credit
bank.

In 2006, PIVDENNYI Bank obtained high marks from
world ratings agencies, attracted syndicated credit, and
also was reorganized from a closed joint-stock company
to a public corporation.

Nowadays, PIVDENNYI Bank offers the most modern
banking services and products. Thereby retaining its
traditions and enriching the corporate culture of its
development.

By providing the most up-to-date products and services,
we help each of our customers to become even more
contemporary and dynamic.

By supporting our customers' transactions throughout
the world, the Bank has strengthened its position in the
international financial market and has actively developed
a partners network beyond Ukraine.



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ACTIVITY PERFORMANCE                                                                            WWW.BANK.COM.UA
                                                                     ANNUAL REPORT
                                                              ACTIVITY PERFORMANCE




- takes the 1st position in the Southern region of            Increasing trust of clients and partners, and attention of
  Ukraine in volume of credit portfolio                       potential customers, known internationally corporations,
                                                              public organizations, ratings and analytical agencies,
- winner of contest determination of Ukrainian banks,         allows PIVDENNYI Bank to be certain that its growth
  which are brought over to cash service with the             and development will continue.
  purpose of cash flow of checks - the organs of state
  treasury of Ukraine in 2006 - 2008-




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ACTIVITY PERFORMANCE                                                                         WWW.BANK.COM.UA
                                                                          ANNUAL REPORT
                                                                   DEVELOPMENT PROSPECTS




PIVDENNYI Bank, since its inception, officially and
informally, has earned a reputation as the Bank with the
highest level of service, as well as a very caring attitude
towards its customers.

This is another aspect of the Bank's services
improvement policy and therefore is a reference point,
for the Bank's further development in this direction.

Accompanying the operations of clients in any part of
the world, PIVDENNYI Bank strengthens its positions at
the international financial markets and actively plans to
develop the partner network beyond Ukraine.

In 2007, the Bank's development will be directed
towards international relations, regional network
expansion and customer base increase.

European business integration, cooperation with foreign
and international financial institutions and organizations
in different business activities, the enhancement of
services range and the improvement of services quality,
will be one of the most important directions PIVDENNYI
Bank proceeds in.
                                                                    These are the principals that guide PIVDENNYI Bank!
From the last years figures, experts have called us "One
of the most dynamic banks and one of the best private
banks in Ukraine".

Stability, growth and the confidence of the Bank's
clients, is the result of our success.

Reliability and an impeccable reputation, efficiency and
professionalism, serve as the foundation for the trust
PIVDENNYI Bank's partners and clients have come to
expect.




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DEVELOPMENT PROSPECTS                                                                            WWW.BANK.COM.UA
                                                    ANNUAL REPORT
                 FINANCIAL STATEMENT - BALANCE SHEET on Jan. 1st, 2007




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FINANCIAL STATEMENT - BALANCE SHEET on Jan. 1st 2007                 WWW.BANK.COM.UA
                                                     ANNUAL REPORT
                                   STATEMENT OF INCOME on Jan. 1st 2007




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STATEMENT OF INCOME on Jan. 1st 2007                                  WWW.BANK.COM.UA
                                                                          ANNUAL REPORT
                                                                 COMPETITIVE ADVANTAGES




- more than 13 years of success
- specialization by sectors of the bank's officers
- personal management system
- manage to maintain the stability during the Ukrainian
  banking crisis
- presence in all the largest cities of Ukraine
- the largest bank in the Odessa region with the
  considerable share in the regional market
- the largest Bank in Southern Ukraine

The activity of PIVDENNYI Bank complies with
recommendations of Basel Committee and requirements
of FATF.

PIVDENNYI Bank renders services to corporate
customers, consulting and analyzing sectors of their
business.

-   More than 139 thousand customers trust us                      PIVDENNYI Bank - absolute intellectual bank.
-   More than 1800 highly skilled personnel
-   Our partners - first-class banks of the world
-   We are member of several world-famous organizations
    that accept only reliable and stable banks

PIVDENNYI Bank is:

- information transparence of financial statement
- system of multilevel risk management
- complex trade and project finance
- unique schemes of trade risk optimization (export
  insurance)
- flexibility in development, adaptation and introduction
  of new products and business processes




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COMPETITIVE ADVANTAGES                                                                          WWW.BANK.COM.UA
                                                                            ANNUAL REPORT
                                                                                  RATINGS




The international rating agency, Moody's Investors
Services, has given PIVDENNYI BANK B2/NP deposit
rating in foreign currency and E+ rating of financial
stability. Signifying a stable rating.

The appropriated ratings reflect extraordinarily strong
regional position in the bank's services for corporate
clients and individuals.

The strategy of diversification in bank's services for
individuals, throughout the history has led to balanced
growth and high profitability. As well as strong capital
base combined with a high amount of managed assets.               Earning PIVDENNYI Bank a solid and stable rating.
Ratings are also grounded due to the corporate
management development and our methodology of                     The Ratings, by the world top agency, reflect strong
risk management.                                                  positions in credit activity, growth of regional franchises,
                                                                  conservative approach to reserves and balances,
Stable growth, thorough the strategy of development               sufficient profitability, capital increase and limited
of the bank's market, combined with a highly skilled              commercial risks.
management team since the bank's foundation.
PIVDENNYI Bank has earned and enjoyed a stable                    Ratings also take into consideration: potential vulnerable
prognosis from the leading rating agencies.                       liquidity, the multiplied percent risk and concentration in
                                                                  both portions of balance.
Moody's agency, the International barometer of
financial institutions, appropriates ratings and publishes        The Chairman of the Board - Vadim Morokhovskiy
independent opinions of credits about:                            remarked: "Appropriation of such ratings by top-ranked
                                                                  rating agencies, is the next stage in bank's long-term
- securities with the fixed income                                strategy. Directed by the increase of trust to the bank
- issuers of securities                                           from clients, investors and partners."
- and other obligations of credits.
                                                                  Fitch Ratings is a leading global rating agency. Activity
In the conditions when global capital markets often               of which is aimed at the grant of timely and exact
depend on ratings of credits, ratings of the Moody's              estimations of the solvency of issuers.
Agency have a major value and create valuable
possibilities both for issuers and for investors.                 The Fitch Ratings agency appropriates ratings to more
                                                                  than 150 issuers of Russia and CIS countries in
                                                                  sovereign, corporate and bank sectors, and also in the
                                                                  sector of public finances.


International rating agency, Fitch Ratings, gives
PIVDENNYI Bank a "B-" rating of issuer default and a
"B" rating of short-term credit.


                                                             17


RATINGS                                                                                           WWW.BANK.COM.UA
                                                                            ANNUAL REPORT
                                                                                  RATINGS




The Ukrainian rating agency "Credit-Rating" has given
PIVDENNYI Bank a long-term credit rating of "uaBBB+"
on the Ukrainian national scale. Such level of Bank's
rating is conditioned of its system consequence for the
economy of Ukraine as one of large bank with the large
volume of assets and deposits.

The receipt of this rating allows to place facilities of
reserves of insurance companies on the savings and
clearing accounts of PIVDENNYI Bank. This rating
advantageously distinguishes PIVDENNYI Bank within
the Ukrainian banking system.                                     PIVDENNYI Bank's rating brings with it a very stable
                                                                  prognosis, forecasting no future changes.
In compiling its analysis, the Ukrainian "Credit-Rating"
Agency has used the Bank's financial reports for fiscal           The "Credit-Rating" agency - is the 1st, specialized rating
year 2001-2006.                                                   agency in Ukraine, providing services in the area of
                                                                  independent estimation of solvency of subjects of
The Rating is specified on the Ukrainian national scale of        lending, with the appropriation of credit ratings on the
credit ratings, developed especially for the estimation of        Ukrainian national scale.
credit risk level and differentiation of borrowers in the
conditions of the Ukrainian market.                               As of 2003, the rating estimations of the credit-rating
                                                                  agency, are officially acknowledged by the Ministry of
"uaBBB" rating designates sufficient ability in good time         finance of Ukraine. The "Credit-Rating" agency is the
to completely satisfy debt obligations in the conditions          authorized agent of the State Commission of Securities
of the Ukrainian financial market. "+" signifies that the         and Fund market of Ukraine. For the appropriation of
Bank's rating is close to the highest rating category             ratings of credits management, industries of economy
of "uaA".                                                         and regions.




                                                             18


RATINGS                                                                                           WWW.BANK.COM.UA
                                                                           ANNUAL REPORT
                                                                                LICENCES




By Authority of licence No. 65 of January 21, 2007 by
the National Bank of Ukraine, the Bank has the right to
perform the following activities:

- deposits from corporate customers and individuals;

- opening and keeping current accounts for customers
  and correspondent banks, including debit and credit
  transactions via payment instruments;

- placement of funds on its own behalf, terms and at
  its own risks;

- currency valuables transactions.

 - non-commercial currency valuables transactions
 - keeping accounts for customers (residents and non-          - investments in the authorized capital and shares of
   residents) in foreign currency and for resident-              other legal entities
   customers in national currency of Ukraine.
 - keeping correspondent accounts for banks (residents         - transportation of currency valuables and cash
   and non-residents) in foreign currency                        collection
 - keeping correspondent accounts in national currency
   of Ukraine                                                  - operations by customer's orders and on its own behalf:
 - opening correspondent accounts in foreign currency
   with the authorized banks of Ukraine and performing          - with instruments of currency market
   transactions through them                                    - with instruments based on exchange rates and
 - establishing correspondent accounts in foreign                 interests
   currency for foreign banks and transactions through          - with financial futures and options
   them
 - transactions in foreign currency market of Ukraine          - funds and securities management under agreement
 - foreign currency transactions in the international            with individuals and legal entities
   markets
 - operations with banking metals in currency market of        - depositary activity of securities custodian
   Ukraine
 - other transactions on currency valuables in the             - issue of guarantees, avals and other documentary
   international markets                                         obligations to be executed in monetary form

- securities issue                                             - purchase of chose of action of payment obligations
                                                                 for delivered goods and services assuming risks of
- organization of securities purchase and sale by                execution of these obligations and incoming of
  customer's order                                               payments (factoring)

- transactions on securities market on its own behalf          - leasing
  (including underwriting)
                                                               - custody and leasing of safes for keeping valuables
                                                                 and documents




                                                          19


LICENCES                                                                                       WWW.BANK.COM.UA
                                                             ANNUAL REPORT
                                                                  LICENCES




- issue, purchase, sale and servicing of bonds,
  promissory notes and other payment instruments

- issue of banking payment cards and performing
  transactions on them

- consulting and information servicing regarding bank
  transactions

On the ground of permit by the State Commission for
securities and Stock Market No 1179 of December 27,
2006, the Bank has the right to perform the following
securities market professional activities:

- securities issue and circulation
- depository activity of securities custodian




                                                        20


LICENCES                                                                 WWW.BANK.COM.UA
                                 ANNUAL REPORT
                         CORRESPONDENT NETWORK




                        21


CORRESPONDENT NETWORK                        WWW.BANK.COM.UA
                                                                 ANNUAL REPORT
                                               MEMBERSHIP IN INTERNATIONAL AND
                                          UKRAINIAN PROFESSIONAL ORGANIZATIONS




Pivdennyi Bank is:

- affiliated member of Western Union Holdings, Inc.

- affiliated member of VISA International

- associated member of EUROPAY International

- official partner of REUTERS DEALING-3000 & REUTERS
  MONEY-3000 systems

- public shareholder of S.W.I.F.T.

- FSTS - First stock trade system

- UICE - Ukrainian interbank currency exchange                 - îñóùåñòâëåíèå èíâåñòèöèé â óñòàâíûå ôîíäû è
                                                                 àêöèè äðóãèõ þðèäè÷åñêèõ ëèö
- PARD - Professional association of registrars and
  depositaries                                                 "Call center" service is for information exchange and
                                                               development of international relations and business
- ISU - Interregional Stock Union                              contracts.

- The Household Deposit Guaranteeing Fund                      Representative of "Call center":

Pivdennyi Bank partner:                                        Councillor of the "Regional investment bank"
                                                               Arkadiy Fedorov, tel.: +3717814722
                                                               e-mail: arkadijs.fjodorovs@rib.lv

                                                               Representative of PIVDENNYI Bank
                                                               Konstantin Terekhin,
                                                               tel.: +38 (0482) 344398, +38 (0482) 307096,
Regional Investment Bank (RIB), Latvia, Riga                   e-mail: tke@pivdenny.odessa.ua

"Regional Investment Bank" is one of the rapidly               The Bank offers the system of remote maintenance of
developing Latvian banks, offering a wide spectrum of          Internetbank, and also the systems of PC-Bank,
banking services. The Bank serves both private                 optimum tariffs processing payments of currencies and
individuals and enterprises. RIB offers a wide spectrum        advantageous conversation rates of hard and soft
of services:                                                   currencies.

- Calculation-cash service                                     The bank gives favourable tariffs to permanent clients
- Services in converting                                       for conducting operations within their accounts.
- Multiple types of crediting, including Ukrainian
  securities                                                   The bank-partner is PIVDENNYI BANK.
- a trust management services
- Investment services




                                                          22


MEMBERSHIP IN INTERNATIONAL AND UKRAINIAN                                                     WWW.BANK.COM.UA
PROFESSIONAL ORGANIZATIONS
                                                                     ANNUAL REPORT
                                                               MANAGEMENT STRUCTURE




Principles of corporate management are based on:

- Principles of corporate management approved by the
  State Commission for securities and investments

- Recommendations of Basel committee

- PricewaterhouseCoopers report on management structure
  optimization

- Consulting regarding management structure improvement




                                                          23


MANAGEMENT STRUCTURE                                                              WWW.BANK.COM.UA
                                                                   ANNUAL REPORT
                                                            GEOGRAPHY OF THE BANK




Head office:
6/1, Krasnova str., Odessa, 65059

Chairman of the Board:
Vadim V. Morokhovskiy

Information service:
+38 (0482) 30-70-30

More detailed contact information of Bank's branches
and departments You can find on a web-site:
www.pivdennyi.com




                                                       24


GEOGRAPHY OF THE BANK                                                           WWW.BANK.COM.UA
                                                 ANNUAL REPORT
                                 BASIC RATING INDICATORS OF AUB




                                     25


BASIC RATING INDICATORS OF AUB                                WWW.BANK.COM.UA
                                                                            ANNUAL REPORT
                                                                          BANK AND SOCIETY




The charitable efforts of PIVDENNYI Bank - are one of
the major elements of our development.

We give tangible help to those in need and first financial
aid on the most difficult operations, and similarly help
gifted young people to get an education via grants and
scholarships!




                                                                    During 5-years PIVDENNYI Bank closely cooperates with
                                                                    the Economic lyceum of Odessa city. On the Bank's
                                                                    foundation the students of lyceum carry out educational
The charity fund "Miloserdiye Victor" is founded in 2005.           practice in summer, the Board of Bank supports (pays
A fund is carried out its activity in accordance with               grants) to students of lyceum, winners of the National
Ukrainian Law "For charities and charitable                         olympiad in economy.
organizations", by the current legislation of Ukraine
and Regulation.                                                     Bank financially supports the lyceum in purchasing of
                                                                    furniture in classes and restorations of apartments of
Basic direction activities are:                                     lyceum. Also PIVDENNYI Bank provides an educational
                                                                    process by methodical literature of banking business.
- assistance in development of culture and spirituality
- assistance in strengthening of health of all segments             Bank specialists take part in holiday measures of lyceum,
  of population                                                     publicity products are given for class designing.
- help to talented creative young people
- help in development of the publishing business, mass              In July, 2005 the decision to revive a chess tournament
  media                                                             in Odessa was accepted by PIVDENNYI Bank.
- participating in giving medical assistance to populous            International chess tournaments in Odessa were not
  and the realization of social care of patients, physically        conducted 16 years heretofore, therefore Bank
  challenged, senior citizens and to other persons that             PIVDENNYI Bank founded and organized a chess
  require social support                                            tournament of rapid chess in 2005, on which
- assistance in maternity and childhood development,                international grand masters were invited from around
  grants to help large families and families of moderate            the world.
  means, etc.
                                                                    The tournament takes place annually. PIVDENNYI BANK
Address: 2/4, Sabanskiy lane, Odessa, 65014, Ukraine                CHESS TOURNAMENT EFIM GELLER MEMORIAL - called
tel.: +38 (0482) 307-045                                            to honour memory of one of the best chess-players of
                                                                    the 20th century. Efim Geller - is one of the best
The Hot line of charity fund "Miloserdiye Victor" - "Way            analysts of the time and a great sportsman.
to the heart":
                                                                    PIVDENNYI Bank is the organizer of the First Odessa
tel.: +38 (0482) 307-067                                            International Chess Cruise. First Odessa International
                                                                    Chess Cruise - 2006 is a unique chess history grand
                                                                    master tournament of rapid chess aboard a marine ship.


                                                               26


BANK AND SOCIETY                                                                                  WWW.BANK.COM.UA
                                                                           ANNUAL REPORT
                                                                         BANK AND SOCIETY




The purpose of conducting a similar unique project is a
revival of Odessa as one of the "Chess capitals" of the
world. Great international intellectual center, interest in
growth of cruise trips development from Odessa,
maximally wide resonance in Odessa, in Ukraine,
in Europe and in the world.

Both, the leading chess-players from around the world,
as well as the premier chess-players of the Odessa
School take part in this fabulous international
tournament.




                                                                   Odessa Chess Federation, and Vice-president of Chess
                                                                   Federation of Ukraine. Pivdennyi continues to play an
                                                                   active role in the future development of Chess as a
                                                                   sport. Aims to make Odessa the Worlds Capital of
                                                                   Chess.

                                                                   The World Cup of rapid Chess will be held in Odessa in
                                                                   early 2007.
The Grand Master tournament of rapid chess, "Chess
Cruise-2006" take place on a motor ship "South Pal'mira"
owned and operated by "Ukrferri". Future plans include
an annual Odessa International Chess Cruise, visiting the
Mediterraneans twin cities of Odessa.

PIVDENNYI Bank, lead by Chairman of the Board,
Mr. Mîrokhovskiy (also the currently President of the




                                                                   Reigning Kings of Chess, such as Vladimir Kramnik,
                                                                   Anand Vishvanatan, Peter Leko, Sergey Rublevskiy and
                                                                   other players will be featured participants.

                                                                   In October, 16, 2006 Mr. Pavel Tregubov, the President
                                                                   of Association of chess professionals visited Odessa.

                                                                   In October, 17, an extended press-conference took place
                                                                   in Odessa.




                                                              27


BANK AND SOCIETY                                                                                 WWW.BANK.COM.UA
                                                                       ANNUAL REPORT
                                                                     BANK AND SOCIETY




The main goals were:

- Planning the World Cup of Rapid chess in Odessa
- creating the headquarters of Association of
  professional chess in Odessa (Odessa, Ukraine and
  Paris, France are World headquarters of the
  Association of Professional Chess)
- outlining up World Championship
- Announcing PIVDENNYI Bank as an "Exclusive finance
  partner of Association".

Vadim Morokhovskiy considers, that his main goal on
the position of both, the President of Odessa Chess
Federation and Vice-president of Chess Federation of
Ukraine is - general propaganda and popularization of
chess, and also the organization of top-ranked world           We invite everyone to take part in our intellectual club!
tournaments in Odessa.
                                                               The bank has conducted the Ukrainian Championship of
Since 2005, PIVDENNYI Bank has organized 5 chess               "Brain-ring" game. In accordance with the chosen
tournaments which visited more than 250 grand masters          strategy of society social development Pivdennyi Bank
from the different countries of the world and more             traditionally becomes the organizer and general partner
than 20 000 fans. The results of tournaments                   of Ukrainian Championship on a game "Brain-ring"
conducting are the increasing of sporting skills, the          among senior pupils, which passed in Odessa.
friendly partnership expansion and strengthening
between the chess-players of Ukraine and foreign               Vadim Morokhovskiy, the Chairman of the Board
countries.                                                     considers that: "doing investments in intellectual
                                                               projects, PIVDENNYI Bank is laying the foundation to
                                                               future of Ukraine, and the game "Brain-ring" is exactly
                                                               the project, that helps to show the intellectual
                                                               capabilities, especially to rising generation".

                                                               The Championship was conducted by:
                                                               - the Odessa literature-playing club "Erudite"
                                                               - The League of the Ukrainian clubs "What? Where?
                                                                  When?".

                                                               30 teams took part in festival (Vinnitca, Dnepropetrovsk,
                                                               Donetsk, Kiev, Kirovograd, Lugansk, Odessa, Poltava,
                                                               Simpferopol, Kharkov and from other cities).
                                                               The participants of Championship were divided by 2
                                                               groups: senior and junior group.
PIVDENNYI Bank is the organizer of mini-football child-
youth tournament. It is the tradition for Bank, after          In Ukraine Championship of "Brain-ring" game among
new-year holidays to conduct the tournaments of child-         senior pupils in a senior group 1st place was taken by a
youths mini-football. PIVDENNYI Bank presented to              team from Simpferopol, 2nd place - a team from Kiev
Odessa citizens a sport holiday, organizing already a          and 3th place - team from Odessa.
3-th PIVDENNYI Cup Tournament of mini-football.                In a junior group places were distributed as follows:
                                                               1st - Kiev, 2nd - Odessa and 3th - Simpferopol.
PIVDENNYI Bank team is the absolute leader of "What?
Where? When?" Club among financial institutions!               Intelligent Bank - for smart Clients!

                                                          28


BANK AND SOCIETY                                                                               WWW.BANK.COM.UA
                                                                    ANNUAL REPORT
                                                  SERVICES TO CORPORATE CUSTOMERS




For the past 13 years we, at PIVDENNYI BANK, have
managed to organize a singular approach to corporate
customers' services. The strategy of our Bank's officers
development has shown substantial results. Each and
every day we receive further confirmation.

Whatever specific requirements You have - PIVDENNYI
BANK has a financier specializing in Your sector.

We offer not only a service of personal management,
so popular in European countries, but a whole system
of approach to corporate customers service, based on
the experience of our experts, who are specialists in
your type of business.

Our officers render services to businesses from the point
of view of the economic sector in which they are a part.         The Bank provides the following services:
That allows them to study even the most minuet details
of the business in each sector.                                  - establishing and keeping current accounts in national
                                                                   and foreign currencies for companies and residents
Thereby allowing them to expand on a number of                   - establishing and keeping current accounts in national
methods which maximize your businesses financial                   and foreign currencies for non-residents
optimization.                                                    - internal and international money transfers
                                                                 - the rendering of information to customers of their
And these are not mere words, but Your real                        account transactions via e-mail and GSM telephones
results!                                                         - cash operations (cash receipt and cash payment, bank
                                                                   notes re-counting and authentication, checks
Our officers have lengthy experience in the financial              collection)
sector and their professionalism is recognized by our            - cash collection
customers. The largest segment of this particular sector,        - cash receipt during non operational time
representatives of small and medium sized businesses.            - A system of remote account's management, Client-
                                                                   Bank via up-to-date telecommunication systems and
Furthermore, our stellar system of customer                        Internet
relationships, and implementation of lending and pricing
policies, combined with the rendering to corporate               Deposit operations:
customers, up-to-date, high quality banking services is
what sets PIVDENNYI apart.                                       - in national and foreign currencies
                                                                 - overnight deposits in national and foreign currencies
As well as providing customers exclusive services,
concerning interaction with other Bank's customers,              Deposit terms:
allow the Bank to be the most effective support of
our customers' business.                                         - deposits in national currencies from 2 months and for
                                                                   any term
Timeliness, reliability and quality!
                                                                 - deposits in USD and other hard currencies from 2
                                                                   months and for any term




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SERVICES TO CORPORATE CUSTOMERS                                                                 WWW.BANK.COM.UA
                                                                    ANNUAL REPORT
                                                  SERVICES TO CORPORATE CUSTOMERS




Lending Operations

Trade operations finance

The complex services of foreign-economic activity,
including international settlement of any complexity, in
all forms accepted in international banking practice - is
an other type of service that PIVDENNYI Bank is
unrivalled at providing, in Southern Ukraine:

                                                                 Letters of credit and guarantees

                                                                 Documentary letters of credit - written commitment of
                                                                 a bank on the instructions of the applicant and in favor
                                                                 of seller to pay a specific amount provided the
                                                                 beneficiary submits documents in conformity with the
                                                                 documentary credit and within the prescribed deadlines:

                                                                 -   issuance
                                                                 -   advising
                                                                 -   confirmation
                                                                 -   negotiation/discount

                                                                 Bank guarantees:
Import finance:
                                                                 - payment guarantee
- issuance of documentary letters of credit in favor of          - performance guarantee
  foreign suppliers without customer's cash collateral           - advance payment guarantee
- issuance of bank guarantees and stand-by letters of            - counter-guarantee - cross commitment of bank
  credit                                                           applicant, provided to another bank for covering the
- post-import finance enabling the customer to make a              risks which the bank takes by issuance a documentary
  final settlement for goods delivered within a specific           liability
  period of time, as from the moment of delivery                 - tender guarantee is issued in favor of tender organizer
                                                                   and ensures the commitment of tender participant to
Export finance:                                                    sign the contract on the terms specified in tender in
                                                                   case of victory
- rendering advance finance for manufacturing of                 - special guarantees are provided in non-standard
  future export production, with the guarantee of a                situations to a limited number of applicants. Special
  first-class bank provided by the partner under the               guarantees are also infrequent guarantees such as bill
  contract, guaranteeing receipt of export proceeds by             of lading guarantee, customs guarantee, contractual
  the Client                                                       guarantee, sub-guarantee.
- post-export finance - the provision by the Bank of
  financial terms to the exporter immediately after the
  shipment of production for export, backed by the
  instrument being either a guarantee or security for
  the receipt of export proceeds by the Customer




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SERVICES TO CORPORATE CUSTOMERS                                                                WWW.BANK.COM.UA
                                                                     ANNUAL REPORT
                                                   SERVICES TO CORPORATE CUSTOMERS




Project finance

Is the target finance of the Borrower under the project
with the right of bank's recourse. The security of project
liabilities are usually cash flows generated by the project,
as well as the assets related to the project.

Project finance can be also determined as mobilization
of sources of finance and complex use of different
forms of finance with optimal distribution of risks
connected with the project.

We perform project finance in the following forms:

1. Borrowing finance:
                                                                    - credit lines - targeted use loans for commercial deals
  - investment lending (co-financing by the borrower of               of legal entities with partial withdrawals during the
    at least 20%);                                                    period specified in the agreement
  - financial leasing;
  - purchase of debt securities (bonds, promissory                  - term loan - targeted use loans for commercial deals
    notes).
                                                                    - avail loan - a short-term loan provided by the Bank by
2. Financing by shares:                                               means of avail of a bill issued by the Client

  - investments in capital (purchase of corporate                   - loans on bills for domicile at the expense of the loan
    rights).
                                                                    - factoring - a short-term trade and fee based
3. Agent services of financing:                                       operation, when the Bank buys out the unpaid
                                                                      payment orders of the Customer for goods delivered,
  - making out project documentation (risks analysis,                 works completed and services rendered. The Bank
    Technical and Economic basis, business-plan);                     purchases short-term receivables and thus guarantees
                                                                      sales. The factoring includes the collection of the
  - search for investors under the project.                           Customer's receivables, loan provision and indemnity
                                                                      for loan and currency risks
PIVDENNYI Bank renders medium and long-term
finance for investment projects.                                    - forfeiting - a short or medium-term trade and fee
                                                                      based operation during export in combination with
Lending for assets increase                                           loan provision to support Customer's circulating capital.
                                                                      The Bank purchases the receivables of the Customer-
We are the absolute leader in Southern Ukraine for                    exporter, provided that the receivables are backed by
credit portfolio volume and we are always glad to render              either guarantees or sureties, issued by first class
to our Customers reliable credit support!                             banks

We render all forms of lending and loan repayment,                  - leasing loans - finance for the Customer by means of
necessary to the customers:                                           providing him fixed assets on long-term leasing
                                                                      conditions with, (or without), the right of redemption
- overdraft - loan without pledge, within limits,
  calculated on the basis of the data of account receipt,
  for the purpose of payment gaps finance in the course
  of current activity of the Customer

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SERVICES TO CORPORATE CUSTOMERS                                                                    WWW.BANK.COM.UA
                                                                     ANNUAL REPORT
                                                   SERVICES TO CORPORATE CUSTOMERS




Lending to small and medium business                                Operations in the system of remote access

Small business is the basis for a large economy! We                 The system, "E-Banking", which includes Internet-
place great emphasis on small business and render loans             Banking, SMS-Banking and Telebanking, is equipped
for small and medium business in the following forms:               with the most up-to-date protection systems. Allowing
                                                                    our customers, in any place and at any time, to take
- Term loan                                                         control over funds and balances on their accounts.
- Credit line                                                       GSM-online - allows our customers to obtain
- Documentary instruments (letters of credit,                       information on payment card account.
  guarantees)
                                                                    Operations with securities and investment business
Currency exchange operations
                                                                    Brokerage services on securities market:
We render sale and purchase of foreign currencies in
interbank markets for our customers - only by the most              - Purchase/sale of securities
advantageous exchange rates!                                        - Consulting
                                                                    - Analytical information on securities
Operations with promissory notes
                                                                    Operations with Bonds of Internal State Debt, for
- Avail - the Bank's avail of promissory notes is a reliable        repayment of the budget overdue debt, on value
  guarantee for settling a bill in case of impossibility of         address tax.
  timely payment of bills
                                                                    - opening and keeping securities accounts for
- Collection of promissory notes - the Bank undertakes                accounting of Bonds of Internal State Debt
  responsibility to present the promissory notes for
  payment to the promisor on behalf of the customer; in             - purchase/sale of Bonds of Internal State Debt
  case of refusal to pay or dishonor, the bank protests
  the promissory notes at the notary                                Bank's services as underwriter of corporate bond's
                                                                    issuance
- Discount of promissory notes - the Bank purchases
  from the customer promissory notes owned by him,                  Operations with promissory notes:
  using its own funds                                               - purchase/sale of promissory notes
                                                                    - avail
- Domicile of promissory notes - the Bank undertakes to             - domicile
  ensure the timely payment of bills                                - collection

- Introduction of standard and non-standard schemes                 Services of securities depositary:
  on promissory notes.                                              - opening and keeping accounts in securities
                                                                    - credit (debit), replacement of securities on the
Cash and settlement services                                          accounts on accounts of securities depositors
                                                                    - rendering statements of accounts to securities owners
We emphasize our customer's needs and constantly
enhance and improve the range of our services and                   Consulting bank's products:
provide for the high-quality rendering of those services.           - taxation consulting
                                                                    - drawing of investment project's business-plans with
                                                                      the view of project finance
                                                                    - consulting concerning compliance with antimonopoly
                                                                      laws standards



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SERVICES TO CORPORATE CUSTOMERS                                                                    WWW.BANK.COM.UA
                                                                   ANNUAL REPORT
                                                 SERVICES TO CORPORATE CUSTOMERS




Corporate cards                                                 - It is possible to validate unlimited corporate cards to
                                                                  one corporate account, or to open individual card
PIVDENNYI Bank's corporate cards are easy and reliable            account for each corporate card
payment instruments for Your business.
                                                                - It is possible to limit charges on every corporate card
The holders of corporate cards have the option of
payment of different charges on behalf of, and at the           - A corporate card account can be refilled if necessary
expense of the company - the legal entity (in the                 for extended or unforeseen circumstances and
context of current law), and get cash in ATMs and in              expenses during the business trip
the Bank's institutions 24 hours a day worldwide.
                                                                - Managing company resources with constant real time
Any card classification of the payment system, such as            accounting
Visa International or Mastercard International, can be
validated to the Corporate card account.

Advantages of corporate cards:

- Payment of goods and services due to the legal face-
  proprietor of corporate card account, (charges on
  business trips, expenses accounts), will facilitate
  record-keeping and will make for more comfortable
  and productive business trip

- A corporate card account can be opened in one of
  three currencies, (in UAH, US dollars or Euro), and at
  the same time the card can be used worldwide (all
  currency conversion operations of an account to the
  currency of the country of your stay will carry out
  automatically by the bank). It releases Your
  organization from the necessity of purchasing currency
  for foreign business trips

- Every operation with the use of a card is accompanied
  by check, which allows the reporting of employees
  expense accounts

- The holders of corporate cards are always prepared for
  business trips, as their need for operational and
  expense accounts cash is solved

- At border crossings, the payment cards are declared
  only in verbal notice, that will save Your employees
  from the processing of superfluous documents at
  customs




                                                           33


SERVICES TO CORPORATE CUSTOMERS                                                                 WWW.BANK.COM.UA
                                                                         ANNUAL REPORT
                                                                 SERVICES TO INDIVIDUALS




Cash and settlement operations

The Bank offers the following services to individuals:

- opening and keeping current account in national and
  foreign currencies for residents
- opening and keeping current account in national and
  foreign currencies for non-residents
- opening and keeping accounts in foreign currency for
  maritime professionals on preferential terms
- internal and international money transfers
- rendering information to customers on their account's
  transactions via e-mail and GSM telephones
- cash operations (cash receipt and cash payment, bank            Services of deposit safes
  notes re-counting and authentication, cheques
  collection)                                                     For the purposes of safekeeping of jewellery, securities,
- utilities and other payments                                    documents the Bank offers to individuals the service of
- system of remote account's management Client-Bank               keeping valuables and documents in individual safe
  via up-to-date telecommunication system and Internet            boxes.

Deposit operations                                                - the safe boxes of "Pivdennyi" Bank are secured for 24
                                                                    hours a day
PIVDENNYI Bank performs deposit operations:
                                                                  - the content of depository boxes remains confidential
-   in national and foreign currencies
-   overnight deposits in national and foreign currencies         - there is an access to the depositary during the
-   deposit programs for children and retired employees             operating hours of the Bank
-   individual deposit programs
                                                                  Traveller's Cheques
The Bank offers different types of deposits:
                                                                  The Bank sells Traveller's Cheques, which are accepted all
- deposits with interest payment upon conclusion of the           over the world in hotels, restaurants and travel agencies.
  agreement term
- deposits with monthly interest payment                          -Travel Cheques Exchange for cash in banks or currency
- deposits with the replenishment option and interest               exchange outlets
  payment at the end of the agreement term
- deposits with partial withdrawals                               - Sale of VISA Interpayment TRAVELLERS CHEQUES in
                                                                    US dollars and Euro
Demand deposits
                                                                  - Purchase of THOMAS COOK (VISA, MASTER CARD),
Lending operations                                                  AMERICAN EXPRESS VISA Interpayment

The Bank renders to individuals loans for medium and              - The Bank sells Visa Travel Money Cash passport cards
small business.                                                     in US dollars.




                                                            34


SERVICES TO INDIVIDUALS                                                                          WWW.BANK.COM.UA
                                                                         ANNUAL REPORT
                                                                 SERVICES TO INDIVIDUALS




Visa Travel Money Cash Passport                                   - Additional payment card - MasterCard Gold in the
                                                                    name of the main card holder
If you should quickly get the plastic card, PIVDENNYI
Bank offers you an efficient solution - Visa TravelMoney          - The option of credit line opening on a card
Cash Passport.                                                      account in amount of 50,000 UAH or 10,000
                                                                    USD/EUR without a deposit

                                                                  - Special insurance program of the card holder during
                                                                    oversees travel and business trips, with the amount of
                                                                    insurance coverage to 100,000 EUR

                                                                  - The package of services - Visa International SOS:
                                                                    emergency assistance in providing of medical services
                                                                    and Concierge Service (providing information about
                                                                    organizations and other inquiries and services)

Visa TravelMoney Cash Passport is a special prepaid card          - Platinum Travel Services - 24 hour travel assistance
which allows you to withdraw cash from any of                       for your business and leisure travel needs
750,000 Visa ATMs in 134 countries worldwide.
                                                                  - Platinum holders receive discounts from various
An amount on Visa TravelMoney Cash Passport can be                  merchants for goods and services
$100 to $10,000. The cash can be withdrawn all at once,
or in portions. The validity period of a card is 3 years.         - Special offer from Visa International program - Visa
                                                                    World Best Offers
The prepaid cards of Visa TravelMoney Cash Passport
are not intended for purchases in shops and payment               - Consultations of client support 24 hours a day
of services.
                                                                  - 24 hour a day consultations by Visa International -
Therefore, even if you lose this type of card, no one               Visa Global Support Service
else, will not be able to spend cash using this card.
Without the PIN-code, access to funds placed on the               - In the event of loss or theft in Ukraine, or abroad,
card, is impossible.                                                emergency issuance and delivery of replacement card.
                                                                    Including delivery of available cash.
Payment cards of PIVDENNYI Bank - are the most
convenient means of settlement:                                   - Bonus system of loyalty for usage of the payment
                                                                    card Visa Platinum, for goods and services. Foreseeing
Visa Platinum                                                       the receipt of rewards points redeemable for Bank
                                                                    services
The versatility of VISA Platinum allows PIVDENNYI Bank
to show the special attention and give additional options         - Individual VIP-service on all Bank services
to VIP-clients with top credit ratings.
                                                                  - Additional free Bank services: the opening and
Visa Platinum, is the most singular credit card that                maintaining of current accounts, payment instructions,
PIVDENNYI Bank offers.                                              GSM-info and Internet-banking

Card holders acquire not only an elite international
payment card, but also a specialized set of services:




                                                            35


SERVICES TO INDIVIDUALS                                                                           WWW.BANK.COM.UA
                                                                         ANNUAL REPORT
                                                                 SERVICES TO INDIVIDUALS




MasterCard Gold è Visa Gold                                       Maestro and Visa Electron

MasterCard Gold & Visa Gold are prestigious credit cards          The debit cards for private use. These cards make
provided to those bank's customers with the highest net           possible purchases and cash withdraws only within the
income, the most reliable bank's customers.                       limit of funds available on the card account.

It is recognized all over the world that Gold level is            The most available and popular cards - offer means of
evidence of cardholder's high level of financial                  payment for groups of "initial" holders without credit
capabilities.                                                     history.

Gold card holders have at their disposal a wide range of
supplementary possibilities and services, in addition to
use the card as a mean of payment and cash receipt.




                                                                  Every citizen, independently with his or her income, can
MasterCard Standard & Visa Classic                                be the user of this card. It makes possible purchases and
                                                                  cash withdraws only within the limit of funds available
The most popular cards of MasterCard and Visa for                 on the card account.
private use.
                                                                  Visa Virtuon
The cardholder can pay in shops, restaurants and hotels,
as well as withdraw cash worldwide.                               Visa VIRTUON possesses a number of advantages,
                                                                  among which are:
They are offered to reliable and solvent bank's
customers, as well as business people, whose activity is          - the option to make payments via Internet all over the
related to trips (within and beyond Ukraine), individuals           world. In all e-commerce shops, that accept Visa
that need short-term loans or credit lines.                       - secure payments via Internet
                                                                  - free opening of a card account
The holder of this card can receive cash within the limit         - payments via Internet without commission
of funds available on the card account, as well as within         - possibility of bringing a card to stop-list, etc.
the limit of a credit line.
                                                                  The preferable tariffs and rates of operations by this
Mastercard Unembossed & Visa Unembossed                           payment card will allow clients to easily make payments
                                                                  via Internet and to be sure of secure data transfers.
These payment cards are of the credit class. The
universal means of payment for the use in ATMs, cash
centers and in trade-service companies, with the set
trade terminals. The Cards can be used for online
payment via Internet.


                                                            36


SERVICES TO INDIVIDUALS                                                                         WWW.BANK.COM.UA
                                                                          ANNUAL REPORT
                                                                  SERVICES TO INDIVIDUALS




Nowadays, the Internet is the not simply developed                 To make transfers You do not need to fill-out any
information network, but also an ever the developing               forms, thereby saving you time. The PIVDENNYI
e-commerce business area, which requires secure                    EXPRESS works very simply. For this purpose you can use
payment instruments.                                               any of numerous and comfortably located PIVDENNYI
                                                                   Bank ATMs.
The best from which is a payment card of Visa
VIRTUON by PIVDENNYI Bank.                                         To make money transfers, you just need to provide the
                                                                   recipients payment card number. The recipient will
Blitz Card                                                         receive money on-line instantly.

These Cards can be had in any Bank's branch within 15              Payment instructions
minutes. Blitz cards - are debit cards, which allow their
holders to access cash in ATMs and in cash centers.                Automatically installed regular payments upon client
Also these cards can be used in trade-service companies.           application.

This card product saves substantial time for our Clients.          Once drawing up the additional agreement to the bank's
By being the standard product of payment systems, a                account contract, PIVDENNYI Bank Clients charge the
great number of projects are realized for different strata         Bank to transfer the indicated amount by them on the
of citizens.                                                       specified day on the indicated accounts.

These are: pensionary and social security cards, maritime          Our clients do not need to visit the Bank's branch
professionals cards, tourist cards, cards for interest             offices, in order to pay regular payments, such as
payment on deposits, as well as corporate cards for                redemption of a credit, payment of telco services,
business owners.                                                   Internet-providers, etc. Thus the cost of payment is
                                                                   fixed and cost only UAH 1.
MOBI-Card Service
                                                                   Bank metals
By using this service, PIVDENNYI Bank Clients can
receive notification on their mobile telephones about the          Bank metals are reliable, stable and profitable means of
balance on a card account, the information about the               investment and savings of Your funds.
receipt of cash facilities, information about the
operations made by a pay card and other useful                     Jubilee coins
information.
                                                                   Jubilee coins are commemorative coins issued in honour
PIVDENNYI EXPRESS                                                  of historical events, persons or as a rarity; jubilee coins
                                                                   are not frequent in circulation.
Instant money transfers in national currency, which you
may utilize 7 days a week, 24 hours a day.                         PIVDENNYI Bank sells jubilee coins. You may acquire
                                                                   jubilee coins as a present for Your friends and family.
PIVDENNYI EXPRESS service is:

- safe and instantaneous money transfers
- confidentiality and reliability
- simplicity and comfort.

You may make a money transfer at any time of day.
The recipient of transfer is able to use the funds
immediately.



                                                             37


SERVICES TO INDIVIDUALS                                                                            WWW.BANK.COM.UA
                                                                         ANNUAL REPORT
                                                                      SERVICES TO BANKS




PIVDENNYI Bank performs transfers in all countries of
the world by means of correspondent NOSTRO-
accounts. Many Ukrainian and CIS countries banks
perform transfers via correspondent LORO accounts
with PIVDENNYI Bank.

PIVDENNYI Bank is a member of S.W.I.F.T. - Society for
Worldwide Interbank Financial Telecommunications, with
over 6 thousand member-users from 175 countries
worldwide.

An extensive correspondents network, as well as                 Organization of import contracts finance by foreign
regional network allows PIVDENNYI to perform rapidly,           Export Insurance Agencies: EXIMBANK (USA), HERMES
with maximum client's convenience settlement is                 (Germany), SACE (Italy), OeKB (Austria), COFACE
available in almost any currency.                               (France), SID (SLOVENIA), EGAP (Czech Republic),
                                                                KUKE (Poland), as well as other agencies of USA,
PIVDENNYI Bank offers to correspondent-banks the                Europe and Asia.
following services:
                                                                The rendering of finance by means of different
- Keeping correspondent account in national and foreign         international financial institutions.
  currencies;
- Interest accrual on credit balance on correspondent           With consideration for the high cost of resources in
  account;                                                      Ukraine, PIVDENNYI Bank offers the following sources
- Settlements applying extended operational day;                of finance, for trade activity performance:
- Free interbank transfers;
- Competitive terms of settlements by arrangement with          - Foreign commercial banks
  correspondent bank                                            - International financial institutions
- Free crediting of correspondent accounts in UAH and           - Export Insurance Agencies
  in foreign currency;
- Performance of Interbank foreign-exchange and                 Export Finance:
  resources operations in main currencies
- Cooperation in the field of documentary operations            Organization of export finance for the term up to 1 year
  and interbank loans on competitive rates and tariff           with loan repayment from export income:

PIVDENNYI Bank invites other Banks and financial                - Loan repayment guaranty. Issue of loan repayment
institutions for cooperation                                      guaranty by the Bank with the customer's order upon
                                                                  rendering to the customer by a foreign bank of the
Organization of pre-export and post-import finance:               loan for the definite deal.

- refinancing letters of credit with payment against            - Related interbank loan with regress to final Borrower.
  documents presentation                                          Rendering by foreign bank of target financial resources
- discounting of letters of credit with deferred payment          to PIVDENNYI Bank for customer crediting under
- related interbank loan                                          specific operation with possibility of regress to the
- guaranty of loan repayment                                      customer.
- issue of own bills of the Bank
- avail of Bank customer's bills
- forfeiting (foreign-trade operations finance by means
  of bill's discounting) etc.



                                                           38


SERVICES TO BANKS                                                                                WWW.BANK.COM.UA
                                                                     ANNUAL REPORT
                                                                  SERVICES TO BANKS




Import finance:

Organization of import finance with term up to 1 year
with loan repayment from main business income:

- Import letter of credit refinancing. Confirmation by
  first-class foreign bank of letter of credit with
  payment against documents and its further sale in the
  market

- Import letter of credit discounting. Confirmation by
  first-class foreign bank of letter of credit with
  deferred payment and its further sale in the market

- Avail of customer's bill of exchange in foreign
  currency. Issue by the customer of promissory note
  under import operation, aval by the Bank and sale in
  the market

- Forfeiting. Discounting by the bank of bills written out
  on the customer, accepted by the customer and avaled
  by PIVDENNYI Bank.

 PIVDENNYI Bank offeres many diverse of investments
 projects, both on the joint financing and on the sale of
 resources at the interbank market.




                                                             39


SERVICES TO BANKS                                                                 WWW.BANK.COM.UA
                                                     ANNUAL REPORT
                                FINANCIAL HIGHLIGHTS - INTRODUCTION




                                         40


FINANCIAL HIGHLIGHTS - INTRODUCTION                               WWW.BANK.COM.UA
                                                         ANNUAL REPORT
                                  MACROECONOMIC ENVIRONMENT OF THE BANK




As of the end of fiscal 2006, 169 banks were operating         As compared with the year 2005, in 2006 loans granted
in Ukraine (193 registered banks), including 100 banks         to the Ukrainian economy, increased by 70,99% and
of Kiev, and 69 regional banks.                                made UAH 245 226 MIO:

Undisputable leaders among regions as for market               by currency type:
volume, as before are:                                         - in UAH - by 52,30% to UAH 123 783 MIO
                                                               - in currency - by 95,42% to UAH 121 443 MIO
-   Dnepropetrovsk region                                        (figures are given in UAH equivalent)
-   Kharkov region
-   Donetsk region
-   Odessa region

In 2006 the deflation of bank-rate NBU from 9,5% at
the beginning of the year till 8,5% at the end of the
year was observed.

As compared with 2005, in 2006 deposits and
customer's funds with the banks of Ukraine considerably
increased:
- in UAH - increased by 30,84% to UAH 114 093 MIO,
  including term - UAH 65 136 MIO, from wich is long-
  term - UAH 42 970 MIO
- in foreign currency - increased by 54% to -
  UAH 70 142 MIO, including term 56 807 MIO, from
  which is long-term - UAH 37 628 MIO
  (figures are given in UAH equivalent)
                                                               by loan type:
                                                               - short-term - by 57,23% to UAH 86 193 MIO
                                                               - long-term - by 79,50% to UAH 159 033 MIO




                                                          41


MACROECONOMIC ENVIRONMENT OF THE BANK                                                      WWW.BANK.COM.UA
                                                                       ANNUAL REPORT
                                                                    BALANCE STRUCTURE




As of 01.01.2007 in assets structure were dominating            As of 01.01.2007 customer funds attracted by the bank
loans and other equated debts - 70,62% of Bank's                amounted to UAH 2 860 MIO.
assets.




Assets growth as compared with the year 2005 made
75,36 %. The expansion of active operations is based on
the Bank's resource base strengthening. Total amount of
liabilities considerably increased and at the end of the
fiscal year totaled UAH 3 582 MIO.




                                                           42


BALANCE STRUCTURE                                                                            WWW.BANK.COM.UA
                                                                        ANNUAL REPORT
                                                                      CAPITAL STRUCTURE




The share capital of the bank underwent changes due to           The increase in the Authorized capital of the Bank in
the registration of 3 issues of shares during 2006.              2006 was completely in compliance with bank's
                                                                 capitalization strategy.
Emissions repayment sources were composed by
dividend's capitalization and by shareholder's own funds.




                                                            43


CAPITAL STRUCTURE                                                                              WWW.BANK.COM.UA
                                                                   ANNUAL REPORT
                                                     INCOME AND EXPENSE STRUCTURE




In 2006 the Bank accrued income of UAH 478,075 MIO             The Bank's expense in 2006 amounted to UAH 418,631
from all kinds of operations.                                  MIO, including:

The main part of the Bank's income (73,35%) in 2006            Interest expense - UAH 187,066 MIO:
was traditionally made of interest income - UAH                - on interbank loans, including NBU loans -
350,655 MIO, including:                                          UAH 34,392 MIO.
                                                               - on deposit and current customers accounts -
- on customer's loans - UAH 342,305 MIO                          UAH 144,871 MIO.
- on funds in other banks - UAH 3,041 MIO                      - on securities - UAH 0,138 MIO.
- on securities for sale - UAH 5,309 MIO                       - on funds of non-financial - UAH 3,405 MIO.
                                                               - on long-term saving (deposit) certificates of own debt,
The commission income in 2006 totaled UAH 94,329                 emitted by the bank - UAH 2,868 MIO.
MIO. The increase in commission income (by 56%) can            - on short-term loans, received from international and
be explained by increase in turnover on customer's               other financial organizations - UAH 0,108 MIO.
accounts and widening of the range of services.                - on funds upon request of nonbank financial
                                                                 institutions - UAH 0,495 MIO.
The result of trade operations as of 01.01.2007 totaled        - other interest expense - UAH 0,789 thousand.
UAH 17,328 MIO.
                                                               Commission expense - UAH 10,427 MIO.
The dividend income - UAH 23 thousand
The capital icome - UAH 5,809 MIO                              Assignments to mandatory reserves - UAH 51,182 MIO.
The income from other operations amounted to
UAH - 9,931 MIO.                                               Expense on staff maintenance - UAH 81,870 MIO:
                                                               - staff salary - UAH 60,248 MIO.
                                                               - assignments for state social insurance -
                                                                 UAH 17,533 MIO.
                                                               - expense on staff training - UAH 1,006 MIO.
                                                               - other staff costs - UAH 3,084 MIO.

                                                               General administrative expense - UAH 65,503 MIO:

                                                               - administrative expense - UAH 21,265 MIO.
                                                               - amortization of fixed and intangible assets -
                                                                 UAH 11,155 MIO.
                                                               - expense on fixed and intangible assets maintenance -
                                                                 UAH 3,347 MIO.
                                                               - other taxes and mandatory payments -
                                                                 UAH 10,339 MIO.
                                                               - other expense - UAH 19,397 MIO.

                                                               Other bank's operational expense (equipment and
                                                               running costs, publicity expense and other assignments
                                                               and expense) amounted to UAH 22,583 MIO.




                                                          44


INCOME AND EXPENSE STRUCTURE                                                                 WWW.BANK.COM.UA
                                                                 ANNUAL REPORT
                                                   INCOME AND EXPENSE STRUCTURE




Profit taxation amounted to UAH 13,554 MIO.

As a result of activity in 2006, bank's net profit
amounted to UAH 45,890 MIO, that is 82% more than
in 2005.

According to Bank's Statute and the Law "On economic
societies" the profit amounting to UAH 43,60 MIO - is
subject to division as dividends, and the rest of the
profit is to be directed to the reserve fund.




                                                        45


INCOME AND EXPENSE STRUCTURE                                                  WWW.BANK.COM.UA
                                                                ANNUAL REPORT
                                         OPERATIONAL ACTIVITY DYNAMICS IN 2006




During 2006 PIVDENNYI Bank performed dynamically in
all sectors of financial market.

PIVDENNYI Bank enhanced and improved the range
of banking and financial services in conformity with the
licence of National Bank of Ukraine No 65 from
November, 4, 2002.

Qualitative changes in Bank's management structure in
2006 were based on general methodology of economic
work improvement, control strengthening over economic
standards, revision of risk management policy,
optimization of credit-investment portfolio towards
quality improvement of debt instruments service.

In the course of the year 2006 the bank collected cash
funds to the amount of UAH 9,479 billion, including by:

- Head Office - UAH 4,9895 billion;
- Branches and representative offices of the Bank -
  UAH 4,4898 billion.

The Incoming cash turn in 2006 amount to UAH 8,753
billion, including Head office - UAH 5,153 billion.

As of 1.01.2007, 139 208 customers used the services
provided by the Bank, including 17 474 corporate
customers.

In 2006 the number of customers increased by 45 045,
including 2238 corporate customers and 38 807
individuals.

In 2006 the balance on customers' accounts increased
from UAH 1,671 billion as of 01.01.2006 to UAH 2,860
billion as of 01.01.2007.




                                                           46


OPERATIONAL ACTIVITY DYNAMICS IN 2006                                        WWW.BANK.COM.UA
                                                                ANNUAL REPORT
                                         OPERATIONAL ACTIVITY DYNAMICS IN 2006




The total volume of foreign currency purchased over the          The credit portfolio in 2006 increased by 70,41% and as
year 2006 amounted to UAH 1,325 612 billion, and                 of 01.01.2007 reached UAH 3, 001 987 billion (credit
therefore, foreign currency sold - UAH 1,182 950 billion.        portfolio as of 01.01.2006 - UAH 1, 761 607 billion).

                                                                 The greater part of credit placements made credits:




Accordingly the result on purchase/sale of foreign
currency in 2006 reached UAH 8,783 MIO.

In 2006 the Bank obtained UAH 65,569 MIO for cash
and settlement service, that is 1,58 times more than in
2005.

The effective assets and liabilities management allowed
rendering loans to a large quantity of bank's customers
and contributed to the Bank's credit portfolio increase
during 2006.

The introduction of branch specialization of credit
inspectors allowed to accelerate the process of credit
document's circulation and increase the number of
agreements concluded under the small staff increase.



                                                                 Monthly, the Bank forms provisions for credit risks
                                                                 covering. Funds directed to forming these provisions
                                                                 belong to gross Bank's expense that considerably
                                                                 decreases Bank's profit before taxation.

                                                                 The amount of provisions for credit risks covering made
                                                                 UAH 115,319 MIO as of 01.01.2006, and as of 01.01.2007
                                                                 - amounted to UAH 150,119 MIO.

                                                                 In conformity with National Bank of Ukraine license No
                                                                 65 from 04.11.2002 to perform operations with currency
                                                                 valuables, PIVDENNYI Bank constantly enhances business
                                                                 relationship with foreign banks and takes measures which
                                                                 contribute the creation of favorable environment for
                                                                 customers in the sphere of foreign-economic activity,
                                                                 increase in volume of foreign currency operations and
                                                                 foreign currency loans rendering.




                                                            47


OPERATIONAL ACTIVITY DYNAMICS IN 2006                                                          WWW.BANK.COM.UA
                                                                    ANNUAL REPORT
                                             OPERATIONAL ACTIVITY DYNAMICS IN 2006




There were established direct correspondent relationship
with first-class banks of United States, Europe and Asia,
as well as with banks of CIS and Baltic countries.

During the financial year the number of international
payment transactions encreased. And in fiscal 2006
there were sent 63 371 payment and information
messages via S.W.I.F.T. system (in 2005 - 32 862).

PIVDENNYI Bank enhanced the number of bank-partners
on documentary operations. In order to satisfy                   Selling and accepting of travel cheques VISA
customers requirements, letters of credit and guarantees         Interpayment and Thomas Cook, and also the
are confirmed by the first-class banks:                          representative bank on compensation of lost travel
                                                                 cheques of Thomas Cook Master Card company in
-   The Bank of New York,                                        the Southern Ukraine.
-   Commerzbank AG,
-   Raiffaisen Zentralbank Oesterreich AG,                       In 2006 cheques were sold to the amount of USD
-   Bayerische HypoVereinsbank AG,                               92 020 and EURO 29 150. The volume of travel cheques
-   ING Bank N.V.,                                               bought in 2006 made USD 276 470 and EURO 40 550.
-   Bank TuranAlem,
-   Kazkommerzbank,                                              The total income from operations with travel cheques
-   Savings Bank of Russian Federation.                          made UAH 32,5 thousand in 2006.

As a whole, 14 letters of credit and 1181 guarantees to          The bank is also a member of the international payment
the amount of UAH 487,890 MIO were issued during                 systems MasterCard International and Visa International.
the year.                                                        Performing services and emissions of payment cards
                                                                 MasterCard Gold, MasterCard Standard, Maestro, VISA
The income on the documentary operations made UAH                Gold, VISA Classic, VISA Electron.
5,994 MIO. The increase in the documentary operations
made UAH 1, 502 MIO, and accordingly, a result made              In 2006 PIVDENNYI Bank became the member of the
UAH 4,492 MIO.                                                   National mass system of electronic payments, that
                                                                 allowed to serve the NSMEP cards in Bank's card
For purposes of correspondent network optimization, 7            application network.
NOSTRO accounts, including 2 gold accounts and 13
LORO account were opened.                                        As of 01.01.2007 the bank issued 61 368 own payment
                                                                 cards, including 49 094 in compliance with salary
Thus, as of 01.01.2007, the bank registered 50 NOSTRO            projects.
accounts, with the balance of UAH 127,912 MIO, and 34
LORO accounts with the balance of UAH 205,450 MIO.               As of 01.01.2007 PIVDENNYI Bank concluded agreements
                                                                 with 335 enterprises on salary payment to employees via
In conformity with the item 15 of the Licence, the bank          payment cards.
performs currency-exchange operations by means of
own exchange bureaux, as well as via the bureaux                 As of 01.01.2007 the bank installed 126 ATMs (including
acting by agent agreement.                                       89 - in branches), for processing cards of international
                                                                 payment systems Visa International and MasterCard Int.
PIVDENNYI Bank is the representative agent of Thomas
Cook Master Card company.




                                                            48


OPERATIONAL ACTIVITY DYNAMICS IN 2006                                                          WWW.BANK.COM.UA
                                                                ANNUAL REPORT
                                         OPERATIONAL ACTIVITY DYNAMICS IN 2006




The total volume of the money drawn at bank's ATMs
amounted to UAH 382, 514 915 MIO. The Bank
conducted 983 197 ATM transactions in the course of
the year 2006.

As of 01.01.2007 the Bank installed 721 POS-terminals,
that serve VISA International and MasterCard Int.
payment cards.

Pivdennyi Bank is a member of First stock trade system
and Professional association of registrars and
depositaries.

On the ground of the licence #1176 (October, 14, 2004)
and the licence #1178 and #1179 (December, 27, 2006)
by the State Commission for Securities and Stock                In conformity with requirements of the National Bank of
Market, the bank performs operations on securities              Ukraine, on the basis of internal methodology of active
issuence and circulation, as well as depository services        operations risk management, the bank monthly forms
of custodian.                                                   provisions for covering of eventual losses from securities
                                                                operations.
During fiscal 2006 securities operations volume totaled
(UAH thousand):                                                 As of 01.01.2007 the amount of provisions above made
                                                                UAH 71 thousand.




In 2006 bank issued saving certificates amounted to
UAH 149,407 MIO.

The volume of guaranteed promissory notes in 2006 as
compared with 2005 increased by 2,7 times and
amounted UAH 1,264 915 MIO.

The income from securities operations amounted
accordingly: (UAH, thousand)

Trade income - UAH 7 268 thousand

Interest income - UAH 7 428 thousand

Commission income - UAH 519,939 thousand




                                                           49


OPERATIONAL ACTIVITY DYNAMICS IN 2006                                                          WWW.BANK.COM.UA
                                                                    ANNUAL REPORT
                                                                 RISK MANAGEMENT




One of the key factors of the Bank's success and
development - is a stable complex multilevel system of
risk management.

Therefore, we focus special attention on risk exclusion,
risk blockage and risk assessment.

The Bank created a crisis-proof reaction system which
has successfully held global economic fluctuations of the
Ukrainian financial market in check.

Each subdivision of PIVDENNYI Bank, in its sphere, is
engaged in risk management, as well as risk
management and economic works department, whose
main purpose is to take control over the high-risk
directions of the bank's activity.

The conception of the risk management system and an
effective all-round automation are determined by the
Board of PIVDENNYI Bank.

The solvency of the bank during the year 2006 was
maintained on the satisfactory level: average value of
bank's solvency normative for the year 2006 was equal
to 11% under the minimal acceptable 10% (in conformity
with the Instruction "On the order of regulation and
analysis of commercial bank's activity" from 28.08.2001,
#368).

Average value of short-term liquidity normative for the
year 2006 was equal to 27,5% under the minimal
acceptable 20%.

It is also important to mention, that during the fiscal
year PIVDENNYI Bank complied with all standards and
followed the reservation norms of funds attracted of
correspondent accounts with National Bank of Ukraine.




                                                            50


RISK MANAGEMENT                                                                 WWW.BANK.COM.UA
                                                                         ANNUAL REPORT
                                                             CUSTOMER BASE DEVELOPMENT




At the end of fiscal year 2006, PIVDENNYI Bank
possesses a 30% of banking market share, in the
Odessa region.

As of January 1st, 2007, 139208 clients (17474 legal
entities and 121734 individuals) use the services provided
by PIVDENNYI Bank.

Friendly, partner-type relationships with customers allow
the Bank to realize customers needs.

Therefore, appropriately and promptly respond to these
needs, allowing customers to focus their attention
on achieving their business goals.                                  In order to meet the requirements of each bank's
                                                                    customer group, our officers render services to
This approach has ensured mutual benefit from banking               enterprises from the point of view of economic sector.
relationships and the possibility of simultaneous                   That allows studying all the minutest details of the
development, individually with each customer.                       business in each sector and elaborating a number of
                                                                    financial process of optimization.
An important point is that PIVDENNYI Bank develops
partner relationship not with a selective part of                   Our officers have long been working in the financial
customers, defined by type and range of business, but               sector and their professionalism will be enjoyed and
with each customer, providing a full complex of banking             relied upon our customers. They are the largest
services to large, medium and small business.                       enterprises in the sector. Representatives of medium
                                                                    and small business.
These highlights became possible due to the strict
adherence to the main principles of the Bank's customer             We offer the most advantageous tariff and provide
service mantra:                                                     high-quality service that distinguishes us from large
                                                                    retail banks.
-   partnership
-   mutual benefit                                                  We are continually driven to reach further goals.
-   individual approach to each customer                            We search for new ways of cooperation and press
-   personal management system                                      towards maximum diversity of services range.
-   complexity of service
-   special-purpose service for each sector of the market
-   joint development
-   searching for new possibilities
-   introduction of the up-to-date technologies
-   reaching goals.

Individual programs of cooperation are performed for
each customer, while products and services are
elaborated with orientation at a specific markets.




                                                               51


CUSTOMER BASE DEVELOPMENT                                                                          WWW.BANK.COM.UA
                                                                      ANNUAL REPORT
                                                         BRANCH NETWORK DEVELOPMENT




Branch network development is one priority of
PIVDENNYI Bank's growth and development.

Since the first years the Bank was established, it has
attracted many customers from other regions of
Ukraine.

The Bank's branch network in the main center of
business activity in Ukraine have been enhanced as well.

In 1999 Bank branches in Krivoy Rog and Kiev were
opened.

In 2000 - in Dnepropetrovsk,

In 2001 - in Yalta, Zaporozhie, Nikolayev and Kherson,

In 2002 - in Simferopol, Izmail, Alushta and Gurzuf.

In 2003 - 10 representative offices throughout Ukraine.

In 2004 - Main offices in Kharkov and Lugansk were
opened. As well as branch offices in Odessa, Kotovsk,
Dnepropetrovsk, Kherson, Kiev, Simferopol.

During 2005 - Main office in Sevestopol was opened
and 16 branch offices in various cities of Ukraine.

In 2006 - Main offices in Lvov and Kirovograd and 17
branch offices.

Thus, at years end, 2006, the Bank had grown to 17
main offices and 83 branch offices throughout Ukraine.




                                                            52


BRANCH NETWORK DEVELOPMENT                                                        WWW.BANK.COM.UA
                                                                  ANNUAL REPORT
                                                                    STAFF POLICY




The key factor of PIVDENNYI Bank's success and
development is a well-planned human resources policy.
We focuse on retaining our employees thoughout their
careers.

Thereby effectively harnessing and fostering our
intellectual potential. Making it exciting and intrigueing
for new specialists to join the PIVDENNYI Team.

PIVDENNYI Bank is proud of its team of professionals.

Due to effective development, introduction of
up-to-date banking and information technologies,
enhancement of banking products range
and penetration into new markets, as well as branch
network development, PIVDENNYI Bank has increased
the number of its professionals each year.

And as of January 1st, 2007, PIVDENNYI Bank Team
numbers more than 1848 employees.

The attention to the workplace and of our team
members - are all conditions created for the most
productive and natural development of the bank.
All of our employees are part of our team.

Functional furniture and the newest office equipment,
as well as, systems of microclimate and illumination are
attributes of all PIVDENNYI Bank's branches.

They not only create the atmosphere of care and
comfort, but also demonstrate the considerable increase
in labour productivity and the decline of stressful
situations.

Efficiency tests have shown, enthusiasm and desire of
our employees continues to rise.




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STAFF POLICY                                                                   WWW.BANK.COM.UA

								
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