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					           Conference
          Transcription




Date of conference :   1 December 2011
Conference title   :   Nomos Bank –
                       Nomos Bank 9M
                       2011 Financial
                       Results Conference
                       Call
                           CONFERENCE DETAILS



Conference Date:                             1 December 2011


Conference Time:                             17:30 Moscow, Saint Petersburg - Russia


Speakers:                                    Jean-Pascal Duvieusart
                                             Maxim Nazimok




Transcript of 4492257 ACT conference on 1 December 2011          Page 2
ACT Operator

Ladies and gentlemen, welcome to the Nomos Bank Conference Call.               Thank you,
gentlemen. Please go ahead.

Jean-Pascal Duvieusart

Good morning for some of you, good afternoon for others and good early evening for the
rest. This is – welcome to the Nomos September Q3 Results. We have here on the line
Maxim Nazimok and Jean-Pascal Duvieusart. We propose that we go briefly through the
presentation and then we will do Q&A. For those of you who don’t have access to the
presentation so far it is on our website and has been on the website already for a couple
of hours, so you should be able to download it and follow the presentation.

Let me first start by giving a few words of introduction. I will be brief as this is not the
first phone call. On page one, we have here the few facts and key elements about
Nomos. Nomos is the eighth largest banking group in Russia, the second largest
privately owned bank. We are covering 85% of the Russian GDP with a strong presence
in Moscow, St Pets, the region of Tyumen, region of Novosibirsk and Khabarovsk. And
we are active in mid-sized corporate clients, small business and retail which gives us a
good diversification.

One of the key elements of the Q3 result that I want to speak about, if you go to the top
right corner of the page on page number one. Let me just point out a couple of
numbers, we will go into more detail later in the presentation. First is a significant
increase on a quarterly basis of our loan book. It grew in the third quarter by 17%, so
year-to-date we have grown the loan book by 33% which is in line with the guidance
that we had given for the full year. Customer accounts in the third quarter grew also
significantly by close to 10% which is significant achievement. Net interest margins
stayed flat at decent a level of 5.5%, so there is no decline whatsoever in the net
interest margin for the Q3. Return on equity went down due to loss on the fixed income
and securities portfolio basically bringing down the annualised return on equity for the
Bank from 20% to 15.6%. The Tier 1 equity ratio for the Bank stayed strong at 11.1%.

I propose to skip page two which position the Nomos among the different banks in
Russia and go in more detail and speak about the key messages for the third quarter
result. And here I propose that we go to page three other keys points that we would like
to make. The first one is the Q3 trading mark-to-market losses of RUB2.9 billion has
obviously affected the bottom line, however the core operating performance of the Bank
has been very strong and in line with all the targets that management has set to itself.
The bulk of the trading loss is related to the negative revaluation of fixed income
securities portfolio. And this loss has been partially recovered as of today, we will give
you more detail later in the presentation based on management information.

From an operating perspective the Bank continues to demonstrate fairly sustainable
growth above the market having grown year-to-date by 34% compared to slightly less
than 20% for the market. NIM is stable, Fees and Commissions have increased 12.3%
quarter-on-quarter and here there is no more impact of the acquisition of Rapida so it’s
really organic growth basically growing to RUB1.6 billion for the third quarter and
represents a bit more than a quarter of the Q3 revenues.

The funding base is stable with 60% of it comprising customer deposits in the third
quarter, as I said before the deposit base grew by 9%. From an integration perspective
with Bank Khanty-Mansiysk we are pushing through the revenue generating programme




Transcript of 4492257 ACT conference on 1 December 2011           Page 3
with cash flow on insurance and pricing optimisation and we are starting as we speak
some back office centralisation effort.

The costs in the third quarter have gone down in absolute level, they have gone down by
13.7% so we are talking about a reduction in operating cost of RUB650 million. If you
remember in the second quarter it had gone up faster than expected and that was driven
by lot of one-off related to the IPO. And we are here demonstrating that we have the
costs under control and there are no more one-offs.

The Tier 1 ratio is at 11.1%, which is plus 0.5 basis point compared end of last year with
a total capital adequacy ratio of 15.9%, so ahead of what some people and very
probably rightfully considered as being a difficult economic situation the Bank is starting
with a very strong capital adequacy ratio whether you take the international accounting
standards or the Russian accounting standards.

Talking about economic situation I want to finish this short overview of our result talking
about our risk cost. In the third quarter we have risk cost of 0.8% (on an annualised
basis obviously), 0.8% of our loan book which is fully in line with the performance we
are seeing in the first half of the year. This is driven by the fairly conservative and
successful risk management of the Bank and a good diversified portfolio and what is by
any standard very strong and very stable asset quality.

Overall and I know this is a question that many of the analysts have asked us we think
the Bank is on track to achieve its growth and net interest margin and operations cost
targets for 2011. The full year return on equity although expectation and our guidance
for the full year is slightly below our original guidance and obviously depend on how the
capital markets are going to evolve in the next couple of weeks. Should the capital
markets stay where they are as of today I think it is fair to say that the bank has lost
roughly half to two-third of a quarter in terms of profit generation. And therefore our
guidance will go from around slightly above 20% to below 20 and I think you can shave
from that number about 10% of 20% just to avoid any misunderstanding.

Let me now go into slightly more detail on page four. Here we show the growth of our
loan book by segments. As you can see each of the segment has contributed fairly
nicely to our growth of customer business with 22% on the corporate side, 15% quarter-
on-quarter on small business and 13% on retail. Year-to-date retail and small business
in line with our strategy have been growing faster than corporate and we expect that
trend to stay the prevailing trend on any measure of time, unit of time which is
sufficiently long. On a quarter-on-quarter basis you may have fluctuations but we
expect small business and retail to keep growing faster than corporate.

The customer accounts have been growing too over the last quarter significantly with the
bulk of the growth coming from corporate, small business and retail being relatively or
fairly flat. Here the Bank treasury together with the different businesses is playing the
art of managing on one hand the funding mix, the stability of the funding and the
liquidity and on the other hand the net interest margin. And so far we think that we
have the right balance in terms of managing the cost of funding while keeping the Bank
with a sufficient cushion of liquidity allowing it to capture the opportunities that we see
on the asset side as they occur.

If you go to page five, let me address some points about our operating performance. On
the revenue side you see the evolution of the revenue base with a strong increase of our
net interest revenues. In nominal terms net interest grew by 6.3% just in the third
quarter and commissions we talked about that grew by more than 12% quarter-on-
quarter. From an operating expenses perspective as I said operating expense went
down from RUB4.7 billion to RUB4.1 billion in the third quarter. You can see at the
bottom of the right hand corner that our cost percent of our average assets have not



Transcript of 4492257 ACT conference on 1 December 2011          Page 4
moved year-to-date despite all the one-off costs that we have so we stood at 2.9% of
assets which shows a good cost control. The cost of risk, we will talk about that in more
detail later but has evolved very nicely in the third quarter. From a profitability
perspective the Bank is displaying year-to-date an annualised return on equity of 15.6%.

Let me take a few seconds of your time to talk to you about the number that you see
above the 15.6% which is 20.2%. We took the liberty of doing the following simulation
which computes the return on equity and the cost income ratio of the bank should we
have not booked any loss, incurred any loss, in the third quarter with our securities
trading activity. Had we done that which is not a very aggressive assumption then our
annualised return on equity would be at 20.2% year-to-date and our cost income ratio
will be at 45% both numbers being fully in line with the guidance we have provided so
far to the investor community.

I will now pass the word to Maxim who will bring you through the following pages.

Maxim Nazimok

OK, thank you. The next page covers the trends within the interest margin and the cost
of our funding and also the rate on our assets. Net interest income compared to 2010 in
absolute terms is up by 31%, our net interest margin stabilised at a high level of 5.5%,
same as in Q2 and obviously higher than in 2010 and in Q1. One notable thing is the
continuing reduction of the cost of funding as a result of efforts JP has mentioned when
discussing the funding evolution of the banks within this quarter.

On the asset side the overall rate is stable, there were some movements within this.
Small business and retail contribute more and more share of the total interest income of
the Bank. In corporate we saw a slight reduction in overall interest rate driven by two
principal factors. One is the fast growth of that part of the portfolio particularly in Q3
and then the second is that part of this rapid growth in Q3 was within shorter term loans
and you might have seen that through the term structure of our assets which obviously
brought the effective interest rate down.          I think what we have consistently
demonstrated is the ability to re-price both sides of the balance sheet in volatility time
especially so that to maintain or to expand the interest margin.

On the next slide we are giving more detail about the performance of our securities
portfolio and the composition of the securities portfolio. I would probably start from the
top left graph on that page. You see that the volume of total securities has went down
as our investment banking division has been proactively cutting some of the riskiest
positions and maintaining the overall conservative structure of the portfolio. We have
brought down the duration as well, you see this in the upper part of the graph.

Importantly what I would like to draw your attention to is that Nomos is applying the
most conservative policy in terms of classification of securities, 90% of our securities
portfolio is within fair value through profit and loss which means that unlike some other
banks we are showing the full dynamics of price. We have some volatility in this
particular quarter but more transparency in terms of reporting and also you will see the
positive movement as soon as the markets return to normalised conditions.

On the top right part, we have set out the structure of the portfolio. As mentioned many
times it is a really conservative portfolio composed mainly of corporate bonds and euro
bonds most of that repoable with Central Bank as they are a part of “Lombard list”. The
promissory notes despite some analysts mentioning that this is a hole in our balance
sheet are represented by high quality credit institutions. In the back of this presentation
you have the breakdown of that portfolio just out of top five names what we have there
and each comprise 75% of total portfolio’s Alfa, Promsvyaz and VTB. And average




Transcript of 4492257 ACT conference on 1 December 2011          Page 5
duration of that particular part of the book is considerably lower compared to the bond
portfolio – around 90 days.

Looking at the profitability of that book overall the securities are still yielding the positive
portfolio performance yield. Of course Q3 was a hit in terms of trading losses but you
see that the interest income part of the rating is still there and it is keeping stable at
around 8%. Also October and November showed much more positive numbers in terms
of securities pricing so we were able to cover nearly half of total losses made in Q3.

Performance by segment, here I would like to draw your attention that all of the core
segments of our business – namely corporate, small business and retail – continue to
generate solid profitability. Notably we have an increase in number of corporate banking
clients and retail banking clients driving up the fee and commission revenue, you see
that by the numbers. Retail has shown improvement in overall profitability as a result of
strong lending growth this year and also as a result of the gradual reduction of the cost
of retail deposits. The core business segments are performing exactly in line with their
targets.

In terms of capital position, the Core Tier 1 ratio is 11.1% driven by asset growth this
particular quarter exceeding the capital growth. We are still maintaining the guidance of
being above 10.5% so the capital position is sufficient for our next year growth plans.
And you also see that the market risk components within risk weighted assets has been
reducing.

In terms of funding base and liquidity position, the liquidity position of the Bank remains
strong. The growth in customer accounts in just one quarter was RUB30 billion or 9.5%
of total customer accounts and you see we are doing this in a sustainable way the share
of current accounts is growing as the number of clients both in corporate and retail
continue growing. We are maintaining the high share of customer accounts in total
liabilities at around 61%.

In terms of interbank funding, we have prepared additional disclosures on that for your
ease and there you will see that the term structure of that funding is also sustainable
and diversified by source. The average duration of the interbank funding is 220 days
which means that we are sufficiently covered in terms of liquidity position as a bank. We
don’t have any major repayments until end of this year it’s zero in terms of wholesale
funding, by that I mean bond or euro bonds or sub debt. And for next year it’s just
around $200 million.

While many people have been looking at loan to deposit ratio indeed that went up but in
terms of overall liquidity position of the Bank compared to beginning of the year and you
might see that from the liquidity gap disclosures in the financial statements the
cumulative liquidity gap up to one year as I show improved by RUB35 billion. And so we
are positive in terms of liquidity position within the short-term by that I mean within one
year.

Asset quality has evolved in line with the guidance and we are happy to see that the
share of non-performing loans is consistently going down. The absolute volume of them
is nearly flat and the total share is now 1.9% of gross loans. With that the risk cost
stays within guidance and it is very well performing at 0.8% on an annualised basis. We
still continue to book provisions mostly on unimpaired part of the loan book which leads
an increased provision coverage by NPL.

We have been often questioned why is that happening, why is your NPL coverage going
up? The answer is set out in the bottom of this slide. NPLs are flat in absolute terms
and are going down in relative terms. Restructured loans are also a small share of the
loan book 1.5%, 1.6% of the total gross loans, so what’s driving the provisioning is



Transcript of 4492257 ACT conference on 1 December 2011              Page 6
indeed the collective or statistics-based provisioning on the non-impaired part of the loan
portfolio. If you just multiply the loan growth in this particular quarter which was RUB69
billion by 2.3% which is average provisioning rate you arrive at a theoretical cost of risk
of 1.6% while the actual cost of risk was 0.8%. Same trend is for nine months, which
means that indeed the vast majority of the provisions booked is just related to the faster
than the market growth in the loan book.

In terms of diversification, there is not too much change in terms of structure of the loan
book. A notable trend in retail is the faster growth of consumer lending, mortgage is no
longer more than 50% of our total retail book. Consumer loans are 46% and credit
quality of this part of the portfolio is evolving quite nicely. In terms of corporates,
growth of the loan book was generally across all segments there was some growth in
particular on operation with real estate. We have got some questions on what exactly
does that mean? Just for all you to know it is the loans to the companies who have
positive operating cash flows from existing real estate objects. It is not a construction
and project lending, it is not project financing but rather working capital or acquisition
lending. Related parties are staying at around 6% of total loan book, related party
deposits are also gradually going down at 3.5% and the loan concentrations are more or
less flat.

Now in terms of financial targets, we are maintaining all of the medium term targets we
have previously communicated to the market. In terms of planning for 2012 it is clearly
now dependent on the market situation and how the macroeconomic situation in Europe
and in the world evolves. What we have now is the visibility of the loan growth. We are
setting a range of 15% to 20% for next year, that’s in our budget. We are still finalising
the outlook for other indicators but I mean generally we are sticking to the medium-term
targets overall.

Jean-Pascal Duvieusart

Thank you very much. I think right now we would like to take questions.

ACT Operator

Thank you, sir. If any participant would like to ask a question, please press *1 on your
telephone. If you wish to cancel this request, please press *2. There will be a short
pause whilst participant register for a question.

Thank you. Our first question comes from Mikhail Shlemov from VTB Capital. Please go
ahead with your question.

Mikhail Shlemov – VTB Capital

JP, Maxim, good evening. A couple of questions from me. I want just first of all to
check the recovery of the trading losses. I believe Maxim has mentioned that recovery
has been close to 50% so far, is this correct?

Maxim Nazimok

That’s correct as of a certain date.

Jean-Pascal Duvieusart

Mikhail, there is a page with that in the presentation.

Maxim Nazimok




Transcript of 4492257 ACT conference on 1 December 2011          Page 7
Yes, that’s page seven.

Jean-Pascal Duvieusart

Which gives you the exact number as of today. And as for lot of humility this is not as of
today, I mean we are seeing the jumps in the market by 5% on a good or bad day, so
its very volatile. As of today this is where the number stand, so according to our
management accounts which are obviously unaudited because you cannot audit this
thing on a daily basis we stand to have approximately RUB800 million of trading gain for
the fourth quarter as of today.

Mikhail Shlemov – VTB Capital

OK, perfect. That’s very helpful. And also I want just to check with the decline in the
securities portfolio that you show on page seven at the top left. The decline is actually
you are basically redeeming security that for maturity rather than selling them and fixing
the losses?

Jean-Pascal Duvieusart

Depends on our view on the different securities, it’s a blend of it. Also in the third
quarter we have been reducing our exposure with standstill for the whole month of
August and September, so there was some proactive shortening of the maturity as you
can see also on the book, so all of that happens together.

Maxim Nazimok

Yes, but just to confirm the bulk of the loss is unrealised mark-to-market revaluation.

Mikhail Shlemov – VTB Capital

OK, perfect. That’s helpful. And my second question is actually on the loan growth,
clearly it has been very strong in the third quarter and like looking for the industry
exposure I noticed that very large bulk of it came from mining and construction and real
estate and things like this, large chunk and relatively short-term loans part of it as
Maxim has mentioned. Could you give us some colour on this? Should we expect this
short-term loans to stay on the balance sheet or you can post some even decline in the
loan book in the fourth quarter?

Jean-Pascal Duvieusart

I think the best way to answer is our current guidance for total loan growth stayed back,
may be Q3 was finished with a bit of a confirmation that we are entering into uncertain
times. For Q4, the bank has taken significantly more cautious approach and our overall
guidance for loan book growth for Q4 is that the loan book will be flat.

Maxim Nazimok

Yes.

Jean-Pascal Duvieusart

Which means that will keep going within small business and retail portfolio, you will very
likely to have a relative decline of the corporate book.

Mikhail Shlemov – VTB Capital




Transcript of 4492257 ACT conference on 1 December 2011          Page 8
OK. And should we expect some repricing of the remaining part of the corporate book as
clearly the rates have started to drift enough?

Jean-Pascal Duvieusart

Yes.

Mikhail Shlemov – VTB Capital

Can you give us some extend of this repricing?

Jean-Pascal Duvieusart

No. It is difficult to give you numbers at this point in time but let’s put it that way we do
not expect any reduction in NIM so far because of everything we see. We see that the
bank has the ability to re-price roughly as it goes the assets in line with the evolution
cost of credit.

Mikhail Shlemov – VTB Capital

OK, perfect. That’s very helpful. Thank you gentlemen.

ACT Operator

Thank you. Our next question comes Genis Toryvay from Raiffeisen Bank. Please go
ahead with your question.

Genis Toryvay – Raiffeisen Bank

Good evening. Thank you for presentation. I saw a significant growth on your loan
portfolio for the third quarter and as I understand it was financed mostly by loan
(inaudible – technical difficulties). And this loan was not using collateral, I mean repo
transaction for which is natural short-term. As a result we see some negative figures in
your liquidity gap a bit in assets and liabilities. Currently as I understand you are quite
in a position of attracting longer term financing to negate with negative liquidity gap.
And are you going to tap bond market or take loans from your shareholders to improve
your liquidity position? Thank you.

Maxim Nazimok

OK. As a first note we are not financing longer-term loan short-term repo transactions.
This is not the way the liquidity management is done in Nomos Bank, that’s one point.
The growth in loans was financed by different sources but mainly through customer
accounts growth. Yes, we have some repos, average duration of that is presented on
slide 23 it is 60 days but that is by far not the source of funding for the lending
transactions within the bank.

In terms of liquidity gap as I mentioned we have a net positive cumulative liquidity gap
where the maturity is up to one year, the negative gap that you are probably referring to
from the financial statements relates to maturities up to one month and here we need to
note that the maturities in this particular table are presented on a contractual basis
which means that all of the current accounts are within that particular timeframe and
70% of that is a stable balance which stays within the bank for one year or more so we
are pretty much comfortable about the liquidity position and we feel that the current
liquidity position of the bank is stable and sufficient.




Transcript of 4492257 ACT conference on 1 December 2011            Page 9
Jean-Pascal Duvieusart

Now going forward you are asking what is our funding strategy, we want to keep the
funding strategy which is predominantly based on customer accounts and on the long
term source of funding to allow the development of the loan book. That may very well
include accessing the local bond market or the euro bond market in due times. But it
may be attracting long-term funding from banks, just want to remind in the months of
October the bank signed a $200 million interbank clubbed facility in dollar syndicated
facility with a duration of one year renewable for LIBOR plus one and 1.9% if I am not
mistaken. The bank is in a very good position to attract the long-term funding it needs
to develop its lending activity.

Genis Toryvay – Raiffeisen Bank

OK. Thank you.

ACT Operator

Thank you. Our next question comes from Alex Kantarovich from JP Morgan. Please go
ahead with your question.

Alex Kantarovich – JP Morgan

Thank you. My first question is on Bank of Khanty-Mansiysk, if you can provide us with
any update? I noticed that if one of your slides to be concluded or rather the auction to
be concluded for 2011, I would like to know if this is still the case?

Jean-Pascal Duvieusart

OK. Thanks Alex for the very important question. We are obviously interested in buying
the remaining stake in Bank of Khanty-Mansiysk and plan to do the further consolidation.
However we want to do this on the good financial terms which is the price needs to be
attractive and the bank needs to be in position to raise the required capital to do this on
the good terms. For the time being we don’t look at it as being reasonable to go to the
capital market and raise the capital at least not in the short-term. And if anybody has
another perspective we are happy to discuss it offline. Secondly, I would say that in the
current context the region of Khanty-Mansiysk had not yet started the privatisation
process, so the question is not on the agenda as far as we know for this year.

Alex Kantarovich – JP Morgan

OK, fair enough. My second question is on operating costs. If you can provide us with
any colour for Q4 given the one-offs in Q2 and also seasonality how should we progress
sequentially?

Jean-Pascal Duvieusart

OK. The bank is accruing bonus as we go, so we do not expect the Christmas
seasonality of operating cost that some other banks are showing. Bonus pool might be
reduced unless the bank managed to recover its performance first. Secondly I would tell
you we are expecting a mild increase compared to Q3.

Alex Kantarovich – JP Morgan

OK. That’s very clear.




Transcript of 4492257 ACT conference on 1 December 2011         Page 10
Jean-Pascal Duvieusart

I mean we are clearly not talking about increasing Q4’s operating cost by 15% compared
to Q3 just to be very specific. We are talking about something mild in line with what you
have seen between Q1 and Q3 just take away Q2 which is loaded with one-offs but if
you take Q1 to Q3 you get there a more reasonable increase and we are talking about
something similar.

Alex Kantarovich – JP Morgan

OK. No, that’s understandable.

Jean-Pascal Duvieusart

I mean in line with the asset growth, let’s not forget we are growing the bank as we
speak opening the branches and everything so all of that require some staff also.

Alex Kantarovich – JP Morgan

OK. Also back to the issue of loans to deposits at over 130%, that is high compared to
other banks. And my question is, what you will view as a sustainable or optimal level
over the medium run?

Jean-Pascal Duvieusart

Look right now we are getting into the situation where some of our competitors are
going into where I would call irrational pricing of retail deposit. We are really taking
advantage of all of the source of funding the bank had to be able to develop its asset
business with the long-term funding without being excessive prices. And in that context
we are comfortable with the loan to deposit ratio where it stands as of now. I would
though want to tell you that normally the Russian banking sector is showing a lot of
seasonality in liquidity and December is a good month, so that normally should help the
loan to deposit ratio by the end of the year.

Alex Kantarovich – JP Morgan

OK, got it. Thank you very much. No further questions from me.

Jean-Pascal Duvieusart

You are welcome.

ACT Operator

Thank you. Our next question comes from Svetlana Aslanova from VTB Capital. Please
go ahead with your question?

Svetlana Aslanova – VTB Capital

Thank you. Good afternoon. I had a couple of questions. First question is on asset
quality. We saw NPLs and restructured loans starting to grow in third quarter and could
you please give us some guidance on what trends you see observed in the fourth quarter
and may be a view for 2012?

Jean-Pascal Duvieusart




Transcript of 4492257 ACT conference on 1 December 2011        Page 11
Look NPL growing, they grew by RUB200 million, so it is really not a very big growth
compared to the size of the book. You are talking about one loan and then it makes a
difference of RUB200 million, so may be that’s one point. And restructured loan has
been growing but also it’s a very minor growth and the numbers on the quarterly basis
are extremely sensitive to one loan during restructure or one loan going NPL good or NPL
in bad, point one.

Point number two, what we see so far is a very positive. We have absolutely no problem
in the asset quality of the book. Our trend for 2012 will predominantly reflect the fact
that we are growing small business and retail faster than corporate and that these are
credit activities which usually show and display higher loan loss provision. Loan loss is
then being corporate activity and hence we might see a slight increase in risk cost
compared to our number so far which amounts to 0.8% as we go in to 2012. But that
would be more than match by the increase in the net interest margin but these lines of
business do deliver.

Svetlana Aslanova – VTB Capital

OK. Thank you very much, I see. Could you please also explain, we noticed that for
some reason there was a decline in cash collection in the third quarter comparing to the
first half of the year. Was it somehow related to the asset quality?

Jean-Pascal Duvieusart

No, this is a question we face since we did the IPO. The cash collection amount on
interest received and the cash paid and interest paid varies quarter-by-quarter in the
bank. We had positive quarters where we basically collected more interest than we
accrued, we had months where we had a lag. This is totally dependent on the structure
of the contract they were signed, when they were signed in the quarters, whether or not
you have grace period or not. If you compare two for example the first nine months of
last year, this year it looks better than last year. If you compare third quarter to second
quarter it looks worse. But it is totally – the number change quarter-by-quarter. We
have one policy which is we accrue all the interest that we should receive or should pay
as we should accrue them. We do not accrue any interest on non performing loan, we
do not accrue any interest ahead of time and that is how it plays out. There is no
indication in that that would basically show a deterioration of the loan book or
whatsoever.

Maxim Nazimok

Exactly, plus we need to factor in the rapid growth of loan portfolio which resulted
actually in the fact part of those loans haven’t yet made any interest payment because
they were just issued. There was like 20 days, 15 days accrual which influenced that
number.

Jean-Pascal Duvieusart

Last one I may want to say is that if you look at our net interest margin in cash terms it
is exactly the same as our interest margin in accrued terms.

Svetlana Aslanova – VTB Capital

I see. Thank you very much. Thank you.

ACT Operator




Transcript of 4492257 ACT conference on 1 December 2011         Page 12
Thank you. Our next questions comes from Svetlana Kovalskaya from Renaissance
Capital. Please go ahead with your question.

Svetlana Kovalskaya – Renaissance Capital

Hi JP, hi Maxim. A few questions from me. First of all could you shed some more light
on your 2012 guidance, you mentioned 15% to 20% loan growth. I just wondered what
kind of GPD growth does that assume? That’s my first question.

The second question would be on your net interest margin. If you could just walk us
through your expectations, I think you said that you expect an increase in net interest
margin which should more than compensate for the increase the cost of risk. If you
could just walk us through the components of NIM, what’s going to happen to assets
field, what is going to happen to loan rates and the same thing for cost of funding?
What have you done recently to your rates? How do you expect this to translate into
high NIM next year?

Jean-Pascal Duvieusart

Our expectation for next year, first of all you have to be humble in front to next year it
would be my first reaction. The second one I want to say is that we are planning a GPD
growth around 2% to maximum 3% next year for Russia. That is our underlying
assumption. We are not planning a recession. We are sticking to the macro forecast of
some of the banks that we are working with in and we think 2% to 3% is a realistic
expectation for the time being.

After that giving you the breakdown of the name per segment I would like to refrain
because this is going at that one level of detail below the one I want to get in terms of
specific guidance. We do however expect a high growth of our retail and small business
loan compared to the growth of our asset that we expect on the corporate side. While
the retail and small business group easily grow at double the speed of the corporate
book.

Svetlana Kovalskaya – Renaissance Capital

Basically you are saying that you expect positive impact on NIM from the asset mix as
opposed to right now.

Jean-Pascal Duvieusart

Yes. I expect positive impact due to the asset mix and then if there is growth in cost of
funding which there is I expect growth in asset yield also to compensate for that and for
any change in risk cost. Do I expect NIM to go to 6%, no.

Svetlana Kovalskaya – Renaissance Capital

OK. That's very clear. But still maybe you could give us some colour on your recent
changes to interest rates on both sides, on your loan and deposit offering, maybe since
July to date.

Maxim Nazimok

Basically as I mentioned since July we were raising rates. We started only on the
corporate front doing parallel increase on deposit and loan rates. Until recently we have
not touched small business and retail and thereafter in line with our competitors we will
also raise rates again on both loan and deposit side on retail as well. But the increase
was until now relatively moderate within 1%.



Transcript of 4492257 ACT conference on 1 December 2011         Page 13
Going forward we don’t want to be paying crazy prices already offered by many privately
owned banks. We will monitor the situation and as JP rightfully said the pricing of retail
deposit in our case is a Treasury decision. We are monitoring the mix of the funding and
sustainability of the funding but we are monitoring the interest margin and we don’t
want the interest margin to be hit by increased deposit gathering activities on the most
expensive part of our funding.

Svetlana Kovalskaya – Renaissance Capital

OK. That's very clear. Then the final question from me if I may. On your renegotiated
loans, could you just repeat it again for us? I guess there was a significant increase in
the renegotiated loan in Q3 from RUB 6 bln to 7.8 bln. Was it driven by any particular
big loans and how much of concern is it in terms of asset quality?

Maxim Nazimok

No significant concerns.       I mean we are strictly following the IFRS definition on
renegotiated loans i.e. we are classifying every loan which was renegotiated in a
response to some concerns about the credit quality of the borrower. This is the number
disclosed. None of those loans is in overdue or non performing status. And the
particular increase in Q3 was caused by two or three corporate loans. Again we are
strictly monitoring those but there are no major or even mild concerns about the real
credit quality and ability of the borrower to repay. And as we mentioned previously, we
are granting restructurings only on the basis that the borrower is able to comply with the
new schedule. We are pretty much comfortable with the credit quality of those
particular loans.

Svetlana Kovalskaya – Renaissance Capital

OK. Would you be able to be a bit specific on what sectors for examples those loans are
coming from?

Jean-Pascal Duvieusart

Across all sectors, Svetlana. There is no specific concentration.

Svetlana Kovalskaya – Renaissance Capital

OK. Well thank you very much for your answers. That’s it from me.

ACT Operator

Thank you. Our next questions comes from Hugo Swann from Credit Suisse. Please go
ahead with your question

Hugo Swann – Credit Suisse

Hi JP, Maxim. Thank you very much for taking the call. Two quick questions. Firstly I
wondered whether what kind of assurance you have from your core shareholders in
terms of support regarding the auction of the bank Khanty-Mansiysk should this happen
before the equity markets recover and you are able to issue new equity to fund that.
What kind of action they are going to take and what level of assurance you have with
that?

My second question is, given the squeeze that you are seeing in liquidity amongst some
of the mid tier and small banks, how is that affecting your own repo lending operations



Transcript of 4492257 ACT conference on 1 December 2011             Page 14
into these banks and what credit risk do you see, how is that changing? That’s it. Thank
you.

Jean-Pascal Duvieusart

Two questions. The first one is there are the two strategic shareholders in the banks ICT
and PPF are committed to the development of the bank and should the region of Khanty-
Mansiysk decide to go on then we will obviously do whatever is needed to make sure
that Nomos is positioned to buy the remaining stake in the bank. However I have to tell
you that it is very unlikely that the region really starts on this, we are all ready to go
forward because nobody is going to come and buy the remaining stake in the bank
except us. There is absolutely interest for anybody to come and become a minority
shareholder in a mid-sized Siberian bank. But should that happen PPF and ICT stand
ready to support the bank, similarly as were the PPF under all the subordinated debt in
the months of September when the capital market was closed. I think that is a very
important point I wanted to put across that now we are standing behind the bank and
will support the development of the bank in the months to come.

Regarding the tightening of the liquidity, if I understand your words, your question is not
what is the impact on our liquidity because so far as you can see from our asset growth
we haven’t been constrained by liquidity but how does that impact our interbank repo
based lending. Well that makes it more profitable because we get higher margin and
makes our risky partners more cautious. As a result we have reduced our exposure
significantly in the third quarter. If you look at our official IFRS report on page 22 you
will see a substantial decline in loan under reverse repo agreement with other financial
institutions.

Hugo Swann – Credit Suisse

That’s great. And have you seen any difficulties within the guys you were lending on
repo with them posting collateral, has you seen declines in values of some of their
collateral? Have you seen any stress in terms of them being unable to post collateral all
being fairly fine?

Jean-Pascal Duvieusart

Well, two points. If you look at the detail of all of the reports you will see that our ratio
of collateral to loan value has slightly declined. However all of the customers have
sticked to the contractual agreement that were agreed with Nomos, so there is not any
issues so far on that front. And historically our performance on reverse repo lending has
been extremely strong especially in terms of risk cost and even in the crisis of 2008, so
we feel very comfortable. At the end of the day these reverse repo agreement, we are
lending to people that we have good business relationship with and that undergo a very
strict risk screening and in addition to that we get a liquid collateral that allows us to
manage to the risk exposure should we have a problem.

Hugo Swann – Credit Suisse

Great. That’s very clear. Thank you very much indeed.

ACT Operator

Thank you. Our next question comes from Gleb Shpilevoy from Raiffeisen Bank. Please
go ahead with your question.

Gleb Shpilevoy – Raiffeisen Bank




Transcript of 4492257 ACT conference on 1 December 2011           Page 15
Good afternoon and thank you for the presentation. Some of my questions have been
answered but I still have a follow up on funding. I noticed that your retail deposits grow
only 5% year-to-date and negatively in the third quarter which is actually slightly below
the market. Can you please explain what were the drivers behind that and what are
your expectations with regard to the retail deposits taking capacity of Nomos Bank next
year?

Jean-Pascal Duvieusart

Sorry, if I understand the question, well you are saying under the retail deposit we grew
slower than the market, what is the driver of that and what are the long-term implication
regarding our capabilities?

Gleb Shpilevoy – Raiffeisen Bank

Yes exactly.

Jean-Pascal Duvieusart

Yes, it is a fair question. The key driver is that we did not jump in the price competition
if you drive to Moscow you see advertising for one year deposit at 10%, 11% or 12%
and we think we can attract better quality funding at lower rate than that. And therefore
we decided not to jump into that battle and rather maintain our current deposit base as
you can see it has not gone down and optimised the pricing.

Going forward we can always decide to increase pricing over time if we think this is
warranted and needed our branch have the capability to attract deposit on large scale
fairly quickly as they have done so far. But our focus right now is more to put forward
the quality of our service, the diversity of our service, the branch network and try to get
money through what we call relationship banking rather than through price competition
for hot money.

Gleb Shpilevoy – Raiffeisen Bank

I understand but given that the rates that will probably rise also next year, would be the
rate increase also on the agenda for you sometime in the beginning of 2012?

Jean-Pascal Duvieusart

For the right maturity we have already started increase rate as Maxim said previously.
We could increase them further if we needed to and we see the development of the
revenue on the asset side. But so far we are not planning to go in the price battle for
deposit because we have an alternative source of longer term stable funding which are
cheaper than retail hot money.

Gleb Shpilevoy – Raiffeisen Bank

If I may get more specific, what would be actually your expectations for the growth of
your retail deposits for next year roughly?

Jean-Pascal Duvieusart

I do not want to go at that level of detailed guidance.

Gleb Shpilevoy – Raiffeisen Bank

And that would be?



Transcript of 4492257 ACT conference on 1 December 2011         Page 16
Jean-Pascal Duvieusart

No, the bank has never given guidance at that level of detail. I do not want to enter that
level of detailed guidance.

Gleb Shpilevoy – Raiffeisen Bank

OK. Thank you very much.

ACT Operator

Thank you.   Our next question comes from Avgeniy Grigoriev from VTB Capital
Investment Management. Please go ahead with your question.

Avgeniy Grigoriev – VTB Capital Investment Management

Good evening, gentlemen. I have two questions. The first question, what is the average
extension period for your renegotiated loans?

Second question is, actually you have about loan portfolio secured by securities. And
what is the loan to value ratio change for this types of loans? What is the mix of the
collateral of securities that are pledged, I mean what percentage of it relates to liquid
shares and what percent of it relates to liquid shares?

Maxim Nazimok

OK. Let me start from the back. The type of securities and the haircuts are actually
disclosed in the accounts. Principally I have to say all of them are 100% liquid otherwise
we wouldn’t have initiated those transactions. And then out of the 25% you are
referring to again a significant portion is the same portfolio of repo transactions, so there
is not too much left in commercial lending which is securitised by securities. And the
difference is principally the lending like M&A transactions but there it is substantially
different from the repo business, it is longer term lending with full assessment of credit
spending of the borrower, cash flows, business plans, credit monitoring procedures
etcetera.

Avgeniy Grigoriev – VTB Capital Investment Management

I see but I think that then you have for example some discount of this collaterised
portfolio, it probably was changed somehow for example from 80% to 90% for the
quarter.

Maxim Nazimok

I think JP actually covered that question already, all customers are under reverse repo
transactions performed in accordance with their contractual obligations.        We are
exercising margin calls where necessary, so we are at the way the current coverage of
all the repo book.

Avgeniy Grigoriev – VTB Capital Investment Management

OK. And then as far as the extension period is concerned?

Maxim Nazimok




Transcript of 4492257 ACT conference on 1 December 2011           Page 17
I have to say I don’t have the number from the top of my head. As far as largest loans
are concerned the renegotiation is usually done on a tranche basis, so we are not putting
huge load on a borrower as bullet repayment. But I cannot say the average extension
period, of course it is not 10 years or 20 years. If you look at the term structure of the
loan book it is actually evolving towards shorter term lending recently as opposed to
more extension of longer term loans.

Avgeniy Grigoriev – VTB Capital Investment Management

Could it be about two or three years or so?

Maxim Nazimok

No, typically not.

Jean-Pascal Duvieusart

Why don’t we – we will find out the exact data and then we will post it in the information
we make public so that you can access it.

Avgeniy Grigoriev – VTB Capital Investment Management

OK. Thank you.

ACT Operator

Thank you. Once again, if you would like to ask a question, please press *1 on your
telephone. If you wish to cancel this request, please press *2.

Thank you. We have a question from Alexei Butylin from Goldman Sachs.           Please go
ahead with your question.

Alexei Butylin – Goldman Sachs

Yes. Good afternoon, JP, Maxim. Thanks for presentation. Almost all of my questions
have been answered, just one question remaining. If we look at your breakdown of
customer accounts by currencies we can see that there is some substantial increase in
gold denominated customer accounts. Could you please elaborate a little bit more on
this situation and could you please provide more colour on to which part of your assets
are those accounts essentially tied?

Jean-Pascal Duvieusart

Typical Goldman Sachs question.           The gold deposits are tied to some of our bond
portfolio and it is –

Maxim Nazimok

Alexei, are you mentioning just customer accounts or every single part of funding?

Alexei Butylin – Goldman Sachs

Well actually I am mentioning customer accounts.

Maxim Nazimok




Transcript of 4492257 ACT conference on 1 December 2011          Page 18
In terms of customer accounts, we are one of the leaders in the gold market. We do
offer metal accounts to your retail and private banking clients, so this is principally the
major source of increase.

Jean-Pascal Duvieusart

I mean just for you to understand the cost of these deposits, because they are deemed
deposits once you swap them in dollar and then forward and then swap in roubles the
cost of that deposit for the bank in less than 4%. It is very, very cheap source of
funding.

Alexei Butylin – Goldman Sachs

Also potential change in price of gold as far as I understand?

Jean-Pascal Duvieusart

No, because you hedge –

Alexei Butylin – Goldman Sachs

Your customers. OK, I understand.

Jean-Pascal Duvieusart

No, we have no risk on that. We take it, we hedge it, we swap it in roubles, if we want
to have roubles then we stay with it and that’s it. There is no risk in terms of foreign
exchange, there is no exposure to any change in foreign exchange currencies or price of
metal.

Then your other question is, it is used by some people that have gold and want to
deposit with the bank. And some people also want to liquefy gold and get access to
funding from the bank without selling their gold. And therefore the bank admitting a
margin under funding and a margin under landing as far the relationship with our
customers. It is what we offer for our customers, to liquefy their gold and get access to
cash, for the bank there is no credit, they do nothing, we just make a pure margin on
this.

Alexei Butylin – Goldman Sachs

OK. Thanks for explanation.

Jean-Pascal Duvieusart

It is a very good business by the way.

ACT Operator

As a reminder if you would like ask a question, please press *1 on your telephone. To
cancel your request, please press *2.

Thank you. We have a question from Andrew Keeley from Troika Dialogue. Please go
ahead.

Andrew Keeley - Troika Dialogue




Transcript of 4492257 ACT conference on 1 December 2011          Page 19
Good afternoon. Thank you for the call gentlemen. I’ve just got a question on your
capital position, I think you put out a statement earlier in the week about the transfer of
this stake from Nomos the stake in Bank Khanty-Mansiysk from Nomos to a 100%
subsidiary. Could you just give a little bit more detail on why you have done that? And
I mean is this a case that you standalone capital ratio is under pressure? Perhaps you
can give us what the N1 ratio currently is for Nomos on the standalone basis? Thank
you.

Maxim Nazimok

OK. Andrew as we probably mentioned earlier the capital adequacy calculation for us as
a bank is completely different on Russian accounting standards and on IFRS. The key
difference being our investment in Bank of Khanty-Mansiysk which is fully deducted from
Tier 1 Core equity under central bank rules. And since we need to manage the two
ratios together we thought it makes much more sense to optimise the capital structure
within the group so that we don’t have N1 as a limiting factor for our future growth.
That was the origin of that transaction, basically we are doing this to be able to grow
further and into next year as indicated by our guidance. The current level of N1 in
October, November was at around 11.5% to 12% and we are fairly comfortable with that
level given the fact that this is pre-restructuring ratio.

Andrew Keeley – Troika Dialogue

OK. All right. Thank you, that make sense. Just a follow up question in terms of
lending. I think you mentioned that you expect probably flat loan growth in the fourth
quarter. I am just wondering I mean is that a case of you guys basically taking a more
conservative risk approach or are you seeing demands slowdown very strongly? I mean
we have gone from 17% loan growth in the third quarter to perhaps zero in the fourth
quarter which is obviously a very big gap. I mean are you seeing the things have
dramatically changed in terms of demand for credit?

Jean-Pascal Duvieusart

First of all we are taking a more cautious approach as we said in September when we
had our phone call. We want to see how the situation evolves before we move forward
aggressively, that’s first one point. Point number two, indeed the demand has slightly
been more muted in the fourth quarter. But the two things I think are compounding
each other.

Maxim Nazimok

Exactly and increased interest rates are also a factor for the potential borrowers to
consider.

Jean-Pascal Duvieusart

To reconsider their lending decisions.

Andrew Keeley – Troika Dialogue

OK, all right. Thank you very much.

ACT Operator

Thank you. We have a follow up question from Gleb Shpilevoy from Raiffeisen Bank.
Please go ahead with your question.




Transcript of 4492257 ACT conference on 1 December 2011         Page 20
Gleb Shpilevoy – Raiffeisen Bank

Good afternoon. I have a further follow up on funding. I am not sure whether you are
allowed to disclose that information but it would be very helpful to know what are your
limits on liquidity facilities offered by the central bank and the ministry of finance?

Maxim Nazimok

I am not sure we are able to disclose that but I can say that this is well exceeding any
kind of liquidity requirement we might have in a stress event. What our treasury is
doing is this regular stress testing of the balance sheet which shows that the amount of
those facilities is much more than we might potentially require in a stress test scenario.

Gleb Shpilevoy – Raiffeisen Bank

OK, fair enough. Thank you very much.

ACT Operator

Thank you. As a final reminder, if you would like to ask a question, please press *1 on
your telephone. To cancel your request, please press *2.

Thank you. We appear to have no further questions at this time. Please continue with
any further points you wish to raise.

Jean-Pascal Duvieusart

OK. Thank you very much for the 73 of you that attended the phone call. If you have
any further questions, please contact our investor relationship department and we look
forward to hear from you in the coming weeks. Good bye.

ACT Operator

Ladies and gentlemen, that concludes today’s Nomos Bank conference call. Thank you
for your participation. You may now disconnect.

END OF CONFERENCE




Transcript of 4492257 ACT conference on 1 December 2011         Page 21

				
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