IMB Group Profile by jolinmilioncherie

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									                                         EQUITY RESEARCH

IMB Group Profile
 IMB Group was formed in May 2006 as a consumer finance holding, incorporated
 in Cyprus, which holds 100% of the Ukrainian closed joint stock company
 International Mortgage Bank (IMB), established in January 2005, and 100% of
 Favorit Kapital (Family Credit brand), a credit intermediary that was established
 in October 2005. As the name implies, IMB is a specialized mortgage lending
 institution, while Favorit Kapital is focused on POS loans that are issued using the
 balance sheet of IMB. Together, the form IMB Group that is the leading pure-play
 consumer lending platform in Ukraine, offering its customers home acquisition
 and home equity loans (secured against mortgages on secondary market
 apartments), POS consumer loans, bank accounts and deposit services.
 In one year of credit lending operations, the bank has quickly built its customer
 base and now services more than 500 mortgage and 18,000 consumer lending
 customers. The bank’s targeted loan portfolio comprised of 70% mortgages and
 30% POS consumer loans offers an attractive risk-return profile. IMB Group is
 run by a strong management team, with extensive banking and investment
 experience, and consisting of international professionals with Ukrainian, Central
 European and Western experience.
 IMB Group’s controlling shareholder is Emerging Europe Growth Fund, LP,
 managed by Horizon Capital, a leading private equity fund manager in Ukraine
 and Moldova with USD 200 million under management. A significant equity
 incentive program (using stock options) is in place for the bank’s Management
 Board and Supervisory Board members, implying strong additional incentives
 for exceptional performance.
 IMB has its headquarters in Kyiv, while the group’s POS loan arm, Family Credit,
 has 20 outlets and nearly 250 POS operations in almost all Ukrainian regions. The
 bank is in the process of establishing Mortgage Distribution Centers in the five
 largest Ukrainian cities (Dnipropetrovsk, Donetsk, Odessa, Kharkiv, Lviv) with
 populations of about one million by converting its Family Credit outlets into full
 retail banking outlets, providing mortgages and operating POS network in the
 respective region. Family Credit’s POS network will also be expanding to facilitate
 the bank’s business-to-business (B2B) consumer lending growth. As IMB Group
 actively employs indirect sales channels (brokers, realtors, agents) it does not
 require an extensive network of outlets, implying a relatively low investment in
 fixed assets even in the expansion phase of the IMB Group’s development. It also
 implies much lower overheads compared to its universal peers. This allows IMB
 Group to offer competitive interest rates, while enjoying higher margins and ROE
 compared to its local universal peers.
 The group collectively employs 457 people, of which 64 are employed at the less
 labor intensive IMB. The mortgage staff will grow by 15 people in 2Q06 and then
 in line with the openings of Mortgage Distribution Centers. On the other hand,
 POS personnel will continue growing in line with the POS network. Unlike its
 local competitors, IMB Group maintains highly skilled, specialized mortgage
 personnel. The bank plans to optimize the use of POS workforce by employing its
 own staff in the most attractive POS locations, while outsourcing to the retailers’
 employees (after proper training) in the smaller, less lucrative POS locations.
 As a result of its ownership by a leading US based private equity fund and a credit
 line from the Overseas Private Investment Company (OPIC), IMB Group boasts
 one of the sector’s highest corporate governance and reporting standards. This
 attention to corporate governance detail can also be attributed to the group’s very
 professional management with cross-boarder investment experience, history of
 international audits, and its understanding of the value creation that good
 governance provides at exit.




    Analyst: Oleg Pronin (research@dragon-capital.com); Sales: Dmytro Tarabakin, Sandro Salsano (+380 44) 490 7122
      36-d Saksahanskogo, 01 033 Kyiv Tel.: (+380 44) 490 7120 Fax: (+380 44) 490 7121 www.dragon-capital.ua
September, 2006                                                                                                                             Dragon Capital
Consolidated Financial Summary
Profit & Loss Statement (USD million)
Period                                     2005 Unconsolidated*         2006E               2007F              2008F               2009F             2010F
Net Interest Income                                          0.4           5.6                20.6                31.9                47.0             60.4
  Gross Interest Income                                      0.6           7.8                29.3                51.2                75.7             94.3
…incl. Mortgage Loans Interest Income                         na           3.4                13.6                23.9                31.8             37.3
…incl. POS Loans Interest Income                              na           4.4                14.0                19.7                26.6             31.1
…incl. Credit Card Loans Interest Income                      na           0.0                 1.7                 7.6                17.3             25.8
  Interest Expense                                           0.2           2.2                 8.7                19.3                28.7             33.8
Net Non-Interest Income**                                  (0.4)           2.7                 7.7                 8.0                 1.2              1.2
Total Revenues                                            0.027            8.3                28.3                39.9                48.2             61.6
Total Operating Expenses                                   (2.6)         (5.8)              (13.3)              (18.2)              (24.3)           (30.9)
…Personnel Costs                                           (1.0)         (3.0)               (3.8)               (4.8)               (5.9)            (7.4)
…SG&A & Other Expenses                                     (1.5)         (2.5)               (8.8)              (12.6)              (17.3)           (22.3)
…Depreciation                                              (0.2)         (0.3)               (0.6)               (0.8)               (1.0)            (1.2)
Operating Profit                                           (2.6)           2.4                15.0                21.8                24.0             30.7
  Provisions & Other Items                                 (0.1)         (1.5)               (1.9)               (2.9)               (4.3)            (5.5)
Profit Before Tax                                          (2.7)           0.9                13.1                18.8                19.7             25.3
  Taxes                                                    (0.0)              -              (3.3)               (4.7)               (4.9)            (6.3)
Net Income                                                 (2.7)           0.9                 9.8                14.1                14.8             19.0
Balance Sheet (USD million)
Period                                     2005 Unconsolidated         2006E               2007F               2008F               2009F             2010F
Cash & Reserves                                            0.7             3.9                 6.9                13.8                21.9              27.1
Inter-bank Loans                                           5.9             1.1                 3.2                 5.2                 7.3               9.2
Gross Loans to Customers                                   9.7            92.3              212.8               348.8               486.5             610.0
  incl. Mortgage Loans                                     8.9            67.8              174.2               269.6               355.7             433.7
  incl. POS Consumer Loans                                 0.9            24.5                32.6                54.8                78.2              99.7
  incl. Credit Card Loans                                     -               -                6.1                24.5                52.6              76.6
Loan Loss Reserve                                        (0.1)           (1.7)               (3.0)               (4.9)               (6.7)             (8.3)
Fixed Assets (PPE)                                         0.9             1.5                 1.6                 1.8                 1.9               2.1
Other Assets                                               0.2                -                   -                   -                   -                 -
Total Assets                                              17.4            97.0              221.5               364.8               511.0             640.1
Inter-bank Loans & Deposits                                4.1            29.0              103.9               160.8               218.9             264.1
incl. Domestic Inter-bank                                     -            3.2                 6.9                13.8                21.9              27.1
incl. OPIC & Other IFIs                                    4.1            25.8                47.0                47.0                47.0              47.0
incl. Syndicated Loans                                        -               -               50.0              100.0               150.0             190.0
Customer Deposits                                          4.9            26.0                46.1                92.2              146.2             180.4
  incl. Corporate Deposits                                 1.2            11.7                20.8                41.5                65.8              81.2
  incl. Retail Deposits                                    3.7            14.3                25.4                50.7                80.4              99.2
Bonds                                                         -               -               20.0                40.0                60.0              90.0
Subordinated Debt                                          3.0             4.0                    -                   -                   -                 -
Other Liabilities                                          0.2             1.0                 4.7                10.8                10.1              10.9
Total Liabilities                                         12.3            60.0              174.7               303.8               435.3             545.4
Equity                                                     5.1            37.0                46.8                60.9                75.7              94.7
Total Liabilities & Equity                                17.4            97.0              221.5               364.8               511.0             640.1
Financial Ratios
Period                                      2005 Unconsolidated         2006E               2007F              2008F               2009F             2010F
Asset Growth (%)                                             na          462%               128%                 65%                 40%               25%
Lending Growth (%)                                           na          853%               131%                 64%                 39%               25%
Net Interest Income Growth (y-o-y)                           na        1,175%               266%                 55%                 48%               29%
Total Revenue Growth (y-o-y)                                 na             nm              242%                 41%                 21%               28%
Net Income Growth (y-o-y)                                    na             nm              991%                 44%                   5%              28%
Net Interest Margin (%)                                     nm          10.3%               13.3%               11.2%               11.1%             10.9%
Net Interest Spread (%)                                     nm            6.7%              10.1%                9.2%                9.1%              8.6%
Cost/Income (%)                                             nm            71%                54%                 53%                 59%               59%
Provision/Operating Profit (%)                              nm          63.1%               14.7%               15.4%               21.7%             21.6%
ROE (avg.; %)                                               nm            4.3%              23.4%               26.2%               21.6%             22.2%
ROA (avg.; %)                                               nm            1.6%               6.2%                4.8%                3.4%              3.3%
Notes: *Unconsolidated means IMB only, **Includes net Fees & Commissions (most of the total), F/X operations and securities trading gain.

IMB Group Profile                                                                                                                                         2

								
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