TRUST Investment Bank & National Bank TRUST
1st Half 2007 Results and Business Strategy
20 September 2007
Disclaimer
This presentation has been prepared and issued by National Bank TRUST and TRUST Investment Bank (collectively and jointly known as “TRUST”). This publication is intended for professional and institutional customers. Any information in this presentation is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by TRUST with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. This presentation is for information purposes, it is not intended to be and should not be construed as an offer or solicitation to acquire, or dispose of any of the securities or issues mentioned in this presentation. TRUST and/or its subsidiaries may use the information in this presentation prior to its publication to its customers. TRUST or its employees may also own or build positions or trade in any such securities, issues, and derivatives thereon and may also sell them whenever considered appropriate. TRUST may also provide banking or other advisory services to interested parties. TRUST accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation.
2
1 Executive Summary 2 Rationale for Merger 3 Group History & Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
3
Executive Summary
• The shareholders of Investment Bank TRUST (“IBT”) and National Bank TRUST (“NBT”) announced the merger of the two banks on July 17th, 2007 • The merger will optimise both the capital and asset structure of the merged bank • Although the merged bank will be a universal bank, the focus of growth will be on the retail and SME portfolios
• The branch expansion plan will be largely completed by the end of 2008 allowing management to greater focus on achieving higher ROAE targets
• Including the announced and funded RUB3.4bn capital increase of NBT, the merged bank will have sufficient capital for at least 24 months and will be in the top 20 financial institutions in Russia by capital and assets
4
Executive Summary: NBT‟s Stand Alone Profile
What We Are: NBT provides full range of commercial banking services to corporate and private clients. Bank primarily focuses on Retail and SME loans to corporate and individual customers and federal / municipal governmental entities. NBT is a member of Deposit Insurance System. Key Clients: Mass Retail segment, Trade and Service Industries, SME Current Geographical Coverage: Strong presence in cities with population of over 100,000 and satellite towns of large cities Strategic Goal: In the next two years to become a TOP 5 Russian retail and SME bank in Russian regions with high growth potential based on • Size of assets • Number of clients • Coverage of branch network NBT in Figures: 1H 2007 IFRS (RUB mln.) • Total Assets: 54,977 • Net profit (6 month): 145 • Shareholders’ equity: 5,497 • Loan portfolio: 32,676 Branch Network as of 20 September, 2007: 171 offices in 118 cities of Russia and in process of opening 42 offices by the end 2007 Employees: 6,357 Ratings: “B1”, outlook “Positive” by Moody’s “B-” , outlook “Positive” by Fitch
5
Executive Summary: TIB‟s Stand-Alone Profile
What We Are: TIB provides a full range of investment banking services to corporate and institutional clients. The Bank’s primary focus is to act as an intermediary between second and lower tier corporate Russia and domestic and international investors. Key products include DCM, ECM, Hybrids, Securitizations, Real Estate, Corporate Finance, Investment Banking and Principal Investments. Key Clients: Primary: Second and lower tier Russian & Ukrainian corporates with an appropriate size within the next 18 months to be seen as a qualified issuer of debt or equity to investors. Investors: Global Hedge Funds, International and Domestic Banks, Insurance Companies, Pension Funds, Private Clients and Asset Managers Location: Moscow based with FSA registered office in London with plans of expansion to Asia (licensed office in Hong Kong) within next 12 months. Strategic Goal: In the next two years: • Remain in top 3 domestically owned banks in fixed income credit product (CLNs, Eurobonds, Hybrids) • Move into top 3 domestically owned banks participating in IPOs, by number of deals • Retain research leadership in Fixed Income and Second Tier Equity
TIB in Figures: H1 2007 IFRS (RUB mln.) • Total Assets: • Net loss (6 month): • Shareholders’ equity: 2007 YTD League Tables:
1st Qtr 2007, #2 CLNs (37.5%) 1st Qtr 2007, #2 Domestic Owned Bank, Eurobonds (1.3%), #17 overall 1H 2007: #1 Domestic owned Bank, Eurobonds and CLN 1H 2007: #3 Domestic Owned Bank, IPOs
43,647 (36) 6,633
Employees: 409 Ratings: “B1”, outlook “Positive” by Moody’s
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1 Executive Summary 2 Rationale for Merger 3 Group Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
7
Rationale for Merger
• Focus remains to grow branch network to cover all cities with population greater than 100,000 people. However the management recognises that the expansion plan will discontinue by the end of 2008 – Further asset growth and diversification, namely across retail and SME • • ROAE is forecasted to start to pick up in 2007 and normalize during 2008 Release app. $150mln of capital from Investment Bank TRUST by optimising asset structure through spin-off of the proprietary position to an asset management structure – needed in 12 months time (including current capital increase) (1) Yukos deposits no longer represent a material component of the group balance sheet (2)
•
•
Become one of the top 20 Russian banks and reduce cost of funding
– For every 50bp improvement to overall effective funding rate the earnings of the merged bank will increase by approximately $13mln leading to an improved ROE of additional app. 2.1%
• •
Recognised cost synergies of at least $7.5mln per year; headcount reduction of 80 people Merger advisors: Merrill Lynch as exclusive financial advisor, Allen & Overy as legal counsel and KPMG as auditors and financial advisors
(1) See page 47 for further information (2) See page 55 for further information
8
Executive Summary Rationale for Merger Group History & Structure Group Strategy Group Business Overview
Group Risk Management Group Financial Forecasts Group Merger Implementation Plan
9
NBT‟s History
1995–2002
• NBT (AKB “Menatep SPb”) was founded as a 50/50 JV between Yukos (Menatep) and Gazprom Servicing Menatep and Gazprom In 2002 Menatep purchased Gazprom’s stake •
2003–2004
2003 IBT management takes over management of NBT May 2004 Management Buyout (IBT management) Re-branding of TRUST: The Two Banks Hired professional retail banking team • • •
2005
May 2005 – MBO fully paid Branch Network & Product Expansion Hired team from one of the top SME banks’ in Russia •
2006
Continue Branch Network & Product Expansion Leading Retail and SME Bank
•
•
• •
•
•
2005-present
• • • March 2005 – First Auto Loan April 2005 – First Cash Loan July 2005 – Retail loan program available at all branches
“New Era”
• • • March 2006 – First SME Loan April 2006 – Credit Cards program launched October 2006 – First Mortgage Loan
10
TIB‟s History
1998–2003
• • Bank was founded by Group Menetep Leading Fixed Income and Investment Bank in Russia •
2003–2004
May 2004 Management Buyout (IBT management) Re-branding of TRUST: The Two Banks • •
2006 – 1H2007
September 2006, hired new CEO Restructured institution to meet the demands of clients and investors Built equity platform (trading, research, sales) Opened regulated sales office in London
• • •
Beyond
Execution of broader product range Derivatives platform (JV) Expanded distribution with non-exclusive relationships with international banks and funds Alternative Investments (Private Equity, Hedge Fund and Asset Management) Open regulated sales office in Asia
•
•
•
•
•
2H2006 to Present
• • •
“New Era”
• • • Jan 2007 – Announced Bank restructuring and staff upgrade program April 2007 – First non-group Eurobond lead manger role May 2007 – First Official IPO role (Nutritec & Dixy)
Summer 2006 – Institutional Investor Ranked Research Team Sept. 2006 – TIB $150m, Reg S Eurobond placed. First Capital Markets Transaction post the MBO Dec 2006 – First Subordinated CLN placed (BSP)
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Current Shareholding Structure
Other shareholders Terzyan Artashes Beliaev Sergei Fetisov Nikolai Yurov Ilia
8,12%
16,44%
21,55%
21,55%
32,33%
Beliaev Sergei 100%
Fetisov Nikolai 100% Winsala Investments Limited (Cyprus)
Yurov Ilia 100% Zaploma Investments Limited (Cyprus)
TIB Holdings Limited (Cyprus)
Neaspal Investments Limited (Cyprus)
68,10%
9,12%
9,12%
13,66%
Other shareholders
Yurov Ilia
Management company TRUST (Russia)
– 18,1699% Beliaev Sergei – 3,8225% Fetisov Nikolai – 1,1589% Terzyan Artashes – 1,031%
Yurov Ilia
Other shareholders
0,55%
0,1% 99,35% 68,38%
24,18% 7,44%
National bank TRUST (Russia)
TRUST Investment Bank (Russia) 12
Pro-forma Post Merger Shareholder Structure
Other shareholders Terzyan Artashes Beliaev Sergei Fetisov Nikolai Yurov Ilia
8,12%
16,44%
21,55%
21,55%
32,33%
Beliaev Sergei 100%
Fetisov Nikolai 100% Winsala Investments Limited (Cyprus)
Yurov Ilia 100% Zaploma Investments Limited (Cyprus)
TIB Holdings Limited (Cyprus)
Neaspal Investments Limited (Cyprus)
68,10%
9,12%
9,12%
13,66%
Other shareholders 2,8%
Management company TRUST (Russia) 89,24%
– 5,99% Beliaev Sergei – 1,25% Fetisov Nikolai – 0,38% Terzyan Artashes – 0,34%
Yurov Ilia
7,96%
Calculation based on the following numbers •NBT BV multiple = 2.5 X IBT multiple •Total equity NBT, thousand RUR 5492425 •Total equity IBT, thousand RUR 6651134
National bank TRUST (Russia)
13
Merged Bank Organisational Structure
Board of Directors Chairman: Yurov
CEO & Chairman of Management Board Eggleton
Management Committee Chairman: Fetisov
President Fetisov
CFO
CRO
CIO
COO
Treasury
HR
Retail Bank
Investment & Corporate Bank Committee Chairman: Eggleton
Retail SME Network
Origination Markets Research Sales & Syndicate Asset Management
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Group Management Structure (Post Merger)
Board of Directors Chairman: Yurov
Credit Committee Chairman: Yurov
Investment & Corporate Banking Committee Chairman: Eggleton
Management Committee Chairman: Fetisov
ALCO Committee Chairman: Eggleton
Retail Risk
Commitments Committee
Technology Committee
SME Risk
Products Committee
Corporate Risk
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Biographies – Shareholders and CEO
Name Ilya Yurov (Chairman of the Board of Directors)
Biography Mr Yurov has been the Chairman of NBT and IBT’s Board of Directors since 2003. Previously, he was the Chairman of IBT’s Management Board, where he was responsible for the general management of IBT’s activities. Prior to that, Mr Yurov worked for Bank MENATEP (Moscow) and for a French investment company, Compagnie Parisienne de Re´escompte S.A. Mr Yurov graduated from the Moscow Institute of Aviation in 1993 and TRESOFI Business School (France) in 1995 Mr Belyaev has been a member of NBT and IBT’s Board of Directors since 2003. He has been working at the banks since 1999. Previously, he worked for Rosestbank and AvtoVAZbank. Mr Belyaev graduated from Samara State University in 1992 Mr Fetisov has been a member of NBT and IBT’s Board of Directors since 2003. He has been working at the banks since 2001. Prior to that, Mr. Fetisov worked for Cargill Financial Markets, DLJ International, and Credit Suisse First Boston Ltd. Europe. Mr Fetisov graduated from the Moscow Institute of Engineering and Physics in 1992 and has an MBA from the University of Minnesota Mr Terzyan has been a member of NBT and IBT’s Board of Directors since 2003. He has been working at the banks since 2001. Prior to that, Mr Terzyan worked for Royston Investments Limited, Chase Manhattan Bank, Tokai Bank Europe, DLJ International and Commerzbank. Mr Terzyan graduated from Yerevan State University in 1982 and has a PhD in Computational Mathematics which he received from the Moscow State University in 1988 Mr Eggleton joined NBT and IBT as the member of the Board of Directors in September 2006. He has over 15 years of banking experience with 14 years of direct experience in Emerging Markets (including living in Russia for 10 out of the past 14 years). From June 2004 until August 2006, he was Managing Director, member of the European Operating Committee and Head of Emerging Markets (CEEMEA) at Merrill Lynch. Prior to this he was a Managing Director at Credit Suisse First Boston where he was responsible for various Emerging Markets regions, including CIS, CEE, Turkey and Israel. During his tenure, he has lived in Russia, Turkey, Egypt and London and was the Chairman and General Manager of CSFB in Moscow, Turkey and Egypt. Mr Eggleton holds an undergraduate degree from the University of San Diego and a graduate degree from the San Diego State University
Sergey Belyaev (Member of the Board of Directors) Nikolay Fetisov (Member of the Board of Directors, President and Chairman of the Management Committee) Artashes Terzyan (Member of the Board of Directors) Michael Eggleton (Member of the Board of Directors, CEO and Chairman of the Management Board)
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1 Executive Summary 2 Rationale for Merger 3 Group History & Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
17
Group Strategy
• Upon the completion of the merger, become and remain one of top 20 Russian banks based on capital, assets, number of clients and branch network in Russian regions with long term recurring ROAE of >20% – In top 5 banks by full city coverage by end of 2008 – In top 5 banks by portfolio and number of retail clients within 3 years – In top 5 SME banks by loan portfolio by the end of 2007 – In top 2 Russian-owned banks league table for CLNs and Eurobond – In top 3 Russian-owned banks league table for IPO by 2009 – At least 2 Institutional Investor ranked team members Continue to provide a full range of banking and investment services to its existing corporate clients, but primarily focus on the retail and SME clients in order to grow the balance sheet while remaining a leader of financial intermediation of Russian corporate sector to international and domestic investors Reduce leverage and absolute MTM securities portfolio across both banks by spinning off IBT proprietary position into asset management JV with internationally recognised partner Focus on ROAE growth through deceleration of branch expansion by the end of 2008 and increased product penetration through the network Utilise the experience of the management and sales department, the large regional network and crossselling opportunities to increase the scope and depth of its banking business Continue to introduce new risk management systems to make operations within the retail and SME sectors of the business more efficient
•
• • • •
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1 Executive Summary 2 Rationale for Merger 3 Group History & Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
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Integrated Multi-Product Platform
RETAIL SME CORPORATE CAPITAL MARKETS
• • Asset management Commercial banking
• •
Auto loans Cash loans
• •
Micro loans Medium loans
• •
Working capital facilities Collateralised loans
•
• • • • • •
Consumer loans
Credit cards Savings products Current accounts Funds transfer Safe custody Debit cards
•
• • • •
Small loans
Overdrafts Factoring Payments and cash management Savings products
•
• • • • •
Overdrafts
Trade finance Export-import finance Payments and cash Management Treasury products Savings products
•
• • • • • •
Debt products
Equity products Hybrid and structured products Fixed income Equities Derivatives Corporate finance
• • Focus on car loans, cash loans and mortgage lending • Diversify and standardise product lines
Reclassify loans less than RUB 30mln to SME, and focus corporate business on loyal client base Further reclassify loans less than RUB 75mln to SME in 2008
• •
Broaden the product and services base Focus on mid-cap companies
•
Investment and Corporate Banking
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Retail Banking
Retail Strategy
• • • • Enter TOP 5 by portfolio and number of clients within 3 years Offer the widest and most flexible product lines Focus on mass market segment of clients living in the Russian regions Serve clients in all cities with the population of over 100,000
5.3 1.9 3.4 1Q 06 8.1 3.2 0.2 4.7 2Q 06 16.9 23.6 0.1 0.8 1.1 1.6 6.7 24.4 14.2
Net Retail Portfolio Size (RUB bn)
40.6
5.7 2.8
7.7
13.9 0.05 5.7 12.2 10.0 0.5 5.3 0.6 0.3 5.2 10.3 5.1 7.9 6.5 4.6
3Q 06 4Q 06 1Q 07 2Q 07
07B
08E
Cash Auto
Cards Mortgage
Number of Clients in Portfolio („000)
341.0 281.0 97.0
Retail Deposits (RUB bn)
234.0
158.0 128.0 11.0 23.0 94.0 19.0 27.0 157.0 112.0 48.0 29.0
68.0
21.8 33.0
15.8 17.5 8.9 3.4 1Q 07 10.0 3.5 2Q 07 12.7 3.1 07B 4.3 08E
30.0 11.7 211.0 183.0 4.5 2.2 2.3 7.3 12.3 13.5
85.0
19.0 66.0 1Q 06
8.3
4.1 3.2 2005 3.4 2006
2Q 06 Cash
3Q 06 Auto
4Q 06 Cards
1Q 2007
2Q 2007
2004
Call Deposits
Term Deposits
21
SME Banking
Overview
• • • Hired professional team from one of the top Russian SME banks in 2005 At 30.06.2007 SME loans accounted for 13.5% of NBT’s total loan portfolio Even though SME lending was launched in March 2006, in 2006 NBT was ranked 9th among Russian banks by loan portfolio Number of clients at the end of June 2007 reached 8,207 comparing to 3,842 at the end of 2006. It is expected to reach 15,000 by the end of 2007. Factoring business is expected to reach RUB6bn by the end of 2007 and RUB10bn by the end of 2008
Type Micro Small Medium
SME Loans Classification as of 2Q07
Average Loan size, USD „000 16.7 83.6 395.8
Loan Size, USD „000 up to 50 50 - 250 250 - 1,000
Duration, Months up to 24 up to 36 up to 36
Yield, % up to 28 up to 20 up to 18
•
•
SME Portfolio Size (RUB mln)
34,700
SME Strategy
• • • • •
(1) (2)
5,187
Diversify SME loan portfolio Increase the range of banking services to SME clients Standardise the products Increase service efficiency Be in top 5 SME bank by loan portfolio by the end of 2007
Doesn’t include factoring Off balance sheet factoring of RUB 3.3bn as of 2Q 2007 , currently RUB3.5bn
18,144 2,638 2,274 (1 540) 1,734 4Q2006 3,285 858 2,376 51 1Q2007 4,399) 1,353 156 2,890 2Q2007 4,134 2007B
(2
20,127
11,372 ) 9,386 2008E
(2
22
1Q2006
296 2Q2006
718 48 669 3Q2006 Micro
Small & factoring
Medium
22
Pro- forma Corporate Banking
Overview
Net Corporate Loans (RUB bn)
•
Number of corporate clients as of 31 July 2007 was c.13,400 (compared to 13,800 corporate customers as of 31 December 2006) Reorganization: focus on relationship with medium-sized clients (up to RUB 5bn annual turnover), interested in multiple value-added banking services, while small clients are redirected to SME banking Cross-sell opportunities for capital market products to regional customer base Approximately $300mln higher yielding structured deals (collateralised) to be retained on Balance Sheet as support to distribution, however this business is not active through the end of the 2nd quarter. Widening of existing product range
Expected budget due to withdrawal of Yukos-related deposits during 2007
•
18.7 17.7 13.1 14.4 14.0
23.8
7.9
1Q 07
2004
2005
2006
2Q 07
07B
08E
•
Corporate Deposits (RUB bn)
30.4 10.5 17.8 1.0 19.9 21.1 21.6 16.2 11.8 30.7 9.6 31.3 9.7 13.1 29.3
(1)
32.7 12.1
(1)
•
21.9 10.1
16.8
20.6
•
(1)
2004
2005
2006 Call Deposits
1Q 07
2Q 07
07B
08E
Term Deposits
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Capital Markets
Overview
• The Bank provides various services including: • • Private placements Corporate finance Capital markets (ECM and DCM) Client flow trading Research Sales Asset management • •
Strategy
Diversify revenue stream and investor base by expanding products and services Focus on mid-cap companies providing bridge to global capital markets Focus on origination to distribution model $13.5m of risk free origination income, including $11.2mln of fee income for 1H 2007 vs. less than $7mln for all 2006. Adjusted Target $25mln for full year 2007
–
– – – – – – – •
Lending and structured lending
National and international presence through: – – 450 international clients 400 domestic clients
•
Institutional Investor ranked research team members
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CAPITAL MARKETS OVERLAY
Investment & Corporate Banking Committee Origination
Products
DCM & DCM & Private Private Placements Placements Capital Markets ECM, Hybrids & Private Placements Securitization Corporate Investment Banking and Structured Solution
TRUST INTERNATIONAL Global Syndication & IBT Alternative Investment Products
Markets Fixed Income & Equity
• Proprietary (Asset Management JV)
Research
Sales Sales & Distribution
Head of Head of Domestic Sales International Sales Coordination Coordination
Macro & Quantitative Analysis
• Client Flow
• Repo
Transaction Management Group Fixed Income
• Derivatives (negotiating JV) • Corporate Book (Lending & Structured Credit)
Equity
Fixed Income • Primary/Secondary
• Flow Equity
• Primary/ Secondary • Flow Treasury • Funding
Real Estate Real Estate
Corporate Finance and Investment Banking
Financial Institutions
IBSS Legal Counsel
Domestic Syndication
• Treasury Products • Alternative Investments
Prinicpal Investments
Origination
Structured Solutions
Distribution
DEAL FLOW
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Nationwide Branch Network (Domestic Distribution)
Critical Regional Indicators (as of September 20, 2007) Network Expansion Targets
As of 2007 As of 2008 (planned) (planned) 59 150-160 190-200 70 220 300 As of 2005 Regions Cities Sales offices 47 74 125 As of 2006 50 77 128 As of 20/09/07 55 118 171
The bank owns app. 80% of the branches The average branch reaches break-even at app. 2 years
NBT Branch Network
MBO 350 325 300 275 250 225 200 175 150 125 100 75 50 25 Today 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 -
City Coverage Full Branches Total Branches Employees
Top 10 Banks in RF Cities as of September 20, 2007
No 1 2 3 4 5 6 7 8 9 10 Bank Sberbank Russian Agricultural Bank Rosbank Russky Standard VTB National bank Trust Uralsib Vozrozhdenie Bank VTB Retail Investsberbank # of Cities 938 268 220 175 118 118 104 74 73 73
*
Target area of regional expansion
Employees
FY 0 FY 3 0 FY 4 0 1Q 5 0 1H 6 0 3Q 6 06 FY 0 1Q 6 0 1H 7 0 M 7 8 3Q 07 0 FY 7E 07 FY E 08 E
Source: NBT estimates * - at the end of December 2006 with the exception of NBT
26
Established and Recognised Global Platform (International Distribution)
Latvia Sweden Germany Estonia
USA
Luxembourg
Switzerland
Denmark UK
USA
France Italy Portugal
Kazakhstan Spain Turkey Greece Israel
Thailand Hong Kong Philippines Singapore
Chile South Africa
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1 Executive Summary 2 Rationale for Merger 3 Group History & Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
28
Group Risk Management Architecture
Board of Directors
ALCO
Management Committee
Credit Committee
Risk Management Monitoring and Reporting Groups
Risk Management Decision Mechanism Trader Support Middle Office Back Office Accounting Financial Direction Internal Audit Compliance DAKS Corporate Risk SME Risk Retail Risk Independent Risk
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Risk Management Strategy
Risk type
Specific Areas Retail lending SME lending Corporate lending
Focus Origination strategies, scoring systems, portfolio management KYC, close monitoring of payments, score based approach Conservative approach, internal rating systems Growing deposit base, increasing its stability and diversification Gap management, securities portfolios, shortterm liquidity Securitisation, eurobonds Overall for the whole balance sheet with Funds Transfer Pricing Minimised, managed on a daily basis Within established limits Basel 2 standardised method All CBR regulations
Credit Risk
Business lines Treasury Structural liquidity
Liquidity Risk
Interest rate risk Foreign exchange Proprietary trading
Market Risk
Operational Risk (incl. Compliance)
Operational risk Compliance
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Pro-forma Credit Portfolio Diversification
Loan Portfolio Regional Breakdown as of 2006YE
Retail
North-West 8.6% Ural 11.2% Siberia 12.2% Far East 2.5% Central 22.0%
SME
North-West 21.2% Central 20.8%
Far East 3% Privolzhskyj 11%
Corporate
West 12%
Ural 3.9%
West 16.2%
Siberia 6.0% Privolzhskyj 15.6%
West 24.6% South 7.9%
Privolzhskyj 13.2%
South 14.0%
South 5% Siberia 6% North-West 1% Ural 7%
Central 55%
Loan Portfolio Regional Breakdown as of 2Q 2007
Far East North-West 9.1% Ural 10.4% 4.7% Central 20.9%
North-West 17.1%
Far East 1.5%
Central 19.5%
Central 53.8% Far East 2.0% North-West 2.7%
West 17.7%
Ural 7.3%
West 14.5%
Siberia 9.6%
Ural 5.5% Siberia 7.8%
Siberia 8.4% Privolzhskyj 11.1%
Privolzhskyj 13.1%
South 17.7%
South 17.4%
Privolzhskyj 9.0%
South 6.9%
West 12.3%
31
Credit Portfolio Diversification (Cont‟d)
Industry Breakdown as of 2006YE
0.3% 3.6% 1.4% 1.7% 4.6% 5.2% 5.0% 7.4% 13.6% 0.6% 0.1%
Individuals Trading Enterprises
Top 10 Credit Concentration - NBT
2006 Borrower 1 2 3 4 5 6 7 8 9 10 Balance (RUB mln) 802 744 502 489 443 377 330 303 301 254 % of Total Portfolio 3.09% 2.87% 1.94% 1.88% 1.71% 1.45% 1.27% 1.17% 1.16% 0.98% Borrower 1 2 3 4 5 6 7 8 9 10 Q22007 Balance (RUB mln) 778 626 614 489 477 450 400 393 338 304 % of Total Portfolio 2.28% 1.83% 1.80% 1.43% 1.40% 1.32% 1.17% 1.15% 0.99% 0.89%
4.4%
Financial Intermediaries Manufacturing Engineering and Metal Processing Construction
52.1%
Energy Chemicals and Petrochemicals Oil and Gas Transport State Administrations Pharmaceuticals Other
Industry Breakdown as of 2Q 2007
0,7%
Top 10 Credit Concentration - IBT
2006 Borrower 1 2 3 4 5 6 7 8 9 10 Balance (RUB mln) 964 642 501 448 185 150 140 120 31 7 % of Total Portfolio 30.16% 20.08% 15.68% 14.01% 5.79% 4.71% 4.39% 3.76% 0.97% 0.23% Borrower 1 2 3 4 5 6 7 8 9 10 Q22007 Balance (RUB mln) 962 547 394 260 219 153 120 47 7 6 % of Total Portfolio 35.39% 20.13% 14.52% 9.58% 8.05% 5.63% 4.43% 1.72% 0.27% 0.21%
1,7% 1,4% 0,6% 5,0% 3,7% 5,5% 5,5%
0,1%
Individuals Trading Enterprises
0,1% 2,5%
Financial Intermediaries Manufacturing Engineering and Metal Processing Construction Energy
58,4%
Chemicals and Petrochemicals Oil and Gas Transport State Administrations Pharmaceuticals Other
14,8%
* Fully repaid as at 30.06.2007 (total amount is RUR 1 945 mln)
32
Credit Portfolio Quality
Non-Performing Loans / Total Loans (%)
6.67% 6.98%
Provisions / Non-Performing Loans (%)
5.23%
5.16%
5.12% 4.19% 4.28% 3.62% 3.70%
3.80% 77.12% 62.85% 61.33%
70.20%
72.23%
2005
2006
2Q 2007
2007B
2008E
2005
2006 Provision / NPL
2Q 2007
2007B 2008E Provision / Gross Loans
Retail NPL / Total Loans (%)
11.33% 11.68% 10.60% 10.00%
SME NPL / Total Loans (%)
1.30%
Corporate NPL / Total Loans (%)
2.22% 1.80% 3.00% 2.50%
0.33% 0.25%
0.54%
2006 Effective Interest Rate
2Q 2007 24.9% 33.6% -
2007B 28.0%
2008E 21.75% Small Micro Blended
2006 21.0% 23.4% -
2Q 2007 19.7% 22.8% -
2007B 18.38%
2008E 16.38% Blended
2006 13.6%
2Q 2007 11.5 %
2007B 16.50%
2008E 16.25%
Auto
Cash Blended
25.7% 35.8% -
33
Managing Retail Credit Risk
Auto
25% 20% 15% 10% 5% 2% 0% FPD, first payment default rate 0% 06.2005 12.2005 06.2006 12.2006 06.2007 SPD, second payment default rate TPD, third payment default rate 14% 12% 10% 10% 8% 6% 8% 6% 4% 2% 0% 06.2005 12.2005 06.2006 12.2006 06.2007 06.2005 12.2005 06.2006 12.2006 06.2007
Cash
16% 14% 12%
Level of defaulted loans
4%
AUTO
CASH
Credit cards
Measures applied in 2006/2007 • • • The reorganisation of retail risk management department was completed. “Welcome calls” were introduced in order to identify frauds at the earliest possible stage. Anti-fraud training and equipment were provided to the retail banking employees to improve their capabilities of spotting fraudulent customers. Credit products were modified or eliminated to avoid high risk combinations, for instance 0% equity auto loans. Credit documentation requirements were standardised and clarified.
Risk management targets: 1. Probability of default – 11% 2. 3. 4. Expected losses – 5%-7% Risk based pricing Further diversification of the portfolio
•
34
1 Executive Summary 2 Rationale for Merger 3 Group History & Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
35
NBT - Financial Overview
Key indicators, RUR mln by IFRS
Capital Assets Loans (gross) Loan / total assets, % Amount due to customers Net operating income Pretax profit
2004
2005
2006
1Q07
Actual
(unaudited )
1H07
Actual
(reviewed)
3,545 29,715 9,553 32% 22,257 2,319 856
4,193 39,360 17,262 44% 30,564 3,615 847
4,337 44,669 25,934 58% 34,868 4,284 303
4, 419 48,057 29,117 61% 38,349 1,234 125
5, 497 54,977 34,136 62% 38,787 2,290 116
Key financial ratios, %
Net interest margin ROAA ROAE Cost / Income before provisions Cost / Income 9.2 1.1 9.3 87.3 70.3 8.3 0.8 7.5 68.1 74.4 9.8 0.5 4.5 77.4 91.7 11,5 0,7 7,4 74.0 88.0 11,4 0,7 6,6 81.2 94.9
CAR
24.1
17.0
14.2
14.7
19.2
Headcount
2,698
3,505
5,529
5,860
6,357
36
IBT-Financial Overview
Key indicators, RUR mln by IFRS
Capital Assets Financial assets at fair value FA at FV / total assets, %
2004
5,808 23,101 9,982 43%
2005
6,233 28,347 13,888 49%
2006
6,669 47,396 34,528 73%
1Q07
Actual (unaudited)
1H07
Actual (reviewed)
6,683 49,541 35,119 71%
6,633 43,646 31,441 72%
Payables under repurchase agreements
Net operating income Pretax profit
2,432
2,027 265
7,013
2,262 938
21,842
1,784 265
24,277
293 14
18,333
707 (36)
Key financial ratios, %
Net interest margin ROAA ROAE Cost / Income before provisions Cost / Income 5.8 1.1 9.3 87.3 70.3 537 4.4 2.8 12.1 53.0 58.5 436 3.2 0.5 2.8 73.0 85.1 475 2.1 0.1 0.8 93.1 95.4 387 1.9 -0.2 -1.1 100.5 100.4 409
Headcount
37
Timeline: Convergence of Expense to Revenue Generation Capacity
Branch Expansion Versus Employee Growth Analysis of Expense Mismatch
MBO 180.0% 160.0% 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% -40.0% Change in Branches from MBO Change in employees post MBO
FY03 FY04 FY05 1Q06 1H06 3Q06 FY06 1Q07 1H07 M807 3Q07E FY07E FY08E
Today
% Change from MBO
"Negative ROE effect"
This is one of the main profitability drivers of the bank.
38
NBT – Total assets and Loan portfolio
Increasing loan portfolio in assets structure 2006 vs.1Q07
2006
Other Assets 3.0% Property , equipment and intangibles 4.4% Cash and cash equiv alents 23.2%
Property, equipment and intangibles 4.8%
2Q 2007
Other assets 2.8% Cash and cash equivalents 28.2%
2007 Budget
Other assets 1.6% Cash and cash equivalents 11.3%
Property, equipment and intangibles 3.9%
Financial assets at f air v alue through prof it and loss 13,8% Loans to customers 55.6%
Loans to customers 59.5% Financial assets through profit and loss 4.8%
Financial assets through profit and loss 8.9%
Loans to customers 74.3%
Total assets & loan portfolio. RUR mln.
Total assets 60 000 50 000 40 000 30 000 20 000 10 000 40 069 16 248 1H2006
Total loan portfolio (net) 37.2% 101.3% 54 977 32 705
Total assets 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000
Total loan portfolio (net) 50.4% 100.9% 67 193
44 669 24 847 2006
49 918
1H2007
2007B
39
Natinal Bank Trust Return on Interest Bearing Assets
30.0% 25.0% 20.0%
19.1%
50,000,000 45,000,000 40,000,000 35,000,000 30,000,000
15.0%
13.7%
25,000,000 20,000,000 15,000,000
Reduction of Yukos-Related Deposits
10.0% 5.0% 0.0%
10.9%
10,000,000 5,000,000 -
Y05
Q106
Q206
Q306
Q406
Q107
Q207 MJul07 MAug07 Q307E Q407E
Period Annualized EIR (period) Annual EIR Interest Bearing Assets
Interest Bearing Assets (RUR)
40
Return
NBT Net Interest Margin less LLP
National Bank TRUST Net Interest Margin less Loan Loss Provisions
16.00% 14.00% 12.00% 10.00%
9.3%
8.00%
7.6%
6.00% 4.00% 2.00% 0.00%
6.5% Reduction of Yukos-Related Deposits
Y05
Q106
Q206
Q306
Q406
Q107
Q207
Q307E
Q407E
Annualized NIM less LLP (period)
Annual NIM less LLP
41
NBT - Loan portfolio structure
Changes in loan portfolio structure
2005
2006
Retail 50.0%
2Q07
Retail 51.8%
2007 Budget
Corporate 25.3%
Retail 28.7%
Retail 52.6%
Corporate 71.3%
Corporate
Corporate 41.3% SME 8.7%
34.7% SME 13.5%
SME 22.1%
93% of retail and SME business is conducted in the Regions
42
NBT – Deposit Analysis (Corp and Retail)
NBT Deposit Analysis (rur)
Jan'07 Act Jan'07 Budget Jan'07 % of Budget 100% 100% 100% Feb'07 Act Feb'07 Budget Feb'07 % of Budget 100% 100% 100% Mar'07 Act Mar'07 Budget Mar'07 % of Budget 100% 100% 100% Apr'07 Act Apr'07 Budget Apr'07 % of Budget 100% 100% 100% May'07 Act May'07 Budget May'07 % of Budget 106% 94% 97% Jun'07 Act Jun'07 Budget Jun'07 % of Budget Jul'07 Act Jul'07 Budget Jul'07 % of Budget Aug'07 Act Aug'07 Budget Aug'07 % of Budget 110% 99% 101% Dec'07 Budget
Retail
Term deposists Moscow Other regions Total Call deposits Moscow Other regions Total Total Retail MOM Change in USD 2,029,694,197 6,568,762,278 8,598,456,475 2,029,694,197 6,568,762,278 8,598,456,475
2,027,473,221 6,678,353,319 8,705,826,540
2,027,473,221 6,678,353,319 8,705,826,540
2,050,499,301 6,838,993,106 8,889,492,407
2,050,499,301 6,838,993,106 8,889,492,407
2,084,516,287 6,996,130,222 9,080,646,509
2,084,516,287 6,996,130,222 9,080,646,509
2,253,365,001 7,181,070,462 9,434,435,463
2,117,711,898 7,604,405,411 9,722,117,310
2,369,922,081 2,189,174,211 7,501,397,898 7,927,185,116 9,871,319,979 10,116,359,327
108% 2,425,895,920 2,260,636,524 95% 7,991,457,271 8,260,667,727 98% 10,417,353,191 10,521,304,251
107% 2,572,783,242 2,332,098,836 97% 8,475,337,781 8,594,608,297 99% 11,048,121,023 10,926,707,133
2,617,948,087 9,936,217,036 12,554,165,123
1,532,049,342 1,618,242,828 3,150,292,170
1,517,918,434 1,314,441,850 2,832,360,284
101% 123% 111%
1,586,595,662 1,666,405,555 3,253,001,217
1,572,750,589 1,373,831,984 2,946,582,573
101% 121% 110%
1,574,895,905 1,785,869,503 3,360,765,408
1,558,570,377 1,419,623,012 2,978,193,389
101% 126% 113%
1,493,021,289 1,846,910,301 3,339,931,590
1,474,165,686 1,383,856,851 2,858,022,537 11,938,669,046
101% 133% 117%
1,523,295,347 1,814,991,409 3,338,286,756
1,887,586,125 1,347,664,946 3,235,251,071
81% 135% 103%
1,579,452,536 1,938,557,718 3,518,010,254
1,887,586,125 1,347,664,946 3,235,251,071
84% 144% 109%
1,421,082,682 1,893,632,025 3,314,714,707
1,887,586,125 1,347,664,946 3,235,251,071
75% 141% 102%
1,439,830,157 1,918,613,554 3,358,443,711
1,887,586,125 1,347,664,946 3,235,251,071
76% 142% 104% 102%
1,887,586,125 1,347,664,946 3,235,251,071 15,789,416,194
11,748,748,645 11,430,816,759
103% 11,958,827,757 11,652,409,113 210,079,112 8,238,397
103% 12,250,257,815 11,867,685,796 291,430,058 11,428,630
103% 12,420,578,099 170,320,284 6,679,227
104% 12,772,722,219 12,957,368,381 352,144,120 13,809,573
99% 13,389,330,233 13,351,610,398 616,608,014 24,180,706
100% 13,732,067,898 13,756,555,322 342,737,665 13,440,693
100% 14,406,564,734 14,161,958,204 674,496,836 26,450,856
Corporates
Term deposists Moscow Other regions Total Call deposits Moscow Other regions Total Total Corporate MOM Change in USD TOTAL Deposits MOM Change in USD 2,411,423,936 2,847,525,414 5,258,949,350 2,372,300,000 3,567,940,000 5,940,240,000 102% 80% 89% 2,913,597,772 3,001,861,228 5,915,459,000 2,383,422,727 3,597,280,909 5,980,703,636 122% 83% 99% 2,905,392,501 3,127,068,499 6,032,461,000 2,395,245,455 3,819,621,818 6,214,867,273 121% 82% 97% 3,168,818,596 3,314,970,404 6,483,789,000 2,414,768,182 3,815,962,727 6,230,730,909 131% 87% 104% 3,143,894,648 3,376,000,352 6,519,895,000 2,432,190,909 3,925,803,636 6,357,994,545 129% 86% 103% 4,010,340,686 4,001,558,314 8,011,899,000 2,485,713,636 4,103,244,545 6,588,958,182 161% 98% 122% 5,223,812,743 4,139,273,257 9,363,086,000 2,582,474,044 4,260,735,617 6,843,209,661 202% 97% 137% 5,368,967,628 4,254,291,877 9,623,259,505 2,527,603,773 4,305,651,821 6,833,255,593 212% 99% 141% 2,438,609,867 5,080,546,515 7,519,156,382
8,286,786,767 14,237,800,000 11,956,586,129 4,261,200,000 20,243,372,896 18,499,000,000 25,502,322,246 24,439,240,000
58% 8,285,744,504 13,710,527,272 281% 13,061,595,496 4,243,472,728 109% 21,347,340,000 17,954,000,000 104% 27,262,799,000 23,934,703,636 1,760,476,754 69,038,304 104% 39,221,626,757 35,587,112,749 1,970,555,866 77,276,701
60% 8,173,445,713 11,715,354,544 308% 11,149,175,287 4,206,045,735 119% 19,322,621,000 15,921,400,279 114% 25,355,082,000 22,136,267,552 (1,907,717,000) (74,812,431) 110% 37,605,339,815 34,003,953,348 (1,616,286,942) (63,383,802)
70% 7,828,104,731 265% 7,117,694,269 121% 14,945,799,000 115% 21,429,588,000 (3,925,494,000) (153,940,941) 111% 33,850,166,099 (3,755,173,716) (147,261,714)
10,004,381,816 4,237,011,546 14,241,393,362 20,472,124,271
78% 7,613,211,801 7,707,609,088 168% 5,799,613,946 4,255,912,846 105% 13,412,825,748 11,963,521,933 105% 19,932,720,748 18,321,516,479 (1,496,867,252) (58,700,677) 104% 32,705,442,967 31,278,884,860 (1,144,723,132) (44,891,103)
99% 7,883,137,198 7,735,899,996 136% 5,812,537,802 4,393,615,868 112% 13,695,675,000 12,129,515,864 109% 21,707,574,000 18,718,474,045 1,774,853,252 69,602,088 105% 35,096,904,233 32,070,084,443 2,391,461,266 93,782,795
102% 6,825,999,674 6,239,441,401 132% 5,443,203,326 4,455,703,801 113% 12,269,203,000 10,695,145,202 116% 21,632,289,000 17,538,354,863 (75,285,000) (2,952,353) 109% 35,364,356,898 31,294,910,185 267,452,665 10,488,340
109% 8,545,192,913 6,248,368,689 122% 6,814,126,093 4,508,241,832 115% 15,359,319,006 10,756,610,521 123% 24,982,578,511 17,589,866,114 3,350,289,511 131,383,902 113% 39,389,143,244 31,751,824,318 4,024,786,346 157,834,759
137% 151% 143% 142%
6,256,439,744 5,211,608,773 11,468,048,517 18,987,204,898
37,251,070,891 35,870,056,759
32,410,793,317
124%
0 34,776,621,093
Retail
Term deposists Moscow Other regions Call deposits Moscow Other regions 24% 76% 24% 76% 100% 100% 23% 77% 23% 77% 100% 100% 23% 77%
YUKOS RELATED COMPANY AUCTION EFFECT
23% 77% 100% 100% 23% 77% 23% 77% 100% 100% 24% 76% 22% 78% 110% 97% 24% 76% 22% 78% 111% 97% 23% 77% 21% 79% 108% 98% 23% 77% 21% 79% 109% 98% 21% 79%
49% 51%
54% 46%
91% 111%
49% 51%
53% 47%
91% 110%
47% 53%
52% 48%
90% 111%
45% 55%
52% 48%
87% 114%
46% 54%
58% 42%
78% 131%
45% 55%
58% 42%
77% 132%
43% 57%
58% 42%
73% 137%
43% 57%
58% 42%
73% 137%
58% 42%
Corporates
Term deposists Moscow Other regions Call deposits Moscow Other regions 46% 54% 40% 60% 115% 90% 49% 51% 40% 60% 124% 84% 48% 52% 39% 61% 125% 84% 49% 51% 39% 61% 126% 83% 48% 52% 38% 62% 126% 84% 50% 50% 38% 62% 133% 80% 56% 44% 38% 62% 148% 71% 56% 44% 37% 63% 151% 70% 32% 68%
41% 59%
77% 23%
53% 256%
39% 61%
76% 24%
51% 259%
42% 58%
74% 26%
57% 218%
52% 48%
70% 30%
75% 160%
57% 43%
64% 36%
88% 122%
58% 42%
64% 36%
90% 117%
56% 44%
58% 42%
95% 106%
56% 44%
58% 42%
96% 106%
55% 45%
43
TRUST Investment Bank - Assets structure
2006
Other 8.5% Loans to customers 6.7% Cash and cash equivalents 12.0%
1H07
Other 10.9% Loans to customers 6.2% Cash and cash equivalents 10.9%
2007 Budget
Other 3.4% Loans to customers 21.2%
Cash and cash equivalents 0.5%
Financial assets through profit and loss 72.9%
Financial assets through profit and loss 72.0%
Financial assets through profit and loss 74.8%
1H2006 to 1H2007
Total assets 50 000 Financial assets at fair value 50 000
2006 to 2007
Total assets Financial assets at fair value
45.4%
40 000 40 000
-11.4%
34.0%
30 000 30 000
20 000
43 647 32 581 31 441 21 629
47 396
20 000
-21.0% 41 973 34 528 27 285
10 000
10 000
1H2006
1H2007
2006
2007B
44
NBT – 1H07 Effective Interest Rates
Effective interest rates (month to date)
July 2007 Corporate customers (both banks) Corporate customers Small/Medium/Micro Small Medium Micro Retail Auto Cash CreditCards Mortgage 11.5% June 2007 11.2% May 2007 11.2% April 2007 11.6% March 2007 12.3% Jan-Feb 2007 11.5% Dec 2006 11.3%
19.3% 15.0% 22.7%
19.1% 15.5% 22.7%
18.0% 15.2% 22.8%
19.4% 15.6% 22.8%
21.3% 22.9%
21.0% 22.8%
21.0% 23.4%
23.7% 32.8% 39.3% 12.7%
24.3% 33.0% 38.2% 12.8%
24.3% 33.0% 38.5% 12.3%
24.5% 33.0% 38.9% 12.6%
24.0% 32.5% 38.6% 12.9%
26.1% 35.1% 40.8% 12.2%
25.7% 35.8% 39.4% 13.8%
Corporate, time deposits Individuals, time deposits Corporate, current accounts* Individuals, current accounts Debt securities issued Eurobond Subordinated loans
7.6% 10.4% 0.9% 0.7% 9.1% 9.8% 11.3%
7.9% 10.8% 0.7% 0.7% 9.1% 9.9% 11.3%
8.4% 10.4% 1.2% 0.7% 9.2%
8.0% 10.8% 1.5% 0.7% 9.3%
9.0% 10.3% 1.1% 0.7% 9.3%
8.2% 10.5% 1.4% 0.7% 9.3%
6.7%
* Decrease in May is related to Yukos outflow
45
TRUST Investment Bank - Financial assets at fair value structure
Changes financial assets at fair value structure
2005
Other 21% Eurobons of RF 11%
2006
Other 14%
1H07
Other 15%
Eurobons of RF 0%
Corporate debt securities 43%
Eurobons of RF Corporate debt securities 58% 20% Corporate debt securities 60% OFZ 5%
OFZ 17% OFZ 36%
46
Rating breakdown of Securities Portfolio - IBT
Ruble bond portfolio rating breakdown
BBB+/Baa1 (incl. sovereign) BBB/Baa2 21% BBB-/Baa3 0% 1% 44% 1% BB/Ba2 BB-/Ba3 B+/B1 19% B/B2 3% 4% 6% 1% B-/B3 No rating BB+/Ba1
Currency bonds portfolio rating breakdown
BBB+/Baa1 (incl. sovereign) BBB/Baa2 BB+/Ba1 BB/Ba2 BB-/Ba3 52% 16% B+/B1 B/B2 7% 3% 1% B-/B3 No rating 2% 18% 18%
2% 2% 9%
8%
Ruble bond without rating portfolio breakdown Banks Electric utilities Municipality 2% 1% 13% Private enterprises State enterprises 9% 37% Subfederal financial institutions Subfederal governments OFZ Futures
47
TRUST Investment Bank - Liabilities structure
Funding structure
2006
Other 10% Long term financing 8%
1H07
Long term financing 10% Other 8%
2007
Other 7%
Long term financing 12% Short term interbank 6% Customer accounts 9%
Short term interbank 10% Payables under REPO 53%
Short term interbank 12%
Payables under REPO 49%
Customer accounts 19%
Customer accounts 21%
Payables under REPO 66%
48
Pro-forma Key Ratios; Merged Bank Targets
2007B ROAA ROAE Cost / Income ratio (pre-provisions) CAR Total assets growth Net interest margin Average loans / Average deposits Operating costs / Average assets Number of cities present Total Headcount 1.4% 10.2% 65.0% 20.6% 20.0% 5.4% 107.5% 6.2% 150 8,200 2008E 2.4% 17.5% 56.0% 18.2% 35.0% 6.1% 169.7% 6.1% 220 9,100 2009E 2.5% 20.3% 52.2% 16.1% 33.0% 5.7% 189.8% 5.3% 220 9,500
3 year plan has not been amended due to current market conditions
49
Pro-forma Securities Portfolio – Optimising for the Future
• In order to optimise the asset structure of the bank and allow the expansion of the retail and SME business, the bank has decided to reduce its position in trading securities to 10% of total assets by the end of 2009
Pro-forma Trading Securities (RUB mln) - Proprietary
Pro-forma Trading Securities (RUB mln) – Client Flow Business
1,494 4,974 4,948 6,181 6,056 7,650
19,691
35,688
36,181
27,897
17,704
10,575
1,525 1,690 16,258 1,376 941 5,799 16,215 11,575
1,262 2,396
15,434 1,512 2,420
Treasury and Asset Management
6% 5% 370 5,100 6,302 11,016 6,302 6,120 2,228 2,227 2008E 2% 137 1,357 2005 2006 1Q 2007 Total Equities Corporate bonds % of total assets 4,604 4,422 5% 526 6,181 5,483 5% 574
5% 765
12,949 17,089
6,885
2005
2006
1Q 2007
2Q 2007
2007B
2Q 2007
2007B
2008E
Government and municipal bonds Equities
Corporate bonds Asset Management & Other
50
Pro-forma Funding Structure
2006
• • $100mln CLN by NBT (Dec) $150mln Eurobond by IBT (Sep) • • •
2Q 2007
$20mln NBT subdebt (Mar) $50mln NBT CLNs (Apr) $200mln NBT Eurobond (May) €150mln funding from securitisation (May) • • •
3Q-4Q 2007
€150-200mln securitisation bond $100mln private placement $100mln one year syndicated loan • • • •
2008E
$400-500mln funding from securitisation $350mln new Eurobonds issued $100mln raised in syndicated loans $50-100mln of other securities issued • • • •
2009E
$400-500mln funding from securitisation $150-300mln new Eurobonds issued $100mln raised in syndicated loans (new) $50-100mln of other securities issued (new)
•
Increasingly Diversified Funding Structure
2006 2Q 2007
Funding from
2007 Budget
Shareholders' Equity 14.8% Other liabilities 0.9% Debt Securities 17.1% Amounts due to credit institutions 3.3% Payables under repurchase agreements 17.9%
2008E
Shareholders' Equity 13.1% Other liabilities 0.9% Debt Securities 21.9% Amounts due to credit institutions 2.9% Payables under repurchase agreements 10.0%
Amounts due to Shareholdes' Shareholders' Amounts due to securitisation credit institutions credit institutions equity Equity 1% 3.5% 6% 12% 12.2% Payables under Other liabilities Other liabilities repurchase 0.9% Payables under 3% agreements repurchase Debt 19% agreements Debt securities Securities 24.3% 11.7% 12%
Amounts due to customers 47.4%
Amounts due to customers 47%
Funding from securitisation 9.4%
Amounts due to customers 36.6%
Funding from securitisation 13.9%
Amounts due to customers 37.4%
51
Pro-forma Capital Structure
Total Shareholders Equity (RUB mln)
23,367 19,057 15,997
Comments
•
Management estimates that after the merger, National Bank TRUST would reach TOP 20 Russian banks in terms of assets
12,130
•
1.5bln of 3.4bln of announced capital increase
has been provided. The remaining 1.9bln will be provided by the end of October
2Q 2007
2007B
2008E
2009E
Capital Adequacy Ratio
20.6%
•
Significant room to overperform asset growth targets in model
16.89%
14.73% 12.24% 13.16%
17.6%
18.2% 16.0% 16.1% 15.3%
•
RUB 7bln capacity for tier 2 subdebt issuance
1Q 2007
2Q 2007
2007B
2008E
2009E
Tier 1 Ratio BIS Requirements (8%)
Total Capital Ratio Central Bank (10%)
52
Investment Banking Optimal Asset Structure as Department in Merged Bank
IBT Asset Structure
USD Mln Corporate bonds - client flow trading Asset management Corporate bridges Structured corporate loans Total assets 300 200 150 300 950 Risk Weighting 130% 100% 100% 100% 1,040
Total shareholders equity (current) Tier 1 capital (current)
279 305
Tier 1 CAD Required CAD Excess CAD Excess capital to be transferred to NBT
29% 15% 14% 149
NBT
53
Pro Forma Related Party Transactions
Amounts Due to RP Customers
4.00%
6.03%
Loans to RP
1120
1.69% 722 0.66% 248
728
2.62% 2.31% 1.72%
0.80% 374
543 647 610
2004
2005
2006
1H2007
2004
2005
2006
1H2007
RUB mln
% of Total
Transactions with related parties: • • Carried out on an arm's-length basis Subject to the same approval procedures and limits as transactions with unrelated parties
54
Pro-forma Employee Structure
Employee Structure
2006
401 37% 5,230 7%
409 18%
2Q 2007
6,357 6%
Pro-Forma 2007
8,200 7%
Pro-Forma 2008
9,100 7%
93% 63%
82%
94%
93%
93%
IBT
NBT
IBT
NBT
Merged Bank
Merged Bank
Total: 5,631
Total: 6,766
Total: 8,200
Total: 9,100
• Post merger, the group expects a minimal impact to its headcount due to different business operations of the banks being merged; however due to spin-off of proprietary and alternative investments combined with synergies and back office redundancy will lead to savings of at least $7.5mln a year • Expected redundancies of appr. 80 people due to merger (23 front office, 57 back/middle office) • In light of the bank’s network expansion plans, management anticipates to have approximately 3,000 new employees to grow the business in 2007 and 2008. The new employees will receive introductory training to ensure that high standards are maintained • Headcount not due to increase significantly after 2009
55
1 Executive Summary 2 Rationale for Merger 3 Group History & Structure 4 Group Strategy 5 Group Business Overview
6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
56
Indicative Timetable: Expected Completion in 2Q 2008
Announced Merger to market, staff and regulators on 17 July 2007 Engaged A&O as legal counsel Finalizing Capital Increase of National Bank TRUST by late October 2007 Informal Discussions with regulator on Merger Official request will be filed with CBR during October 2007
57
APPENDIX
58
Yukos Deposits
59
Yukos Related Deposits
NBT and Yukos RD (Rub bln and % )
30 25 20 15 10 5 0 60% 50% 40% 30% 20% 10% 0%
30 /0 9/ 20 06 31 /1 2/ 20 06 31 /0 3/ 20 07 17 /0 4/ 20 07 02 /0 5/ 20 07 30 /0 5/ 20 07 30 /0 6/ 20 07 31 /0 7/ 20 07 31 /0 8/ 20 07 13 /0 9/ 20 07
Corporate Current Account Non Restricted Yukos Restricted Yukos All current accounts
% YRD vs Corp C/Acs
% All YRD vs All Current
TRUST Group and Yukos RD (Rub bln. and % )
35 30 70% 60% 50% 40% 30% 20% 10% 0%
Post Yukos related company auctions the Unfrozen Yukos-Related deposits have effectively been reduced to zero
25 20 15 10 5 0
30 /0 9/ 20 06 31 /1 2/ 20 06 31 /0 3/ 20 07 17 /0 4/ 20 07 02 /0 5/ 20 07 30 /0 5/ 20 07 30 /0 6/ 20 07 31 /0 7/ 20 07 31 /0 8/ 20 07 13 /0 9/ 20 07
Corporate Current Account All current accounts % All YRD vs All Current Non Restricted Yukos Restricted Yukos % YRD vs Corp C/Acs
60
Historical Financials of NBT and IBT
61
Balance Sheet (RUB mln)
NBT 2005 Cash and cash equivalents Amounts due from credit institutions Trading securities Net loans to customers Total retail loans Corporate SME Property, equipment and intangibles Tax and other assets Total Assets Amounts due to credit institutions Payables under repurchase agreements Amounts due to customers Retail Corporate SME Funding from securitisation Obligations to return securities received as collateral Debt securities issued Tax and other liabilities Total Liabilities Shareholders' Equity 13,970 15 7,302 16,379 4,691 11,688 1,203 484 39,360 2,875 30,564 7,299 23,265 1,002 726 35,167 4,193 2 2006 11,147 15 6,150 24,847 12,715 9,891 2,241 1,965 546 44,670 1,126 34,868 11,886 22,867 3,713 625 40,333 4,337 2Q 2007 16,326 15 2,655 32,676 16,934 11,343 4,399 2,633 672 54,977 1,423 38,787 13,482 25,305 8,640 630 49,480 5,497 2005 5,350 1,891 13,887 4,381 4,381 417 2,421 28,347 3,959 7,013 7,235 176 7,059 846 2,714 348 22,114 6,233
IBT
2 2006 5,696 1,320 34,529 3,166 3,166 604 2,081 47,396 3,983 21,842 7,899 7,899 1,885 4,914 204 40,727 6,669
2Q 2007 4,774 519 31,441 2,695 2,695 582 3,635 43,646 4,395 18,333 7,637 7,637 2,092 4,312 244 37,013 6,633
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Income Statement (RUB mln)
NBT 2005 Interest income Due from credit institutions Debt securities and other financial instruments Reverse repurchase agreements Loans to customers Interest expense Due to credit institutions Repurchase agreements Deposits by customers Debt securities issued Net interest income Provision for impairment Net interest income after provisions Fee and commission income Fee and commission expense Net Fees and commissions Total operating income Operating expense Salaries and benefits Administrative expenses Depreciation and amortization Other expenses Profit before taxation Income tax expense Net income 2,726 208 615 1,904 (788) (73) (634) (81) 1,938 (304) 1,634 876 (163) 713 3,310 (2,463) (1,318) (815) (153) (178) 847 (558) 288 2 2006 4,622 321 679 3,622 (1,373) (27) (1,247) (99) 3,249 (665) 2,584 925 (159) 766 3,619 (3,317) (1,855) (1,148) (165) ( 148) 303 (111) 192 2Q 2007 3, 337 243 179 2,915 ( 1,140) (26) (870) (244) 2,197 (417) 1,780 461 (96) 365 2,290 ( 2,174) ( 1,288) (687) (115) (84) 116 29 145 2005 1,354 145 555 117 440 (659) (125) (301) (109) (123) 695 (238) 457 187 (51) 136 2,262 (1,324) (828) (359) (77) (61) 938 (213) 726
IBT
2 2006 2,383 290 1,581 117 395 (1,439) (237) (739) (225) (238) 944 (295) 649 318 (45) 274 1,784 (1,518) (946) (426) (95) (51) 265 (87) 178
2Q 2007 1,558 143 1,126 62 226 ( 1,077) (153) (617) (116) (153) 481 7 488 290 (27) 263 707 (748) (442) (256) (40) (10) (41) 5 (36)
63
Russian Banking Sector Overview
64
Russian Banking Sector: Summary
Banking Sector Summary
• Retail lending is increasingly the focus for banks and, despite explosive growth in consumer credit, Russia still lags behind emerging market peers. There is potential for several years of further strong growth in credit card, auto credit, as well as mortgage lending as personal income levels rise Mortgages, although quickly becoming a mass product, still account for only 0.75% of GDP vs. 5.3% in Kazakhstan and 7.3% in Poland and amid enormous demand for new housing, still make up only c.10% of total retail loans Mortgage lending is forecasted to grow by 80% in 2007 There is increasing emphasis on providing banking services in the under-banked regions as economic wealth spreads into the regions responsible for much of Russia's industrial output The key constraints for all Russian banks are capital and funding. With some of the leading private banks growing at over 100% per annum, sourcing capital is challenging VTB successfully listed in May 2007 and several other banks have IPO in the pipeline In 2006, total NPLs of the banking system has increased by 2.5x from $765m as of January 2006 to $2.0bn whereas lending to individuals rose by 75% in 2006 $bn
Total Assets
%
600 500 400 300 200 100 0 85 2000 105 2001 130 2002 190 2003 257 339 32.3% 35.3% 38.3% 42.3% 42.1% 45.1%
52.8%
60% 50% 40%
• • • • • •
533
30% 20% 10% 0%
2004
2005
2006
Total Assets
Asset/GDP
Key Banking Statistics
2002 Assets GDP Loans GDP Retail loans GDP Retail loans / total Income Deposits GDP Retail deposits GDP Retail deposits / total income Capital /Assets 38.3% 16.6% 1.3% 2.1% 19.6% 9.5% 15.1% 14.0% 2003 42.3% 20.3% 2.3% 3.4% 22.7% 11.5% 17.1% 14.6% 2004 41.9% 22.8% 3.6% 5.6% 24.4% 11.6% 18.0% 13.3% 2005 45.1% 25.2% 5.5% 8.7% 26.9% 12.7% 20.4% 12.7% 2006 52.8% 30.2% 7.8% 12.3% 31.8% 14.2% 22.5% 12.1%
Total Deposits
$bn %
With the fast growth of retail lending, an increasing number of banks face capital constraints as the capital ratio decreases to the minimal level acceptable by the CBR
Source: RosStat, CBR
350 300 250 200 150 100 50 0
16.0%
17.7%
19.6%
22.7%
24.4%
26.9%
31.8% 178
106 78 26 16 30 22 34 32 47 52 71 96 144
35% 30% 25% 20% 15% 10% 5% 0%
2000 2001 Retail Deposits
2002 2003 2004 Corporate Deposits
2005 2006 Deposits/GDP
65
Russian Banking Sector: Forecasts by Product
Total Banking Assets
57.5% 45.4% 47.7% 51.2% 54.4% 787 674 563 339 461 158 233 0.5% 4 2005 2006F 2007F 2008F Total Banking Assets($bn) 2009F 2010F % of GDP 2005 2006F 2007F 2008F 2009F 2010F % of GDP 2005 67.2% 1,016 28.7% 25.1% 300 0.9% 22 8 378 37.8% 33.3% 460 2.0% 37
Total Deposits
42.5% 47.8% 558
Mortgages
5.3% 4.0% 80 3.0% 55
2006F
2007F
2008F
2009F
2010F % of GDP
Total Banking Assets($bn)
Total Banking Assets($bn)
Credit Cards
2.2% 1.6% 1.1% 0.6% 0.2% 1 2005 0.3% 7 3 13 5 22 9 33 0.7% 1.0%
Car Loans
1.1% 1.2% 1.4% 1.4% 21 19 15 12 145 19.5%
Corporate Loans
27.4% 29.2% 21.6% 23.5% 25.5% 375 316 256 209 441
2006F
2007F
2008F
2009F
2010F % of GDP
2005
2006F
2007F
2008F
2009F
2010F
2005
2006F
2007F
2008F
2009F
2010F % of GDP
Total Banking Assets($bn)
Total Banking Assets($bn)
% of GDP
Total Banking Assets($bn)
Source: Deutsche Bank Equity Research (20-Sep-06) and Merrill Lynch Research (23-May-06)
66
Russian Banking Sector: Benchmarking
Banking Assets in % of GDP
315% 303% 133% 136%
Total Loans in % of GDP
Total Deposits in % of GDP
129%
92% 213% 95% 86% 75% 76% 147% 48% 47% 67% 45% 70% 26% 34% 25% 41%
(1)
(2)
(1)
(2)
(1)
Russian-2005
Russian-2010
Portugal
Greece
Portugal
Russian-2005
Russian-2010
Russian-2005
Russian-2010
Portugal
Greece
Greece
France
France
France
Western Europe
Note: Total banking assets, loans and deposits data as of 31 December 2005 unless otherwise stated Sources: European Banking Federation, Bank of Ukraine, Economist Intelligence Unit and broker research (1) Includes Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia and Ukraine (2) Includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Norway, Netherlands, Portugal, Spain, Sweden, Switzerland and the United Kingdom
Western Europe
Western Europe
CEE
CEE
CEE
(2)
67
Top Russian Banks
Main Financial Indicators of Top 20 Banks, as at April 1, 2007
# 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bank Sberbank VTB Gazprombank Alfa Bank UralSib Bank of Moscow Raiffeisenbank Austria MPB Rosbank MMB Russian Standard MDM Bank Ak Bars Rosselkhozbank PSB NRB VTB 24 Promsvyazbank Trust Bank Petrocommerce Capital 582,213.50 136,972.50 88,298.60 39,494.20 39,411.10 31,005.50 27,997.70 27,572.80 23,349.20 22,989.20 21,508.70 21,419.90 21,276.20 19,961.30 19,681.10 17,640.90 16,522.20 15,186.50 (1) 14,553.00 13,464.10 Total Assets 3,945,465.90 860,145.00 1,087,616.40 398,644.40 311,610.30 389,355.10 272,476.70 86,696.10 257,598.00 265,224.60 182,938.30 223,636.80 114,101.50 267,465.00 151,218.10 30,841.60 178,855.10 185,833.30 101,035.00 127,654.50
Source: Interfax (1) Includes capital increase of RUB 3.4bn
68