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Investor Call Presentation 3Q2009 v17

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Investor Call Presentation 3Q2009 v17 Powered By Docstoc
					9M2009 Results Call Presentation


26 January 2010




                                                         Speakers:
                        Vladislav Khokhlov, First Deputy CEO, CFO
                  John McNaughton, Co-Chairman, Investment Bank
Key Highlights

          Back in the black: MDM Bank earned RUB808m in comprehensive income in 3Q2009;

          MDM Bank remains one of the best capitalized of Russia’s top-20 banks with a total CAR at 18.4%, at the same
         time maintaining 100% provisioning coverage of NPLs;
           High loss absorption capacity: with 3Q2009 equity, the Bank can absorb loan loss reserves of up to 24% of gross
           loans while keeping CAR above 12%;
           90day+ NPLs slightly increased in 3Q09 by 1.1% to reach 15.3%, primarily due to a contracting loan portfolio;

           Merger synergies allowed the cost efficiency to remain best-in-class with cost/income ratio at 35.6% for 9M2009;

           Focus on retail deposits as a strategic source of funding led to their growth by nearly 15% since 2008YE;

               MDM Bank is the first private Russian Bank since mid-2008 to have successfully accessed the debt capital
               markets:
                • In October 2009, the Bank successfully signed a syndicated loan in the amount of USD250m. The
                    transaction was oversubscribed;
                • in December 2009, the Bank placed a local RUB 5 bn bond due 2012.
         Liquidity remains strong with over RUB102bn in liquid assets at 31 December 2009 (up from RUB60.1bn on 30
         September 2009), on top of the untapped CBR limit of ca RUB75bn


                                                                                                                              2
Source: Based on aggregated IFRS financial statements, company data
   Changes in Shareholder Structure

                       Voting Shareholder Structure                                                                     Total Shareholder Structure
                                                                  I. Kim
                         Olivant M . Andersson                                                                                       Listed shares
                                                                  11.5%                                              M. Andersson                          I. Kim
                      Investments     7.0%                                                                                               7.4%
                                                                                                                         6.5%                              10.7%
                         6.7%                                                                                  Olivant
                                                                                                            Investments
              EBRD                                                                                             6.2%
              5.2%                                                                                     EBRD
             IFC                                                                                       4.8%
            3.6%                                                                                       IFC
            Siguler Guff                                                                              3.3%
               3.3%                                                                                     Siguler Guff
                                                                      S. Popov
                                                                                                           3.0%
     Troika Capital                                                    55.1%
       Partners                                                                                        Troika Capital                                S. Popov
         2.2%                                                                                            Partners                                     51.1%
                                                                                                           2.1%
            DEG
            1.9% A. Bekarev                                                                           DEG
                                          Other
                                                                                                      1.7%                   Other
                    1.5%                  1.9%                                                                 A. Bekarev
                                                                                                                  1.4%       1.7%


               In November 2009, Siguler Guff & Company (SG) bought 3.3% of MDM voting shares from Avindale Investments
               S.A. through its investment arm, Russia Partners.

               In January 2010, A. Taranov and A. Bekarev sold in total 3.1% of voting shares to MDM Holding SE, whose
               beneficiaries are S. Popov, I. Kim, and M. Andersson.

Note: shareholders structure is given as at 20.01.2010; listed shares are Class 3 preference shares
                                                                                                                                                                    3
MDM Among Top Private Russian Banks

                                      MDM Bank is the second largest privately-owned bank in Russia by capital

    Top Privately-Owned Russian Banks by Capital, as of 30-Sep-09                                     Top Privately-Owned Russian Banks by Assets, as of 30-Sep-09
    RUB bn                                                                                            RUB bn

         73                                                                                             536
                  57                                                                                            389         379    378
                            42
                                      32          29       29                                                                                237     219       218
                                                                  24       21        21                                                                                 166       154
                                      PromSvyaz


                                                  NOMOS
         Alfa




                                                                                                                PromSvyaz


                                                                                                                            MDM
                                                                                     Ak Bars
                                                           IIB


                                                                  NRB
                            UralSib




                                                                          Standard




                                                                                                                                             NOMOS
                   MDM




                                                                                                         Alfa




                                                                                                                                                                                  Zenit
                                                                                                                                                     Ak Bars


                                                                                                                                                               BSPB
                                                                                                                                   UralSib
                                                                          Russian




                                                                                                                                                                       commerce
                                                                                                                                                                         Petro-
    Private Russian Banks by Market Share*

 As of 30-Sep-09                                          MDM                                  Alfa                          PromSvyaz                            UralSib

 Retail loans                                             2.4%                                 2.2%                               1.4%                                2.3%

 Loan portfolio, net                                      1.6%                                 2.5%                               1.8%                                1.3%

 Retail deposits                                          1.3%                                 2.0%                               1.2%                                1.3%

 Total deposits                                           1.5%                                 2.6%                               1.7%                                1.9%

  Source: Interfax-100 as of 30-Sep-09
* Among top -100 Russian banks, which together account for 87% of total Russian banking system assets                                                                                     4
Balance Sheet Highlights (aggregated)

         While repayments of syndicated loans and state corporation deposits totaling ca USD620m in 3Q09 led to a decline of
         liquid assets, the latter still made up 16% of the Bank assets in September 2009
         Focus on retail deposits as a strategic source of funding yielded an above-market increase of nearly 15% in 9M09 vs.
         sector average 13.7%
         High capital adequacy (Total CAR=18.4%) maintained while fully provisioning for rising NPLs
         Loans to Deposits Ratio improved to 148% at 30 September 2009 from 179% at 2008YE

                                                                                                                Change %,       Change %,
     RUBm or %                                                            3Q2009         2Q2009    2008YE     3Q2009/2Q2009   3Q2009/2008YE


     Total Assets                                                              375,924   414,891    537,431            -10%            -30%
     Liquid Assets (cash and equivalents+due
     from banks)                                                                60,088    82,097    161,525            -23%            -61%
     Net Loans                                                                 252,248   275,218    326,492            -8%             -23%


     Due to banks                                                               67,538    93,765    134,215            -28%            -50%
     Deposits: retail                                                           77,445    75,024     67,572             3%              15%
                    corporate                                                   67,610    75,399     92,571            -10%            -27%
                    state organizations                                         25,385    32,495     22,377            -22%             13%
     Debt securities in issue                                                   54,232    53,486     92,893             1%             -42%
Source: Based on aggregated IFRS financial statements; CBR and Interfax data                                                                  5
Statement of Comprehensive Income Highlights (aggregated)

         Quarterly provisioning charges are back to pre-crisis levels;
         While core income decreased by 23%, it was less than decline in total assets (30%), indicating strong
         margins;
         Realized merger synergies and focus on cost-control contribute to improving efficiency: both operating
         and staff expenses decreased by 18 and 17% y-o-y, respectively.


   RUBm or%                                                        3Q2009               3Q2008           Change, %
   Core Income
   (Net interest income + Net fee & commission income)                        7,602              9,913     -23%
   Trading income                                                              375             (1,377)     127%
   Operating expenses                                                       (1,744)            (2,120)     -18%
   Staff expenses                                                           (1,514)            (1,833)     -17%
   Loan impairment charge                                                   (5,127)            (4,795)      7%
   Comprehensive income                                                        808             (1,028)     179%




 Source: Based on aggregated IFRS financial statements
                                                                                                                     6
Asset quality stable in 3Q2009

                                                                                                              High absorption capacity
          90day+ NPLs slightly increased in 3Q09 by 1.1% to
          reach 15.3%, primarily due to contracting loan portfolio;                      Absorption capacity at CAR=12% and 100% NPL coverage
                                                                                 30.0%
          The Bank can absorb up to 23.5% - or almost double                                                                                                             23.5%
                                                                                 25.0%
          the current level of 90 day+ NPLs - while keeping CAR
                                                                                 20.0%
          above 12%;                                                                                                                                 14.2%
                                                                                                                                                                        15.3%
                                                                                 15.0%
          In 3Q09 Bank sold RUB2.7bn book value of retail NPLs                                                                 8.2%                                     8.3%
                                                                                 10.0%                                                               7.8%
          to a collection agency;                                                            2.9%
                                                                                                               4.9%
                                                                                 5.0%                                        4.0%                     6.4%               7.0%
                                                                                                                 2.7%
          Restructured loans went down from RUB46bn in                                   2.3%                    2.2%           4.2%
                                                                                 0.0%         0.7%
          2Q2009 to RUB32bn in 3Q2009, or 10.8% of gross
                                                                                          2007               2008           1Q2009             2Q2009             3Q2009
          loans, principally due to loan repayments.                                             Corporate NPLs,            Retail NPLs,               Total NPLs,
                                                                                                 of gross loans             of gross loans             of gross loans



                   Cost of risk down to pre-crisis level (quarterly)                                                NPL dynamics
                                                                                  360      RUB, bn                                                                          18.0%
  25.0%                                                        22.0%                                         348
                                                                                  350                                                          14.2%
                                                                                                                            339                                             15.0%
  20.0%                                                                           340                                                                        15.3%
                                                                                  330                                      8.2%                321                          12.0%
                                                                                           319
  15.0%                                                                           320
                                                                                                                                                                            9.0%
                                                        8.3%                      310                       4.9%
  10.0%                                                                 6.6%                                                                                   298
                 5.4%              5.7%                                           300     2.9%                                                                              6.0%
   5.0%                                                                           290
                                                                                                                                                                            3.0%
                                                                                  280
   0.0%                                                                           270                                                                                       0.0%
                3Q2008            4Q2008            1Q2009     2Q2009   3Q2009             2007             2008           1Q2009            2Q2009          3Q2009
                                                                                                             Gross Loans                       NPLs/Gross Loans
                                                                                                                                                                               7
Source: Based on aggregated IFRS financial statements
   Strong income generation and cost efficiency

                                                                                                                                        Income Trends and NIM
            Stable quarterly core income (above RUB7.5bn) in the
            context of a contracting loan portfolio indicate improving                               19.0                                                                                                       11.0%

            margins;                                                                                 16.0                                                       6.9%
                                                                                                                                                                                                                9.0%
                                                                                                                                      6.5%       6.9%                        6.2%         6.5%        6.9%
                                                                                                                       6.5%                                                                                     7.0%
            3Q09 comprehensive income of RUB808m was primarily                                       13.0
                                                                                                                                                          3.3              4.1                                  5.0%
            driven by revaluation and gains on the sale of securities                                10.0                                                                               2.9
                                                                                                                 0.9                                                                               1.3          3.0%
            totaling ca RUB2,005m;                                                                    7.0
                                                                                                                                                                                                                1.0%
                                                                                                                                9.1            9.9        8.5
                                                                                                      4.0        8.0                                                       7.6          7.7
            Focus on cost-control: operating expenses and staff costs                                                                                                                              7.6          -1.0%
            continued decreasing q-o-q in 3Q09, contributing to one of                                1.0                                                                                                       -3.0%
                                                                                                                                              -1.4
            the best cost to income ratio among peers;                                               -2.0    1Q2008            2Q2008        3Q2008      4Q2008        1Q2009        2Q2009       3Q2009        -5.0%
                                                                                                                               Core Income                 Non-core Income                    NIM (cumulativ e)



                                       Cost to income vs. peers                                              Operating and Staff Expenses, Cost to Income Ratio

                                                                                                        RUB bn
      70%                                                                                 64.3%
                                                                                                       6.0                                                                                                        50.0%
      60%                                                                                                              46.6%                   44.8%
                                                                                                       5.0                                                                          34.5%                35.6%
                                                                          44.2%                                                                                    31.7%                                          40.0%
      50%                                                         43.0%
                                  35.6%           38.2%                                                4.0
      40%         34.2%                                                                                                                  2.4                                                                      30.0%
                                                                                                       3.0        1.8                                                             1.7
      30%                                                                                                                                                    2.0                                    1.5           20.0%
      20%                                                                                              2.0

      10%                                                                                              1.0        2.1                    2.4                                      1.9                             10.0%
                                                                                                                                                             1.6                                    1.7
       0%                                                                                              0.0                                                                                                        0.0%
                                                                           Vozrozhdenie
                    Sberbank




                                                                   VTB




                                                                                           Uralsib
                                    MDM Bank




                                                      Promsvyaz




                                                                                                                 3Q2008                4Q2008             1Q2009                 2Q2009           3Q2009

                                                                                                                  Operating costs                    Staff costs                 Cost to Income (cumulativ e)
                                                                                                                                                                                                                        8
* Based on banks’ 3Q 2009 IFRS financial statements
Liquidity and repayments

                                                               Repayments 2010 – 2011 as at 22 Jan 2010

                                         Total RUB41.4Bn for 2010                                      Total RUB22.2Bn for 2011
                 12.0
                        10.6                                                                                                                  10.4
                 10.0
                                                     7.3                       7.6
                  8.0          6.8           7.2
     RUB, bn




                                                                                                            5.9
                  6.0

                  4.0                                                                                                                   3.0

                  2.0                                          0.9 1.0                           1.0                0.7                              0.8
                                                                                                                                  0.4
                   -
                            1Q2010              2Q2010           3Q2010      4Q2010         1Q2011            2Q2011            3Q2011          4Q2011

                                                           Eurobonds          Syndicated loans                    Local bonds

               Remaining pre-crisis wholesale borrowings fall due and will be repaid in 1H2010;
               The Bank’s liquidity position at 31 December 2009 was RUB102bn, fully covering all debt repayments in 2010;
               Zero utilization of CBR unsecured limit of approximately RUB75bn;
               First private Russian bank to tap debt market since mid-2008:
                         October 2009: signing of USD250m syndicated loan;
                         December 2009: placement of RUB5bn local bond due December 2012.

                                                                                                                                                           9
Source: IFRS Financial Statements and management reports
Integration Update

 Integration stages completed:                                                                                                 Key objectives for 2010:

        Branch network integration completed, redundant branches (16                                                            To complete the transition to a single banking IT
        administrative office and 20 branches) closed;                                                                          platform, enabling further operational streamlining;
        Middle and back offices centralized for more efficient management, and in
        process of moving to more cost-effective locations;                                                                     New brand to be implemented bank-wide in
        New website launched                                                                                                    1H2010
        New brand has been developed, to be launched in 1Q2010

                                                                                                                                                  Synergy effect
                                                                  Definition                                                                      in 2009 –2011 (RUB bn)   Status
                           Personnel costs optimization            ●      Improving labor productivity and a corresponding reduction in
                                                                                                                                                          1.7-3.61
          Cost synergies




                                                                          headcount thereby creating savings on personnel costs
                           Operating expenses                      ●      Reduction of operating costs due to integrating the back-office
                           optimization                                   functions on both the central and branch levels                                   1.81

                           Branch network optimization             ●      Growth of the commission/fee income from corporate clients through
                                                                          exchanging experience on the most efficient products                            0.5-1.31
    Income synergy
                           Branch network optimization             ●      Branch network optimization
                                                                                                                                                              0.62

    Financial synergy                                              ●      Improving the costs and conditions of attracting finance due to MDM’s
                                                                                                                                                              0.31
                                                                          higher rating
                                                                                                                                                             4.9-7.6
    Total
Note:
1. Synergy effect before tax intended to be implemented in 2009-2011; 2. Single-time cost-saving for implementation in 2009.
                                                                                                                                                                                       10
Source: management data
Funding: increased diversification post-merger

         Gradual shift from capital markets to deposits,                    Declining reliance on Top 20 depositors
         particularly retail (up to 24% at 30/09/2009 vs.                   60 51.3         52.5
                                                                                                                  54.7

         14% at 2008YE), as a strategic source of                           50
                                                                                                       47.6                 46.5
                                                                                                                                         42.5
         funding                                                           40                                                                             35
                                                                                                                                                                   30.7
                                                                          %                                                       25.4
                                                                           30                                                              25.1
                                                                                                                     21.7
         Decreasing    concentration  of    top-20                          20
         depositors from 46.5% at 2008YE to 30.7%                           10
                                                                                      9        7.4
                                                                                                           9.5

         on 30 September 2009                                                   0
                                                                                    3Q 2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q 2009 Q2 2009 3Q 2009

                                                                                Pre-merger MDM Bank               Pre-merger URSA Bank               Merged bank


                    YE2008 (aggregated)                                   2Q2009                                                         3Q2009
                                    Other                       Due to              Other                                                         Other
                                                                                                                            Due to Central
                    Due to                      Due to                               1%                                                            1%
                                     2%                         Central                              Due to                     bank                           Due to banks
                  central bank                banks and
                                                                 bank                                banks                       3%                                21%
                      8%                         IFI's
                                                                 3%                                   26%
                                                 29%       Corp.
                                                                                                                 Corp. deposits
             Corporate                                    deposits
                                                                                                                     30%
              deposits                                      30%
               25%



                                                                                                                                                                   Debt securities
                                                                                                     Debt                                                               21%
                       Retail                 Debt
                                                                                                   securities
                      deposits              securities
                                                                                                     19%
                                              22%                     Retail                                                  Retail deposits
                        14%
                                                                     deposits                                                      24%
Source: IFRS financial statements                                      21%                                                                                                    11
Outlook for YE2009 (estimates)


           Total assets         • approx. RUB400bn

            Net loans           • approx. RUB240bn

       NPLs/Gross Loans         • approx.17%

           Total CAR            • approx. 20%

  4Q2009 Comprehensive Income   • positive

     Loans-to-Deposits Ratio    • approx. 120%

         Cost / Income          • < 40%



                                                     12
Thank You !




 Questions & Inquiries:
  ir@mdmbank.com
    +7.495.221.3075

 www.mdm.ru/investors
Important Notice

 MDM Bank (“MDM”) has obtained the information in this presentation from sources it believes to be reliable. Although MDM Bank has taken all reasonable care to ensure that the
 information herein is accurate and correct, MDM Bank makes no representation or warranty, express or implied, as to the accuracy, correctness or completeness of such information.
 Furthermore, MDM Bank makes no representation or warranty, express or implied, that its future operating, financial or other results will be consistent with results implied, directly or
 indirectly, by such information or with MDM’s past operating, financial or other results. Any information herein is as of the date of this presentation and may change without notice.
 MDM Bank undertakes no obligation to update the information in this presentation. In addition, information in this presentation may be condensed or incomplete, and this presentation
 may not contain all material information in respect of MDM Bank. Certain numbers in this presentation are based on non-audited financial statements. MDM Bank makes no
 representation, direct or implied, that these figures are true and correct, and you should not rely on these numbers as having been audited or otherwise independently verified.
 Certain numbers may be presented differently once audited, and MDM Bank takes no responsibility and accepts no liability for such changes and accepts no responsibility for
 providing the final audited financial statements to you once the audit has been completed.

 This presentation also contains “forward-looking statements” that relate to, among other things, MDM’s plans, objectives, goals, strategies, future operations and performance. Such
 forward-looking statements may be characterized by words such as “anticipates,” “estimates,” “expects,” “projects,” “believes,” “intends,” “plans,” “may,” “will” and “should” and similar
 expressions but are not the exclusive means of identifying such statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important
 factors that could cause MDM’s operating, financial or other results to be materially different from the operating, financial or other results expressed or implied by such statements.
 Although MDM Bank believes the basis for such forward-looking statements to be fair and reasonable, MDM Bank makes no representation or warranty, express or implied, as to the
 fairness or reasonableness of such forward-looking statements. Furthermore, MDM Bank makes no representation or warranty, express or implied, that the operating, financial or
 other results anticipated by such forward-looking statements will be achieved. Such forward-looking statements represent, in each case, only one of many possible scenarios and
 should not be viewed as the most likely or standard scenario. MDM Bank undertakes no obligation to update the forward-looking statements in this presentation.

 Nothing in this presentation constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so.

				
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