Investor Presentation 1H2007_Results and Business Strategy.

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Investor Presentation 1H2007_Results and Business Strategy.

  1. 1. TRUST Investment Bank & National Bank TRUST 1 st Half 2007 Results and Business Strategy 20 September 2007
  2. 2. 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. Disclaimer
  3. 3. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group History & Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  4. 4. Executive Summary <ul><li>The shareholders of Investment Bank TRUST (“IBT”) and National Bank TRUST (“NBT”) announced the merger of the two banks on July 17 th , 2007 </li></ul><ul><li>The merger will optimise both the capital and asset structure of the merged bank </li></ul><ul><li>Although the merged bank will be a universal bank, the focus of growth will be on the retail and SME portfolios </li></ul><ul><li>The branch expansion plan will be largely completed by the end of 2008 allowing management to greater focus on achieving higher ROAE targets </li></ul><ul><li>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 </li></ul>
  5. 5. Executive Summary: NBT’s Stand Alone Profile <ul><li>What We Are: </li></ul><ul><li>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. </li></ul><ul><li>Key Clients: </li></ul><ul><li>Mass Retail segment, Trade and Service Industries, SME </li></ul><ul><li>Current Geographical Coverage: </li></ul><ul><li>Strong presence in cities with population of over 100,000 and satellite towns of large cities </li></ul><ul><li>Strategic Goal: </li></ul><ul><li>In the next two years to become a TOP 5 Russian retail and SME bank in Russian regions with high growth potential based on </li></ul><ul><ul><li>Size of assets </li></ul></ul><ul><ul><li>Number of clients </li></ul></ul><ul><ul><li>Coverage of branch network </li></ul></ul><ul><li>NBT in Figures: </li></ul><ul><li>1H 2007 IFRS (RUB mln.) </li></ul><ul><ul><li>Total Assets : 54,977 </li></ul></ul><ul><ul><li>Net profit (6 month): 145 </li></ul></ul><ul><ul><li>Shareholders’ equity: 5,497 </li></ul></ul><ul><ul><li>Loan portfolio : 32,676 </li></ul></ul><ul><li>Branch Network as of 20 September, 2007: </li></ul><ul><li>171 offices in 118 cities of Russia and in process of opening 42 offices by the end 2007 </li></ul><ul><li>Employees: 6,357 </li></ul><ul><li>Ratings: </li></ul><ul><li>“ B1”, outlook “Positive” by Moody’s </li></ul><ul><li>“ B-” , outlook “Positive” by Fitch </li></ul>
  6. 6. Executive Summary: TIB’s Stand-Alone Profile <ul><li>What We Are: </li></ul><ul><li>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. </li></ul><ul><li>Key Clients: </li></ul><ul><li>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. </li></ul><ul><li>Investors: Global Hedge Funds, International and Domestic Banks, Insurance Companies, Pension Funds, Private Clients and Asset Managers </li></ul><ul><li>Location: </li></ul><ul><li>Moscow based with FSA registered office in London with plans of expansion to Asia (licensed office in Hong Kong) within next 12 months. </li></ul><ul><li>Strategic Goal: </li></ul><ul><li>In the next two years: </li></ul><ul><ul><li>Remain in top 3 domestically owned banks in fixed income credit product (CLNs, Eurobonds, Hybrids) </li></ul></ul><ul><ul><li>Move into top 3 domestically owned banks participating in IPOs, by number of deals </li></ul></ul><ul><ul><li>Retain research leadership in Fixed Income and Second Tier Equity </li></ul></ul><ul><li>TIB in Figures: </li></ul><ul><li>H1 2007 IFRS (RUB mln.) </li></ul><ul><ul><li>Total Assets : 43,647 </li></ul></ul><ul><ul><li>Net loss (6 month): (36) </li></ul></ul><ul><ul><li>Shareholders’ equity: 6,633 </li></ul></ul><ul><ul><li>2007 YTD League Tables: </li></ul></ul><ul><li>1 st Qtr 2007, #2 CLNs (37.5%) </li></ul><ul><li>1 st Qtr 2007, #2 Domestic Owned Bank, Eurobonds (1.3%), #17 overall </li></ul><ul><li>1H 2007: #1 Domestic owned Bank, Eurobonds and CLN </li></ul><ul><li>1H 2007: #3 Domestic Owned Bank, IPOs </li></ul><ul><li>Employees: 409 </li></ul><ul><li>Ratings: </li></ul><ul><li>“ B1”, outlook “Positive” by Moody’s </li></ul>
  7. 7. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  8. 8. Rationale for Merger <ul><li>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 </li></ul><ul><ul><li>Further asset growth and diversification, namely across retail and SME </li></ul></ul><ul><li>ROAE is forecasted to start to pick up in 2007 and normalize during 2008 </li></ul><ul><li>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) </li></ul><ul><li>Yukos deposits no longer represent a material component of the group balance sheet (2) </li></ul><ul><li>Become one of the top 20 Russian banks and reduce cost of funding </li></ul><ul><ul><li>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% </li></ul></ul><ul><li>Recognised cost synergies of at least $7.5mln per year; headcount reduction of 80 people </li></ul><ul><li>Merger advisors: Merrill Lynch as exclusive financial advisor, Allen & Overy as legal counsel and KPMG as auditors and financial advisors </li></ul>(1) See page 47 for further information (2) See page 55 for further information
  9. 9. Executive Summary Group Strategy Group Business Overview Rationale for Merger Group History & Structure Group Risk Management Group Financial Forecasts Group Merger Implementation Plan
  10. 10. NBT’s History 1995–2002 2005 2006 2003–2004 <ul><li>May 2005 – MBO fully paid </li></ul><ul><li>Branch Network & Product Expansion </li></ul><ul><li>Hired team from one of the top SME banks’ in Russia </li></ul><ul><li>Continue Branch Network & Product Expansion </li></ul><ul><li>Leading Retail and SME Bank </li></ul>“ New Era” <ul><li>March 2005 – First Auto Loan </li></ul><ul><li>April 2005 – First Cash Loan </li></ul><ul><li>July 2005 – Retail loan program available at all branches </li></ul><ul><li>March 2006 – First SME Loan </li></ul><ul><li>April 2006 – Credit Cards program launched </li></ul><ul><li>October 2006 – First Mortgage Loan </li></ul>2005-present <ul><li>NBT (AKB “Menatep SPb”) was founded as a 50/50 JV between Yukos (Menatep) and Gazprom </li></ul><ul><li>Servicing Menatep and Gazprom </li></ul><ul><li>In 2002 Menatep purchased Gazprom’s stake </li></ul><ul><li>2003 IBT management takes over management of NBT </li></ul><ul><li>May 2004 - Management Buyout ( IBT management) </li></ul><ul><li>Re-branding of TRUST: The Two Banks </li></ul><ul><li>Hired professional retail banking team </li></ul>
  11. 11. TIB’s History 1998–2003 2006 – 1H2007 Beyond 2003–2004 <ul><li>September 2006, hired new CEO </li></ul><ul><li>Restructured institution to meet the demands of clients and investors </li></ul><ul><li>Built equity platform (trading, research, sales) </li></ul><ul><li>Opened regulated sales office in London </li></ul><ul><li>Execution of broader product range </li></ul><ul><li>Derivatives platform (JV) </li></ul><ul><li>Expanded distribution with non-exclusive relationships with international banks and funds </li></ul><ul><li>Alternative Investments (Private Equity, Hedge Fund and Asset Management) </li></ul><ul><li>Open regulated sales office in Asia </li></ul>“ New Era” <ul><li>Summer 2006 – Institutional Investor Ranked Research Team </li></ul><ul><li>Sept. 2006 – TIB $150m, Reg S Eurobond placed. First Capital Markets Transaction post the MBO </li></ul><ul><li>Dec 2006 – First Subordinated CLN placed (BSP) </li></ul><ul><li>Jan 2007 – Announced Bank restructuring and staff upgrade program </li></ul><ul><li>April 2007 – First non-group Eurobond lead manger role </li></ul><ul><li>May 2007 – First Official IPO role (Nutritec & Dixy) </li></ul>2H2006 to Present <ul><li>Bank was founded by Group Menetep </li></ul><ul><li>Leading Fixed Income and Investment Bank in Russia </li></ul><ul><li>May 2004 - Management Buyout ( IBT management) </li></ul><ul><li>Re-branding of TRUST: The Two Banks </li></ul>
  12. 12. Management company TRUST (Russia ) National bank TRUST (Russia) TRUST Investment Bank (Russia) 68,10% 68,3 8% 99,35% Current Shareholding Structure Yurov Ilia – 18,1699% Beliaev Sergei – 3,8225% Fetisov Nikolai – 1,1589% Terzyan Artashes – 1,031% Beliaev Sergei Other shareholders Yurov Ilia Terzyan Artashes Fetisov Nikolai Other shareholders 0 , 55% Other shareholders 7 , 44% TIB Holdings Limited (Cyprus) 21, 55 % 16,44 % 21, 55 % 3 2 , 33 % 8 ,1 2 % Beliaev Sergei Fetisov Nikolai Yurov Ilia Neaspal I nvestments Limited (Cyprus) Winsala I nvestments Limited (Cyprus) 100% 100% Z aploma I nvestments Limited (Cyprus) 100% 13,66% 9,12% 9,12% Yurov Ilia 0 , 1% 24 , 18%
  13. 13. Management company TRUST (Russia ) National bank TRUST (Russia) 68,10% 8 9,24 % Pro-forma Post Merger Shareholder Structure Yurov Ilia – 5 , 99 % Beliaev Sergei – 1, 25 % Fetisov Nikolai – 0, 38 % Terzyan Artashes – 0 , 3 4% Beliaev Sergei Other shareholders Yurov Ilia Terzyan Artashes Fetisov Nikolai Other shareholders 2,8 % TIB Holdings Limited (Cyprus) 21, 55 % 16,44 % 21, 55 % 3 2 , 33 % 8 , 12 % Beliaev Sergei Fetisov Nikolai Yurov Ilia Neaspal I nvestments Limited (Cyprus) Winsala I nvestments Limited (Cyprus) 100% 100% Z aploma I nvestments Limited (Cyprus) 100% 13,66% 9,12% 9,12% 7,96 % <ul><li>Calculation based on the following numbers </li></ul><ul><li>NBT BV multiple = 2.5 X IBT multiple </li></ul><ul><li>Total equity NBT, thousand RUR 5492425 </li></ul><ul><li>Total equity IBT, thousand RUR 6651134 </li></ul>
  14. 14. Merged Bank Organisational Structure Board of Directors Chairman: Yurov CEO & Chairman of Management Board Eggleton President Fetisov Management Committee Chairman: Fetisov CRO COO CFO Treasury HR Retail Bank Investment & Corporate Bank Committee Chairman : Eggleton CIO Retail SME Network Origination Markets Research Sales & Syndicate Asset Management
  15. 15. Group Management Structure (Post Merger) Board of Directors Chairman: Yurov Retail Risk Commitments Committee Technology Committee Products Committee Corporate Risk SME Risk Investment & Corporate Banking Committee Chairman: Eggleton Management Committee Chairman: Fetisov ALCO Committee Chairman: Eggleton Credit Committee Chairman: Yurov
  16. 16. Biographies – Shareholders and CEO
  17. 17. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group History & Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  18. 18. Group Strategy <ul><li>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% </li></ul><ul><ul><li>In top 5 banks by full city coverage by end of 2008 </li></ul></ul><ul><ul><li>In top 5 banks by portfolio and number of retail clients within 3 years </li></ul></ul><ul><ul><li>In top 5 SME banks by loan portfolio by the end of 2007 </li></ul></ul><ul><ul><li>In top 2 Russian-owned banks league table for CLNs and Eurobond </li></ul></ul><ul><ul><li>In top 3 Russian-owned banks league table for IPO by 2009 </li></ul></ul><ul><ul><li>At least 2 Institutional Investor ranked team members </li></ul></ul><ul><li>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 </li></ul><ul><li>Reduce leverage and absolute MTM securities portfolio across both banks by spinning off IBT proprietary position into asset management JV with internationally recognised partner </li></ul><ul><li>Focus on ROAE growth through deceleration of branch expansion by the end of 2008 and increased product penetration through the network </li></ul><ul><li>Utilise the experience of the management and sales department, the large regional network and cross-selling opportunities to increase the scope and depth of its banking business </li></ul><ul><li>Continue to introduce new risk management systems to make operations within the retail and SME sectors of the business more efficient </li></ul>
  19. 19. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group History & Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  20. 20. Integrated Multi-Product Platform SME CORPORATE RETAIL <ul><li>Auto loans </li></ul><ul><li>Cash loans </li></ul><ul><li>Consumer loans </li></ul><ul><li>Credit cards </li></ul><ul><li>Savings products </li></ul><ul><li>Current accounts </li></ul><ul><li>Funds transfer </li></ul><ul><li>Safe custody </li></ul><ul><li>Debit cards </li></ul><ul><li>Focus on car loans, cash loans and mortgage lending </li></ul><ul><li>Micro loans </li></ul><ul><li>Medium loans </li></ul><ul><li>Small loans </li></ul><ul><li>Overdrafts </li></ul><ul><li>Factoring </li></ul><ul><li>Payments and cash management </li></ul><ul><li>Savings products </li></ul><ul><li>Diversify and standardise product lines </li></ul><ul><li>Working capital facilities </li></ul><ul><li>Collateralised loans </li></ul><ul><li>Overdrafts </li></ul><ul><li>Trade finance </li></ul><ul><li>Export-import finance </li></ul><ul><li>Payments and cash Management </li></ul><ul><li>Treasury products </li></ul><ul><li>Savings products </li></ul><ul><li>Reclassify loans less than RUB 30mln to SME, and focus corporate business on loyal client base </li></ul><ul><li>Further reclassify loans less than RUB 75mln to SME in 2008 </li></ul><ul><li>Asset management </li></ul><ul><li>Commercial banking </li></ul><ul><li>Debt products </li></ul><ul><li>Equity products </li></ul><ul><li>Hybrid and structured products </li></ul><ul><li>Fixed income </li></ul><ul><li>Equities </li></ul><ul><li>Derivatives </li></ul><ul><li>Corporate finance </li></ul><ul><li>Broaden the product and services base </li></ul><ul><li>Focus on mid-cap companies </li></ul>CAPITAL MARKETS Investment and Corporate Banking
  21. 21. Retail Banking <ul><li>Enter TOP 5 by portfolio and number of clients within 3 years </li></ul><ul><li>Offer the widest and most flexible product lines </li></ul><ul><li>Focus on mass market segment of clients living in the Russian regions </li></ul><ul><li>Serve clients in all cities with the population of over 100,000 </li></ul>Number of Clients in Portfolio (‘000) Net Retail Portfolio Size (RUB bn) Retail Deposits (RUB bn) Retail Strategy CAGR: 48% 66.0 94.0 112.0 157.0 19.0 23.0 27.0 29.0 85.0 128.0 234.0 48.0 19.0 11.0 158.0 1Q 06 2Q 06 3Q 06 4Q 06 Cash Auto Cards 211 .0 3 3 .0 34 1.0 97 .0 2Q 2007 2.3 3.2 3.4 3.4 2.2 4.1 8.3 8.9 4.5 7.3 11.7 12.3 2004 2005 2006 1Q 07 Call Deposits Term Deposits 3. 5 1 0 . 0 1 3 . 5 2Q 07 3.4 4.7 4.6 6.5 7.9 1.9 3.2 5.1 5.2 5.3 5.3 8.1 10.0 12.2 0.5 0.3 0.2 0.05 13.9 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 24.4 7.7 2.8 1.6 5.7 1.1 40.6 14.2 6.7 23.6 0. 8 07B 08E Cash Auto Cards Mortgage 1 0 . 3 5 .7 16 . 9 0.6 2Q 07 0. 1 183.0 30.0 281.0 68.0 1Q 2007 4.3 17.5 21.8 3.1 12.7 15.8 07B 08E
  22. 22. SME Banking <ul><li>Hired professional team from one of the top Russian SME banks in 2005 </li></ul><ul><li>At 30.06.2007 SME loans accounted for 13.5% of NBT’s total loan portfolio </li></ul><ul><li>Even though SME lending was launched in March 2006, in 2006 NBT was ranked 9 th among Russian banks by loan portfolio </li></ul><ul><li>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. </li></ul><ul><li>Factoring business is expected to reach RUB6bn by the end of 2007 and RUB10bn by the end of 2008 </li></ul>SME Loans Classification as of 2Q07 SME Portfolio Size (RUB mln) SME Strategy Overview <ul><li>Diversify SME loan portfolio </li></ul><ul><li>Increase the range of banking services to SME clients </li></ul><ul><li>Standardise the products </li></ul><ul><li>Increase service efficiency </li></ul><ul><li>Be in top 5 SME bank by loan portfolio by the end of 2007 </li></ul>(1) Doesn’t include factoring (2) Off balance sheet factoring of RUB 3.3bn as of 2Q 2007 , currently RUB3.5bn (1) (2) 4,134 9,386 11,372 20,127 18,144 2,638 5,187 34,700 2007B 2008E 1,734 22 296 669 48 540 718 2,274 1Q2006 2Q2006 3Q2006 4Q2006 Micro Small & factoring Medium 156 2, 890 1,353 4 , 399 2 Q2007 (2) 51 2,376 858 3,285 1Q2007
  23. 23. Pro- forma Corporate Banking <ul><li>Number of corporate clients as of 31 July 2007 was c.13,400 (compared to 13,800 corporate customers as of 31 December 2006) </li></ul><ul><li>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 </li></ul><ul><li>Cross-sell opportunities for capital market products to regional customer base </li></ul><ul><li>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 2 nd quarter. </li></ul><ul><li>Widening of existing product range </li></ul>Net Corporate Loans (RUB bn) Corporate Deposits (RUB bn) Overview (1) Expected budget due to withdrawal of Yukos-related deposits during 2007 CAGR: 8% 7.9 1 7 .7 1 3 . 1 2004 2005 2006 1 4 . 4 1Q 07 1 8 . 7 23.8 07B 08E 1 4 . 0 2 Q 07 16.8 19.9 21. 1 1.0 10.5 9. 6 17.8 30. 7 30.4 2004 2005 2006 Call Deposits Term Deposits 16 . 2 13 . 1 29 .3 2 Q 07 (1) 21.6 9.7 31.3 1Q 07 (1) 11.8 20.6 10.1 12.1 32.7 21.9 07B 08E
  24. 24. Capital Markets <ul><li>The Bank provides various services including: </li></ul><ul><ul><li>Lending and structured lending </li></ul></ul><ul><ul><li>Private placements </li></ul></ul><ul><ul><li>Corporate finance </li></ul></ul><ul><ul><li>Capital markets (ECM and DCM) </li></ul></ul><ul><ul><li>Client flow trading </li></ul></ul><ul><ul><li>Research </li></ul></ul><ul><ul><li>Sales </li></ul></ul><ul><ul><li>Asset management </li></ul></ul><ul><li>National and international presence through: </li></ul><ul><ul><li>450 international clients </li></ul></ul><ul><ul><li>400 domestic clients </li></ul></ul><ul><li>Institutional Investor ranked research team members </li></ul>Strategy Overview <ul><li>Diversify revenue stream and investor base by expanding products and services </li></ul><ul><li>Focus on mid-cap companies providing bridge to global capital markets </li></ul><ul><li>Focus on origination to distribution model </li></ul><ul><li>$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 </li></ul>
  25. 25. <ul><li>Proprietary (Asset Management JV) </li></ul><ul><li>Client Flow </li></ul><ul><li>Repo </li></ul><ul><li>Derivatives (negotiating JV) </li></ul><ul><li>Corporate Book (Lending & Structured Credit) </li></ul>DEAL FLOW Investment & Corporate Banking Committee CAPITAL MARKETS OVERLAY Origination Markets Sales Fixed Income & Equity Products Investment Banking and Structured Solution Origination Distribution Structured Solutions Prinicpal Investments Real Estate Financial Institutions Corporate TRUST INTERNATIONAL Global Syndication & IBT Alternative Investment Products IBSS Legal Counsel Transaction Management Group Domestic Syndication Research Macro & Quantitative Analysis Fixed Income Equity DCM & Private Placements Corporate Finance and Investment Banking Real Estate Capital Markets Securitization ECM, Hybrids & Private Placements DCM & Private Placements Sales & Distribution <ul><li>Fixed Income </li></ul><ul><li>Primary/Secondary </li></ul><ul><li>Flow </li></ul><ul><li>Equity </li></ul><ul><li>Primary/ Secondary </li></ul><ul><li>Flow </li></ul><ul><li>Treasury </li></ul><ul><li>Funding </li></ul><ul><li>Treasury Products </li></ul><ul><li>Alternative Investments </li></ul>Head of International Sales Coordination Head of Domestic Sales Coordination
  26. 26. Nationwide Branch Network (Domestic Distribution) Network Expansion Targets Source : NBT estimates * - at the end of December 2006 with the exception of NBT Critical Regional Indicators (as of September 20, 2007) The bank owns app. 80% of the branches The average branch reaches break-even at app. 2 years As of 2005 As of 2006 As of 20 /0 9 / 07 As of 2007 (planned) As of 2008 (planned) Regions 47 50 55 59 70 Cities 74 77 118 150 - 160 220 Sales offices 125 128 1 71 190 - 200 300 * Top 10 Banks in RF Cities as of September 20, 2007 Target area of regional expansion No Bank # of Cities 1 Sberbank 938 2 Russian Agricultural Bank 268 3 Rosbank 220 4 Russky Standard 175 5 VTB 118 6 National bank Trust 1 18 7 Uralsib 104 8 Vozrozhdenie Bank 74 9 VTB Retail 73 10 Investsberbank 73
  27. 27. Established and Recognised Global Platform (International Distribution) Israel Chile USA USA South Africa Spain Greece UK Portugal Germany Luxembourg Latvia Switzerland Italy Thailand Singapore Philippines Hong Kong Kazakhstan France Estonia Sweden Denmark Turkey
  28. 28. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group History & Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  29. 29. Group Risk Management Architecture
  30. 30. Risk Management Strategy
  31. 31. Pro-forma Credit Portfolio Diversification Loan Portfolio Regional Breakdown as of 2006YE Privolzhskyj 13.2% Siberia 12.2% Far East 2.5% West 16.2% South 14.0% North-West 8.6% Ural 11.2% Central 22.0% Retail SME Corporate Loan Portfolio Regional Breakdown as of 2Q 2007
  32. 32. Credit Portfolio Diversification (Cont’d) Top 10 Credit Concentration - NBT Industry Breakdown as of 2006YE Industry Breakdown as of 2Q 2007 * Fully repaid as at 30.06.2007 (total amount is RUR 1 945 mln) Top 10 Credit Concentration - IBT Trading Enterprises Financial Intermediaries Manufacturing Engineering and Metal Processing Construction Energy Chemicals and Petrochemicals Oil and Gas Transport State Administrations Pharmaceuticals Other Individuals Trading Enterprises Financial Intermediaries Manufacturing Engineering and Metal Processing Construction Energy Chemicals and Petrochemicals Oil and Gas Transport State Administrations Pharmaceuticals Other Individuals
  33. 33. Credit Portfolio Quality Non-Performing Loans / Total Loans (%) Provisions / Non-Performing Loans (%) Retail NPL / Total Loans (%) SME NPL / Total Loans (%) Corporate NPL / Total Loans (%) 3 . 80 % 6 . 67 % 6. 98 % 5.23% 5.16% 2005 2006 2 Q 2007 2007B 2008E 62 . 85 % 61 . 33 % 70.20% 72.23% 77.12% 4 . 19 % 4.28 % 3.62% 3.70% 5. 12 % 2005 2006 2 Q 2007 2007B 2008E Provision / NPL Provision / Gross Loans - - - - - - - - Blended 1 3 . 6 % 1 1 . 5 % 16. 5 0 % 16.25 % 0.25% 0. 33 % 0.54% 1.30% 2006 2 Q 2007 2007B 2008E 11.33% 11. 68 % 10.60% 10.00% 2006 2 Q 2007 2007B 2008E Auto 2 5.7 % 2 4 . 9 % - - Cash 35.8% 33. 6 % - - E ffect ive Interest Rate Blended - - 28.0 % 21.75 % Small 21.0 % 1 9 . 7 % - - Micro 23.4% 2 2 . 8 % - - Blended - - 18.38 % 16.38 % 1.80% 2. 22 % 3.00% 2.50% 2006 2 Q 2007 2007B 2008E
  34. 34. Managing Retail Credit Risk <ul><li>Risk management targets: </li></ul><ul><li>Probability of default – 11% </li></ul><ul><li>Expected losses – 5%-7% </li></ul><ul><li>Risk based pricing </li></ul><ul><li>Further diversification of the portfolio </li></ul><ul><li>Measures applied in 2006/2007 </li></ul><ul><li>The reorganisation of retail risk management department was completed. </li></ul><ul><li>“ Welcome calls” were introduced in order to identify frauds at the earliest possible stage. </li></ul><ul><li>Anti-fraud training and equipment were provided to the retail banking employees to improve their capabilities of spotting fraudulent customers. </li></ul><ul><li>Credit products were modified or eliminated to avoid high risk combinations, for instance 0% equity auto loans. Credit documentation requirements were standardised and clarified. </li></ul>Auto Cash Level of defaulted loans AUTO CASH 0% 2% 4% 6% 8% 10% 12% 14% 16% 06.2005 12.2005 06.2006 12.2006 06.2007 Credit cards 0% 2% 4% 6% 8% 10% 12% 14% 06.2005 12.2005 06.2006 12.2006 FPD , first payment default rate TPD , third payment default rate SPD , second payment default rate 06 .200 7 0% 5% 10% 15% 20% 25% 06.2005 12.2005 06.2006 12.2006 06 .200 7
  35. 35. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group History & Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  36. 36. NBT - Financial Overview Key indicators, RUR mln Key financial ratios, % Headcount 2,698 3,505 5,529 5,860 6,357 14.7 88.0 74.0 7,4 0,7 11,5 125 1,234 38,349 61% 29,117 48,057 4, 419 1Q07 Actual (unaudited) 11,4 9.8 8.3 9.2 Net interest margin 81.2 77.4 68.1 87.3 Cost / Income before provisions 19.2 94.9 6,6 0,7 116 2,290 38,787 62% 34,136 54,977 5, 497 1H07 Actual (reviewed) 17.0 74.4 7.5 0.8 847 3,615 30,564 44% 17,262 39,360 4,193 200 5 14 .2 91.7 4.5 0.5 303 4,284 34,868 58% 25,934 44,669 4,337 200 6 24.1 70.3 9.3 1.1 856 2,319 22,257 32% 9,553 29,715 3,545 200 4 Loan / total assets, % Net operating income Cost / Income Amount due to customers ROAE ROAA CAR Pretax profit Loans (gross) Assets Capital by IFRS
  37. 37. IBT-Financial Overview Key indicators, RUR mln Key financial ratios, % Headcount 537 436 475 387 409 1.9 2.1 3.2 4.4 5.8 Net interest margin 100.5 93.1 73.0 53.0 87.3 Cost / Income before provisions 95.4 0.8 0.1 14 293 24,277 71% 35,119 49,541 6,683 1Q07 Actual (unaudited) 58.5 12.1 2.8 938 2,262 7,013 49% 13,888 28,347 6,233 200 5 85.1 2.8 0.5 265 1,784 21,842 73% 34,528 47,396 6,669 200 6 100.4 -1.1 -0.2 (36) 707 18,333 72% 31,441 43,646 6,633 1H07 Actual (reviewed) 70.3 9.3 1.1 265 2,027 2,432 43% 9,982 23,101 5,808 200 4 FA at FV / total assets, % Net operating income Cost / Income Payables under repurchase agreements ROAE ROAA Pretax profit Financial assets at fair value Assets Capital by IFRS
  38. 38. Timeline: Convergence of Expense to Revenue Generation Capacity This is one of the main profitability drivers of the bank.
  39. 39. Total assets & loan portfolio. RUR mln. NBT – Total assets and Loan portfolio Increasing loan portfolio in assets structure 2006 vs.1Q07 2007 Budget 2Q 2007
  40. 41. NBT Net Interest Margin less LLP
  41. 42. NBT - Loan portfolio structure Retail 50.0% Corporate 41.3% SME 8.7% Changes in loan portfolio structure 2006 2005 2Q07 93% of retail and SME business is conducted in the Regions 2007 Budget
  42. 43. NBT – Deposit Analysis (Corp and Retail)
  43. 44. 1H2006 to 1H2007 2006 to 2007 Cash and cash equivalents 0.5% Loans to customers 21.2% Other 3.4% Financial assets through profit and loss 74.8% Financial assets through profit and loss 72.9% Other 8.5% Loans to customers 6.7% Cash and cash equivalents 12.0% TRUST Investment Bank - Assets structure 2007 Budget 1H07 2006 32 581 43 647 21 629 31 441 34.0% 45.4% 10 000 20 000 30 000 40 000 50 000 1H2006 1H2007 Total assets Financial assets at fair value 47 396 41 973 34 528 27 285 -11.4% -21.0% 10 000 20 000 30 000 40 000 50 000 2006 2007 B Total assets Financial assets at fair value Financial assets through profit and loss 72.0% Other 10.9% Loans to customers 6.2% Cash and cash equivalents 10.9%
  44. 45. NBT – 1H07 Effective Interest Rates
  45. 46. TRUST Investment Bank - Financial assets at fair value structure Corporate debt securities 43% OFZ 36% Eurobons of RF 0% Other 21% Corporate debt securities 60% OFZ 5% Eurobons of RF 20% Other 15% Corporate debt securities 58% OFZ 17% Eurobons of RF 11% Other 14% Changes financial assets at fair value structure 2006 2005 1H07
  46. 47. Rating breakdown of Securities Portfolio - IBT Currency bonds portfolio rating breakdown 52% 1% 3% 7% 16% 9% 2% 2% 8% BBB+/Baa1 (incl. sovereign) BBB/Baa2 BB+/Ba1 BB/Ba2 BB-/Ba3 B+/B1 B/B2 B-/B3 No rating Ruble bond portfolio rating breakdown 21% 0% 1% 1% 19% 1% 6% 4% 3% 44% BBB+/Baa1 (incl. sovereign) BBB/Baa2 BBB-/Baa3 BB+/Ba1 BB/Ba2 BB-/Ba3 B+/B1 B/B2 B-/B3 No rating Ruble bond without rating portfolio breakdown 2% 18% 2% 1% 37% 9% 13% 18% Banks Electric utilities Municipality OFZ Futures Private enterprises State enterprises Subfederal financial institutions Subfederal governments
  47. 48. TRUST Investment Bank - Liabilities structure Payables under REPO 53% Customer accounts 19% Short term interbank 10% Long term financing 8% Other 10% Payables under REPO 49% Customer accounts 21% Short term interbank 12% Long term financing 10% Other 8% Funding structure 1H07 2006 2007 Payables under REPO 66% Customer accounts 9% Short term interbank 6% Long term financing 12% Other 7%
  48. 49. Pro-forma Key Ratios; Merged Bank Targets 3 year plan has not been amended due to current market conditions
  49. 50. Pro-forma Securities Portfolio – Optimising for the Future Pro-forma Trading Securities (RUB mln) - Proprietary Pro-forma Trading Securities (RUB mln) – Client Flow Business <ul><li>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 </li></ul>% of total assets 19,691 35,688 11,575 16,215 16,258 5,799 941 1,690 1,525 1,376 2005 2006 Government and municipal bonds Corporate bonds Equities Asset Management & Other 1,494 4,974 4,948 1,357 4,604 370 137 2% 5% 2005 2006 Total Equities Corporate bonds 27,897 1 1 , 016 1 2 , 949 2 , 420 1, 512 2 Q 2007 6 , 181 6 % 2 Q 2007 6,181 36,181 17,089 15,434 2,396 1,262 1Q 2007 17,704 10,575 Treasury and Asset Management 6,302 2,227 6,302 2,228 6,120 5,100 2007B 2008E 4,422 526 5% 1Q 2007 6,056 7,650 5,483 6,885 765 574 5% 5% 2007B 2008E
  50. 51. Pro-forma Funding Structure Increasingly Diversified Funding Structure 2006 2007 Budget 2008E 2006 2Q 2007 2008E 2009E <ul><li>$400-500mln funding from securitisation </li></ul><ul><li>$150-300mln new Eurobonds issued </li></ul><ul><li>$100mln raised in syndicated loans (new) </li></ul><ul><li>$50-100mln of other securities issued (new) </li></ul>3Q-4Q 2007 <ul><li>$400-500mln funding from securitisation </li></ul><ul><li>$350mln new Eurobonds issued </li></ul><ul><li>$100mln raised in syndicated loans </li></ul><ul><li>$50-100mln of other securities issued </li></ul><ul><li>€ 150-200mln securitisation bond </li></ul><ul><li>$100mln private placement </li></ul><ul><li>$100mln one year syndicated loan </li></ul><ul><li>$20mln NBT sub-debt (Mar) </li></ul><ul><li>$50mln NBT CLNs (Apr) </li></ul><ul><li>$200mln NBT Eurobond (May) </li></ul><ul><li>€ 150mln funding from securitisation (May) </li></ul><ul><li>$100mln CLN by NBT (Dec) </li></ul><ul><li>$150mln Eurobond by IBT (Sep) </li></ul>2Q 2007
  51. 52. Pro-forma Capital Structure <ul><li>Management estimates that after the merger, National Bank TRUST would reach TOP 20 Russian banks in terms of assets </li></ul><ul><li>1.5bln of 3.4bln of announced capital increase has been provided. The remaining 1.9bln will be provided by the end of October </li></ul><ul><li>Significant room to overperform asset growth targets in model </li></ul><ul><li>RUB 7bln capacity for tier 2 subdebt issuance </li></ul>Total Shareholders Equity (RUB mln) Capital Adequacy Ratio Tier 1 Ratio Total Capital Ratio BIS Requirements (8%) Central Bank (10%) Comments CAGR: 29% 20.6% 18.2% 16.1% 16.0% 15.3% 17.6% 2007B 2008E 2009E 1 4 . 73 % 1 2 . 24 % 1 Q 2007 1 2 , 130 23,367 19,057 15,997 2 Q 2007 2007B 2008E 2009E 1 6 . 89 % 1 3 . 16 % 2 Q 2007
  52. 53. Investment Banking Optimal Asset Structure as Department in Merged Bank IBT Asset Structure NBT
  53. 54. Pro Forma Related Party Transactions <ul><li>Transactions with related parties: </li></ul><ul><li>Carried out on an arm's-length basis </li></ul><ul><li>Subject to the same approval procedures and limits as transactions with unrelated parties </li></ul>Amounts Due to RP Customers Loans to RP 728 543 647 610 6.03% 2.62% 2.31% 1.72% 2004 2005 2006 1H2007
  54. 55. Pro-forma Employee Structure <ul><li>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 </li></ul><ul><li>Expected redundancies of appr. 80 people due to merger (23 front office, 57 back/middle office) </li></ul><ul><li>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 </li></ul><ul><li>Headcount not due to increase significantly after 2009 </li></ul>Employee Structure Total: 5,631 Total: 6,766 Total: 8,200 Total: 9,100 2006 2Q 2007 Pro-Forma 2007 Pro-Forma 2008 82% 94% 18% 6% 6 , 357 409 IBT NBT
  55. 56. 1 Executive Summary 4 Group Strategy 5 Group Business Overview 2 Rationale for Merger 3 Group History & Structure 6 Group Risk Management 7 Group Financial Forecasts 8 Group Merger Implementation Plan
  56. 57. Indicative Timetable: Expected Completion in 2Q 2008 <ul><li>Announced Merger to market, staff and regulators on 17 July 2007 </li></ul><ul><li>Engaged A&O as legal counsel </li></ul><ul><li>Finalizing Capital Increase of National Bank TRUST by late October 2007 </li></ul><ul><li>Informal Discussions with regulator on Merger </li></ul><ul><li>Official request will be filed with CBR during October 2007 </li></ul>
  57. 58. APPENDIX
  58. 59. Yukos Deposits
  59. 60. Yukos Related Deposits Post Yukos related company auctions the Unfrozen Yukos-Related deposits have effectively been reduced to zero
  60. 61. Historical Financials of NBT and IBT
  61. 62. Balance Sheet (RUB mln) NBT IBT 2005 2 2006 2 Q 2007 2005 2 2006 2 Q 2007 Cash and cash equivalents 13,970 11,147 1 6 , 326 5,350 5,696 4 , 774 Amounts due from credit institutions 15 15 15 1,891 1,320 519 Trading securities 7,302 6,150 2 , 655 13,887 34,529 3 1 , 441 Net loans to cust omers 16,379 24,847 32 , 676 4,381 3,166 2, 695 Total retail loans 4,691 12,715 - - - Corporate 11,688 9,891 SME - 2,241 - - - Property, equipment and intangibles 1,203 1,965 2,633 417 604 5 82 Tax and other assets 484 546 672 2,421 2,081 3, 6 35 Total Assets 39,360 44,670 54 , 977 28,347 47,396 4 3 , 646 Amounts due to credit institutions 2,875 1,126 1,423 3,959 3,983 4 , 395 Payables under repurchase agreements - - - 7,013 21,842 18 , 333 Amounts due to customers 30,564 34,868 38, 787 7,235 7,899 7 , 637 Retail 7,299 11,886 176 - - Corporate 23,265 22,867 7,059 SME - - - - - - Funding from securitisation - - - - - - Obligations to return securities received as collateral - - - 846 1,885 2,092 Debt securities issued 1,002 3,713 8 , 6 40 2,714 4,914 4, 312 Tax and other liabilities 726 625 6 30 348 204 2 44 Total Liabilities 35,167 40,333 4 9 , 480 22,114 40,727 37 , 013 Shareholders' Equity 4,193 4,337 5 ,4 97 6,233 6,669 6,6 33 16 , 934 11 , 343 4 , 399 13 , 482 25 , 305 7,899 7, 637 4,381 3,166 2, 695
  62. 63. Income Statement (RUB mln) NBT IB T 2005 2 2006 2 Q 2007 2005 2 2006 2 Q 2007 Interest income 2,726 4,622 3 , 337 1,354 2,383 1,55 8 Due from credit institutions 208 321 243 145 290 143 Debt securities and other financial instruments 615 679 179 555 1,581 1,126 Reverse repurchase agreements - - 117 117 62 Loans to customers 1,904 3,622 2,915 440 395 226 Interest expense (788) (1,373) ( 1,140 ) (659) (1,439) ( 1,077 ) Due to credit institutions (73) (27) (26) (125) (237) (153) Repurchase agreements - - - (301) (739) (617) Deposits by customers (634) (1,247) (870) (109) (225) (116) Debt securities issued (81) (99) (244) (123) (238) (153) Net interest income 1,938 3,249 2,197 695 944 481 Provision for impairment (304 ) (665) (417) (238) (295) 7 Net interest income after provisions 1,634 2,584 1,780 457 649 488 Fee and commission income 876 925 461 187 318 2 90 Fee and commission expense (163) (159) ( 96 ) (51) (45) ( 27 ) Net Fees and commissions 713 766 365 136 274 263 Total operating income 3,310 3,619 2,290 2,262 1,784 707 Operating expense (2,463 ) (3,317) ( 2,17 4 ) (1,324) (1,518) ( 748 ) Salaries and benefits (1,318) (1,855) ( 1,288 ) (828) (946) ( 442 ) Administrative expenses (815) (1,148) ( 687 ) (359) (426) (2 56 ) Depreciation and amortization (153) (165) ( 115 ) (77) (95) (4 0 ) Other expenses (178) ( 148) ( 8 4 ) (61) (51) ( 10 ) Profit before taxation 847 303 116 938 265 (41) Income tax expense ( 558 ) ( 111 ) 29 ( 213 ) ( 87 ) 5 Net income 288 192 145 726 178 (36) -
  63. 64. Russian Banking Sector Overview
  64. 65. Russian Banking Sector: Summary <ul><li>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 </li></ul><ul><li>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 </li></ul><ul><li>Mortgage lending is forecasted to grow by 80% in 2007 </li></ul><ul><li>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 </li></ul><ul><li>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 </li></ul><ul><li>VTB successfully listed in May 2007 and several other banks have IPO in the pipeline </li></ul><ul><li>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 </li></ul>Banking Sector Summary Total Assets Total Deposits Source: RosStat, CBR Key Banking Statistics 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 $bn % $bn %
  65. 66. Source: Deutsche Bank Equity Research (20-Sep-06) and Merrill Lynch Research (23-May-06) Total Deposits Mortgages Total Banking Assets Russian Banking Sector: Forecasts by Product Car Loans Corporate Loans Credit Cards
  66. 67. 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 Total Loans in % of GDP Total Deposits in % of GDP Banking Assets in % of GDP Russian Banking Sector: Benchmarking (1) (1) (1) (2) (2) (2)
  67. 68. Top Russian Banks Main Financial Indicators of Top 20 Banks, as at April 1, 2007 Source: Interfax (1) Includes capital increase of RUB 3.4bn

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