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PresentationAugust 2010
Overview
2
Investment grade credit ratings that are
among highest for Russian banks
Diversified business model spanning corporate, retail,
private banking and asset management
Improving outlook for Russian economy and
banking sector with long-term growth story intact
Extensive distribution network in Moscow and
key Russian regions
Strong risk profile and balance sheet with relatively
low NPLs, conservative provisioning, high collateral and high capital adequacy
Track record of strong support from the City of
Moscow – the Bank’s largest shareholder and
Russia’s wealthiest municipality
Solid earnings generation with
positive profitability sustained even through crisis
Leading and progressively
strengthening Russian banking franchise: #5 by
net assets and loan portfolio, #3 by retail
deposits*
3
Key Investment Highlights
* Source: Kommersant Dengi Magazine(№11) figures as of January 1, 2010
4* Source: Bank of Moscow IFRS Consolidated Financial Statements as at respective date** Source: Kommersant Dengi Magazine(№11) figures as of January 1, 2010
Top-5 Russian bank by net assets, capital and loan portfolio**
Top-3 deposit taker**
Controlled and historically supported by the City of Moscow
Wide range of banking services, including corporate and retail lending and deposit services, private banking, investment banking and asset management
The Bank serves 9.7 mn retail and 105,000 corporate and public sector customers
Ratings Moody’s S&P FitchBank of Moscow
Baa1 (Negative) n/a BBB-
(Stable)Russia Sovereign
Baa1 (Stable)
BBB (Stable)
BBB (Stable)
Key Performance Indicators*(RUB bn, %) FY 2007 FY 2008 FY 2009
Assets 528,086 801,385 825,144
Equity 48,595 67,650 86,596
Deposits 350,646 406,541 428,029
Net Loans 351,622 516,564 534,490
Tier I CAR 10.4% 9.5% 12.8%
Total CAR 14.8% 13.9% 18.9%
Net Profit 10,046 6,978 717
ROE (%) 22.6% 11.8% 0.9%
ROA (%) 2.0% 1.0% 0.1%
Bank of Moscow at a Glance
Moscow-based with wide geographical reach 134 offices and sub-offices and 474 desks at postal offices in Moscow and Moscow Region* The Group operates 68 regional branches which supervise a further 69 full-service sub-branches
and 113 sub-branches providing retail services and 8 cash offices located in the territory of Russia*
With total 394 outlets throughout the country – presence in 60 regions* Foreign subsidiaries in Belarus, Latvia, Estonia, Ukraine, Serbia and Representative office in
FrankfurtUnited States
of America
Estonia Petrozavodsk
Arkhangelsk
Kaliningrad
Vyborg
St. Petersburg
Vologda
Kirov
Yaroslavl
Tula
Kursk
Rostov-on-Don
KrasnodarSochi
Vladikavkaz Astrakhan
Orsk
Orenburg
Samara
Saratov
Voronezh
Nizhny NovgorodCheboksary Berezniaki
Perm
Izhevsk
Yekaterinburg
Tyumen
Moscow
Omsk Tomsk
KemerovoNovosobirsk
Novokuznetsk
Kransnoyarsk
IrkutskUlan-Ude
Vladisvostok
Khabarovsk
Yuzhno—Sakhalinsk
Petropavlovsk—Kamchatsky
“Moscow-Minsk” (Minsk)
“Zarechye”(Kazan)
“Latvian Businessbank”(Riga)
Poland
Byelorussia
Latvia
Finland
Norway
Ukraine
Turkey
Iran
Kazahkstan
China
Japan
United Statesof America
Russian Federation
Regional Branches
Subsidiary and Affiliate Banks
“BM Bank” (Kiev)
Barnaul
Maykop
Belgorod
Stavropol
“Eesti Krediidipank”(Tallin)
Orel
Volgograd
UfaYakutsk
Velikiy Novgorod
LipetskKazan
SyktyvkarKovrov
Chelyabinsk
* Source: Bank of Moscow as of 1 May, 2010
5
Branch Network
6
Macroeconomic and Industry Environment
GDP Growth, Fiscal and Monetary Position
1 76
5
1 58
7
1 22
9
1 66
0
765 9
89 1 29
44,8%
4,0%
(7,9)%
5,6%8,1%7,7%6,4%
0200400600800
1 0001 2001 4001 6001 8002 000
2005 2006 2007 2008 2009 2010E 2011E(10,0)%(8,0)%(6,0)%(4,0)%(2,0)%0,0%2,0%4,0%6,0%8,0%10,0%
Nominal GDP (US$ bn) Real GDP Growth (%)
463,5455,7 447,8
168,4289,0
80,261,9
78,572,7
65,454,4
97,7
0
100
200
300
400
500
600
2005 2006 2007 2008 2009 2010E 2011E0
20
40
60
80
100
Russia's Foreign Reserves, end of period, US$ bnOil price (Brent, US$/b)
Economy and Growth Real GDP Growth vs. Peer Countries
Oil Price and Foreign Reserve Monetary Indicators
Source: CBR historical data for Foreign Reserve, Economist Intelligence Unit, June 18, 2010 for other indicators
7
29,029,5
30,229,428,826,3 24,5
7,0% 7,0%8,8%
13,0%
10,0%
11,0%12,0%
6,5%6,4%
8,8%
13,3%11,9%
10,9%9,0%
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010E 2011E0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
US$/RUB Exchange Rate, end of periodCentral Bank Refinancing Rate, end of periodConsumer Price I nflation (%),end of period
3,3%
0,8%2,8%
8,7%
(7,9)%
(4,9)%
(1,8)%
6,8%
(2,4)%(4,9)% (5,2)%
1,2%
7,8%9,9%
6,3%4,8%
(12,0)%
(8,0)%
(4,0)%
0,0%
4,0%
8,0%
12,0%
Russia China India Brazil Ger-many
USA UK Japan
2009 2010E
Business Overview
8
Top Russian Banks by Capital (RUB, bn)
Bank of Moscow’s Market Position
Source: Kommersant Dengi Magazine(№11) figures as of January 1, 2010
863
Top Russian Banks by Total Assets (RUB, bn)7 158
9
3 674
Top Russian Banks by Retail Deposits (RUB, bn)
Top Russian Banks by Loan Portfolio (RUB, bn)
5 366
Business Overview
Bank of Moscow is among the highest rated in the Russian banking sector
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba3
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
Ba2
10 Source: Senior Unsecured Eurobond Ratings
Business Overview
Business Overview
The City of Moscow has been the largest shareholder of the Bank since it was established in 1995
Combined stake of the City of Moscow in the Bank’s share capital is 63.59%, including 46.48% stake of the Property Department of the City of Moscow and 17.11% stake of Stolichnaya Strakhovaya Gruppa, which in turn is controlled by the City of Moscow and the Bank of Moscow Group
The City has participated in all of the Bank’s 14 equity issues
Mr. Andrey Borodin, Chairman of the Management Board, and Mr. Lev Alaluev, Deputy Chairman of the Board of Directors, indirectly jointly control 20.32% of the Bank
Controlled by
the City of
Moscow
11
Shareholder Structure
Property Department of
the City Moscow46.48%
OJSC Stolichnaya Strakhovaya Gruppa
17.11%
Beneficial Ownership of Mr. Borodin and Mr.
Alaluev20.32%
Goldman Sachs International 3.88%
Source: Bank of Moscow
LLC “GSM” 3.25%
OJSC “GSM Investments”
3.16%
Credit Suisse International 2.77%
Others 3.03%
90,9
66,8
121,6
40,9
13,9%
18,9%
14,8%
13.3%
10,2% 10,4% 9,5%
12,8%
0
20
40
60
80
100
120
31-Dec-06 31-Dec-07 31-Dec-08 31-Dec-095%
10%
15%
20%
Total capital Total capital ratio Tier 1 ratio
BoM has a strong capital position As of December 31, 2009 the Bank’s total
capital ratio (Basel 1 Accord) was 18.9%, and Tier 1 ratio was 12.8%*
The Bank has been proactively increasing its capitalisation:
In July 2009 BoM raised RUB 20 bn in its 13th additional share issue
On July 26 2010 14th issue was successfully registered with the CBR and boosted the capital of the Bank by RUB 21.7 bn.
On October 15, 2009 Vnesheconombank (VEB) extended a 10-year subordinated loan to the Bank for RUB 11.1 bn
Capital Base* (RUB bn, %)Capital Adequacy
Capital Adequacy
12
min 8% (Basel 1 Accord)
* Source: Bank of Moscow, IFRS Consolidated Financial Statements as of December 31, 2009
Business Overview
Main Business Lines
13
Corporate lending Syndicated loans Trade finance and guarantees Foreign trade and exchange operations Debt Capital Markets (Local and International) Payment and account services Securities trading Precious metals Depositary services Underwriting Research
Corporate and Investment Banking
Business Overview
Private asset management services Fund management services Mutual and pension funds Private Banking
Current and deposit accounts Loan services Mortgages Debit and credit cards Money transfers Internet and telephone banking Internet trading (“Mos-broker”)
Retail Banking
Asset Management & Private Banking
FOCUS ON MAINTAINING LEADING POSITION AS TOP 5 RUSSIAN BANK AND IMPROVING EFFICIENCY, PROFITABILITY AND CURRENT FRANCHISE AS OPPOSED TO AGGRESSIVE GROWTH
14
Business and Operating Strategy
Bus
ines
ses
Focus on acquiring new customers and developing relations with existing ones Continue servicing all client segments, yet pay particular attention to strengthening presence in SME segment Build customer relationships and increase cross-selling, including investment banking products
Corporate & Investment Banking
Retail Banking Leverage strong retail brand and branch network Continue developing lending and deposits products as a key focus area – grow retail deposits market share
Target high net worth individuals, while seeking to provide product diversity and service quality in line with best international practices
Private Banking & Asset Management
Business Overview
Emphasis on raising effectiveness of risk management Control over the quality of the loan and securities portfolio Credit risk diversification and strengthening of underwriting standards
Prudent Risk Management Policy
Ope
ratio
nal
Business Efficiency andMarket Positions
Increase business efficiency Maintain leading positions in the national banking industry Tighten control over costs and expenses
Branch Network
Retain and strengthen positions in the regions Use the regional network to diversify client and risk concentration Short-term focus on efficiency improvement of existing network, over medium-term potentially resume network organic
growth
173,0224,0
255,3
2006 2007 2008 2009Other Legal EntitiesState-owned OrganisationsFederal and Regional Budgets and Funds
Over 105,000 corporate and public sector customers as of December 31, 2009*
Focus on strategically important sectors of Russian economy
Corporate banking dominates the asset side of the balance sheet
Involvement in financing of the key projects of the City of Moscow
SME – strategically important sector
Increasingly active in trade financing
Developing of investment banking services, including underwriting, debt issuance, research
Corporate and Investment Banking
15* Source: Bank of Moscow ** Source: Bank of Moscow IFRS Consolidated Financial Statements as of December 31, 2009
Loan Portfolio to Legal Entities**
Business Overview
213%183% 197% 199%
2006 2007 2008 2009Gross Loans, RUB bn Collateral/Gross Loans, %Provision/ Gross Loans, %
222.8281.5
416.4 489.5
Deposits and Accounts of Legal Entities** (RUB bn)
46.6%7.7%45.7%
44.0%9.1%
46.9%
36.9%
10.5%
52.6%
26.5%
17.9%
55.6%
250,6
0.9% 0.8%1.5%
6.1%
68,599,1
121,4144,118,0
27,529,8
33,3
86,5
126,7151,2
177,4
2006 2007 2008 2009
Term Deposits Current Accounts
Business Overview
No. 3 retail deposit taker in Russia* RUB 177.5 bn of term deposits and current accounts as of December
31, 2009** Approved by CBR to participate in the Deposit Insurance System,
authorized bank of the Deposit Insurance Agency to manage retail accounts of the banks with withdrawn licenses
Over 9.7 mn retail customers as of December 31, 2009*** 14.1 mn plastic cards as of July 1, 2010 RUB 88.3 bn – retail loan portfolio (gross) as of December 31, 2009** Wide range of retail services, including Muscovite Social Cards - a
combination of a bank debit card, an ID, an insurance identification card and public transportation travel card for Muscovites
As at July 1 2010, BoM had 1,842 ATMs in operation Advanced Internet and Telephone banking
Retail Banking
16* Source: Kommersant Dengi (№11) figures as of January 1, 2010**Source: Bank of Moscow IFRS Consolidated Financial Statements as of December 31, 2009*** Source: Bank of Moscow
Retail Loan Portfolio** (RUB bn)
Retail Loan Portfolio Breakdown** (2009)
Overview
Retail Deposits and Accounts** (RUB bn)
Consumer Loans48,9%
Mortgages31,1%
Credit Cards 1,6%Scoring Loans 6,6% Car Loans 11,8%
88,3
113,174,6
36,6
111%90%
108%89%
2006 2007 2008 2009Gross Loans, RUB bn Collateral/Gross Loans, %Provision/Gross Loans, %
3.8%2.9% 5.7%
15.4%
Business Overview
Loan portfolio is diversified by industries and geographically, which is in line with the credit risk management approach
More than a half of the Group’s loan book is concentrated beyond the borders of Moscow and Moscow region*
Related-party lending, which includes lending to municipal entities of the City of Moscow, accounted for 2.5% of the Group's gross loan portfolio as at 31 December 2009
Loan portfolio is dominated by loans in local currency. Loans in foreign currencies account for 33,3% of total loans to customers*
Bank of Moscow’s Loan Portfolio
17
Loan Portfolio Breakdown by Currency* (2009)
* Source: Bank of Moscow as of December 31, 2009** Source: Bank of Moscow, IFRS Consolidated Financial Statements as of December 31, 2009
Overview Loan Portfolio Breakdown by Industry Sectors**
RUB 66,7%
USD 25,7%
EUR 3,7% Other 3,9%
Corporate Loans 88%
Construction 13,9%
Others 5,2%
Financial & OtherServices 21,8%
Manufacturing12,5%
Trade 10,9%
Individuals 15,3% Transport & Comms 4%
Fuel& Energy 6,2%
State Agencies 3,2%
Metallurgy 3,8%
Food Industry 2,5%
Overdue Loans and Allowance for Loans Losses Client Concentration: Twenty Largest Borrowers (RUB bn)
Bank of Moscow’s Loan Portfolio (Cont’d)
18
As of December 31, 2009 the provisions totalled RUB 43.3 bn, a 3.4 times growth from the beginning of 2009
As of December 31, 2009 LLPs comprised 7.5% of the loan portfolio compared to 2.4% as of December 31, 2008
NPLs accounted for 3.9% of the Group’s gross loan portfolio The NPLs are 1.9 times covered by provisions
190,3%187,1%186,8%
0,7%
1,3%
3,9%
0%
100%
200%
300%
400%
500%
2007 2008 20090%
1%
2%
3%
4%
5%
LLP/NPL NPL/Gross loans
Concentration of top 20 borrowers in the total loan portfolio increased to 27.5% due to slowdown of the economy
Net loan portfolio 2.0 times over-collateralised as at 31 December 2009
Source: Bank of Moscow, IFRS Consolidated Financial Statements as of December 31, 2009
Business Overview
529,5 577.8
259,4356,1
990,1
621,2
446,2
1 074.2
24,9%
27,5%
20,2% 21,8%
0
200
400
600
800
1 000
1 200
1 400
2006 2007 2008 200920%
22%
24%
26%
28%
30%
Total LoansCollateralTOP 20 Client Concentration
Conservative Credit and Market Risk Policies in Place
19
Credit Risk
Limited open foreign currency position, stop-loss, country and borrower limits Centralised control over exchange rates in currency operations In accordance with CBR regulations, currency risk exposure cannot exceed 20% of the Group’s equity
in all currencies Currency position is controlled by the CBR on a daily basis
Currency Risk
Managed with the aid of scenario analysis, simulative, optimising and predictive modelling Strict CBR controls on instant (N2) and current (N3) liquidity standards Monitored on a daily basis
Liquidity Risk
Measured via gap and interest rate sensitivity models Also employ stress testing and scenario analysis techniques
Interest Rate Risk
Based on recommendations and requirements of CBR, Basel Committee and auditors Single borrower/economic group limits Product type/geographic/industry concentration limits Ongoing monitoring of borrower’s conditions and collateral Centralisation of underwriting standards to address the crisis
Vertically integrated risk management system implemented throughout the Bank, including regional branches, with the CRO reporting directly to the Bank’s CEO and the Management Board
Credit Committee, Small Credit Committee and Mortgage Committee are authorised to make independent lending decisions
Centralized decision making on issuance of retail loan products
Business Overview
20
IssuedMay-2005
US$300mn
Due 2010Issued
Mar-2008
CHF 250mn
Due 2011Issued
May-2006
US$500mnDue 2013
IssuedMar-2007
US$105mn
Due 2010Issued
Nov-2007
US$600mn
Due 2010Issued
Jan-2009
US$30mn&€105mn
Due 2011Issued
Dec-2009
US$350mn
Due 2011
IssuedNov-2005
US$300mn
Due 2015Issued
May-2007
US$400mn
Due 2017
IssuedAug-2008
RUB 10,000mn
Due 2011Issued
Feb-2008
RUB 10,000mn
Due 2013
Within 5 years (2006-2010) the Bank of Moscow raised equivalent of USD 4.25bn and RUB 25bn from the international and local capital markets
Repaid
International and Local Capital Markets Funding History
Business Overview
IssuedNov-2006
US$500mnDue 2008
Eurobonds
LT2 Debt (Subordinated Eurobonds)
Local Bonds
Syndicated Loans
Issued May-2006
US$400mnDue 2009
Issued May-2008
US$220mnDue 2009
Issued Sep-2004
US$250mnDue 2009
Issued Nov-2006
RUB 5,000mnDue 2009
IssuedMar-2010
US$750mn
Due 2015
Financial Overview
21
Financial Overview
Strong and relatively stable deposit base has always been one of the key advantages of the Bank
As of December 31, 2009, customers accounts comprised 58.0% of the Bank’s liabilities
Customer accounts increased 5.3% for 12 months of 2009
Reliance on wholesale financing is currently low Access to variety of liquidity facilities
Assets Assets (RUB bn)
Overview of Assets and Liabilities
22Source: Bank of Moscow, IFRS Consolidated Financial Statements as of December 31, 2009.
215260
351
407 42856
22638 70
92 78
51
3
2
721
0
200
400
600
800
2006 2007 2008 2009Due to other banks Due to customersDebt securities issued Other
Liabilities Liabilities (RUB bn)
Assets well-balanced in terms of risk-return profile
Portfolio of securities mostly issued by federal and municipal government agencies and leading Russian corporates in accordance with conservative risk policy
Fixed-income instruments dominate trading securities portfolio
Over-collateralized loans to customers portfolio
76
517 535256 352
6444
13351
35 119
37
66
51
0
200
400
600
800
2006 2007 2008 2009
350480
734 739
343473
686 735
Loans to customers Cash and equivalentsMandatory cash balances with CBR Trading securities
428,0
259,5
350,6
406,5
2006 2007 2008 2009
Financial Overview
Continued diversification of deposit base state funding available through: CBR facilities (unsecured and secured loans, repo transactions), Ministry of Finance deposits and funds of state-owned corporations
The Bank is authorised to tender for budget funds of the City of Moscow along with several other banks
Growth in Deposits* (RUB bn) Composition of Client Deposit Portfolio
Deposit Base
23
By Deposit Type*
By Customer Type*
* Source: Bank of Moscow, IFRS Consolidated Financial Statements as of December 31, 2009.
Current / Demand Accounts
34.5%
Term Deposits65.5%
Individuals41.5%
Federal budgets + regional funds 15.5%
State-ownedorganisations
10.5%
Other commercial+ legal entities
32.5%
Financial Overview
30,424,918,3
46,3
51,2%
46,1%
49,3%
30,9%
05
101520253035404550
2006 2007 2008 200930%
35%
40%
45%
50%
55%
Income Cost/Income
1,0% 0,1%1,8% 2,0%
4,6%
5,2%5,0%5,3% 11,8%
20,4%22,6%
0,9%0%
1%
2%
3%
4%
5%
6%
2006 2007 2008 20090%
5%
10%
15%
20%
25%
Return on Assets Net Interest MarginReturn on Equity
Operating Income (RUB bn)
24
Cost to Income Ratio* (RUB bn, %) Selected Profitability Ratios*
Source: Bank of Moscow IFRS Consolidated Financial Statements as of December 31, 2009
Profit and Loss (RUB bn)
14,1 19,128,4
1,6
(3,7)
3,14,3
5,8
31,31,1
9,55,5
2006 2007 2008 2009Net commission incomeNet income from trading operations and other incomeNet interest income