Testing TKB

BUSINESS OVERVIEW9M2011

2

OVERVIEW

3

Total Assets and Loans (RURbn)

Loans by Clients(1)

Business Focus:• Lending to mid-sizes corporates & SME sector. Since 2006

gradually increased retail exposure• 25,700 corporate & 211,500 private customers

Reputable Shareholders:• EBRD (AAA-rated): 28.59% (first joined in 2006 with a smaller

share)• DEG, subsidiary of KfW (AAA-rated): 9.1% (first joined in 2007

with 10.5% share)• IFC (AAA-rated): 7.7% (joined in 2011)• Rest owned primarily by management team

Regional Play:• Strong regional focus with historically 2/3 of loan book

formed by the regional clients; • 18 branches & 56 other offices. Key regional markets: Perm,

St. Petersburg, Syktyvkar, Ryazan

Strong Credit Assessment:• Moody’s Investor Service: B1/Stable• Moody’s Interfax Rating Agency: A1.ru• Expert RA: А+

Bank Overview

(1) As of 9M2011Currency Rates (RUR/USD): 2007- 24.5462 2008 – 29.3804 2009 – 30.2442 31.12.2010 – 30.4769, 30.09.2011 – 31.8751

Loans by Regions(1)

4

Operations:• Largest private commercial bank in Perm Region(6)

• Top 10 private bank in trade and structured finance in Russia(4)

(1) RBC Rating(2) Profile Magazine

Rating Positioning by Assets(2)

Rating Positioning by Equity(2)

Market Positioning

(3) Finans Magazine (4) Expert RA, 2011

Our Growth and Size in Russia (as of 9M11): (1)(2)

• Assets :• Loans:• Retail

Deposits:• Equity:

#43rd

#36th

#53th

#41th

Reliability:• Profile: • Expert RA:• Moody’s:

8th most reliable bank 9M2011(2)

А+ «Very high level of creditworthiness»(4)

B1(5)

(5) Moody’s Rating, 2011 (6) Dengi Magazine

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Financial Summary

Currency Rates (RUR/USD): 2007- 24.5462 2008 – 29.3804 2009 – 30.2442 31.12.2010 – 30.4769, 30.09.2011 – 31.8751 (1) Excluding for provisions(2) NPLs include over 90 days overdue loans

Audited IFRS (RURbn) 2007 2008 2009 2010 9M2011Total Assets 44.3 54.9 59.7 74.0 94.1Total Loans 29.9 37.1 41.7 52.8 73.8Total Liabilities 40.2 49.5 52.3 65.4 83.2Total Deposits from Customers

25.1 25.7 29.6 42.3 50.3

Tier 1 Equity 4.2 5.5 7.3 8.6 10.9Total Equity (Tier 1 + Tier 2) 6.2 8.2 10.9 12.8 15.6Net Interest Income 1.7 2.4 0.9 2.8 1.8Net Profit 0.8 0.7 0.5 1.3 0.3ROAE 22.8% 14.7% 7.8% 16.0% 4.8%ROAA 2.3% 1.4% 0.9% 1.9% 0.6%CTI(1) 49.2% 51.7% 35.7% 45.1% 53.2%CAR 15.5% 16.2% 19.1% 15.8% 13.3%NPLs/Total Loans(2) 1.2% 2.6% 6.9% 6.8% 4.6%

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Ownership Structure

Other• Minority stakes of <5%• 5 top managers• 6 legal entities and 7

individuals not involved in day-to-day management of the bank.

• multinational financial organization based in London, UK

• AAA rated by all rating agencies• Shareholder since 2006• Member of BoD

• multinational financial organization based in Washington D.C., USA

• AAA-rated by all rating agencies• Shareholder since 2011

• DEG is wholly-owned subsidiary of KfW, which is 100% owned by German Government

• AAA-rated by all rating agencies• Shareholder since 2007• Member of BoD

O. Gryadovaya • Chair of the Management Board and Member of

BoD• Day-to-day management of the bank since 2000• Shareholder since 2000

L. Ivanovski• Public notary in Moscow; no

involvement in day-to-day management

• Shareholder since 2000• Member of BoD

International shareholders

Spouses

Collaboration with International Shareholders

• Collaboration with EBRD, DEG and IFC allows the Bank to access international funding and provide competitive products

• EBRD & DEG are active Members of BoD and help TCB shape its business in line with best international business standards

• IFIs facilitate their international agenda through offering purpose-orientated funding facilities through TCB (such as energy efficiency, micro-lending and mortgage)

• The support of AAA-rated institutions helps TCB in accessing international markets and establishing business links with foreign banks & companies

EBRD, DEG & IFC (“IFIs”) Benefits Facilities from International Shareholders

Trade Facilitation Program $50 MMortgage Finance $5 MMicro lending & SME $6 MSubordinated Loan $15 MMicro lending $10 MMicro lending & SME $13 MSubordinated Loan Rb572

M

Global Trade Finance Program

$40 M

Energy Efficiency Program $18 M

Syndicated Loan A + B $164 M

SME & Leasing $15 M

Mortgage Finance $10 M

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8

OUR BUSINESS

GENERAL SHAREHOLDERSMEETING Marina Petrov

(Head of resident office of EBRD in North-west district of Russia)

Antje Steiner (Senior Investment Manager, DEG)

CreditCommittee

Risk ManagementCommittee

LimitCommittee

BOARD OF DIRECTORS

Olga Gryadovaya,Chair of Management Board

(Professor of Economics;70+ scientific publications)

MANAGEMENT BOARD

Leonid Ivanovski(Notary public, Moscow)

Boris Kazakov, Chairman of BoD(30+ years+ of experience in finance;

former CFO of NorNickel)

Bank Board(Vice Presidents)

TechnologicalCommittee

Alexey Vorobiev (Bank for Development &

Foreign Economic Affairs, VEB)

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Clear and Transparent Governance

Igor Yurgens(VP of Russian Union of

Industrialists & Entrepreneurs)

Internal AuditCommission

Audit and RiskCommittee

Corp. Gov.Committee

CompensationCommittee

Independentmembers

to be established in 2012

LegalCommittee

Strong Focus on Regional Expansion

St. Petersburg

Moscow

SamaraYekaterinburg

Perm

Syktyvkar

Nizhny Novgorod

YaroslavlBryans

k

Kaluga

Ryazan

Voronezh

Belgorod

KrasnodarRostov-on-Don

Novosibirsk

Moscow

Kolomna

Podolsk

Shelkovo

Serviev PasadKorole

v

Kungur

Perm

Solikamsk

Krasnovishersk

DobryankaKrasnokams

k

Tyumen

High penetration, branch present in regionHigh penetration, covered from branch in adjacent regionAverage or low penetration, no branch presence

BranchVery long-term presence branch

Key Facts:• A diverse and well established regional

network outside of Moscow• 211,500 individuals and 25,700 corporate

customers in more than 18 regions• Headquarters located in Moscow• 74 outlets:

• 18 branches + 1 representative office• 31 additional offices + 3 operational

offices• 21 credit-cash offices

• 65 cash advance offices• 306 ATMs• 1,218 POS terminals

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Kaliningrad

Barnaul

Remote office

Strong Regional Presence

• TCB is a rapidly growing regional bank, registered in Moscow, with 74 outlets

• Over 19 years of regional markets experience – reputation of a local bank in most locations

• Top 5 in its key regional markets: Perm, Syktyvkar, Ryazan

• Bank’s strategy is to diversify further into regions decreasing the relative amount of exposure to Moscow

Lower concentration of banksSome financial services are as yet unavailableHigher customer retention & higher lending marginsBetter lending prospects due to higher regional demand for industrial renovation & modernizationHigher concentration of SMEs; diversified customer base

Advantages of Regional Banking

TCB Coverage:• TCB branches penetrate regions with over 75% of

Russian population• Our primary focus remains to further expand our

network in Central, NW, Volga, Ural and Southern districts

• Significant investments made in mobile & internet banking platforms to penetrate less accessible regions with lower population density

Far Eastern

Siberian

Ural

Northwestern

Volga

Central

North Caucasian

Southern

4 1

7 56

10 3321 29

10 8

27 59

13 4

8 7

% of population in district (1)

People per square km (1)

27

59

National Strategies Russian Federal Districts

TCB presence

1

2

3

4

5

(1) 2010 Russian Census 11

Diversified Business Model

Corporate Banking SME Banking Retail Banking• Corporates with annual sales

over Rb1.8bn• Overdrafts,long-term financing,

guarantees, trade finance, leasing, factoring, treasury, deposits, settlements, cash collection, safety boxes & payroll projects

• 39% of the total loan book

• Medium businesses with sales less than Rb1.8bn,small businesses and micro companies with sales up to Rb400M.

• Overdrafts,long-term financing, leasing, payroll projects, factoring, deposits ,settlements, cash collection and consulting


• Middle segment• Mortgages, credit cards, debit

cards, car loans, cash loans, deposits, settlements

• Special focus on employees of corporate clients


Added-value services and important funding base Bank’s core focus in lending Higher margin lending and

alternative funding base

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Corporate Banking

Guarantees (RURbn)

Type of Guarantees

For participation in competitions & tenders Fulfillment of contracts Return of advance payments To taxing authorities To customs bodies As importer under contracts to foreign

supplier.

Corporate Deposits/Loans (RURbn)

Number of Corporate Customers

+18%

+60%

Currency Rates (RUR/USD): 2007 - 24.5462 2008 – 29.3804 2009 – 30.2442 31.12.2010 – 30.4769, 30.09.2011 – 31.8751

Corporate Lending

Loan Portfolio by Industry 9M2011

Breakdown of Trade Sector 9M2011

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15

Corporate Banking: Trade Finance (1)• TCB offers a wide range of comprehensive trade

finance products, including:• letters of credit (with financing / discounting

options)• guarantees / standby LCs • bilateral trade-related loan facilities (including

PXF) • Currently ranks #7 trade finance provider in Russia

(1)

• TCB has developed various financing structures aimed at arranging medium- to long-term (3 to 7 years) ECA-covered financing to support imports of capital goods into Russia

• More than 40 biggest international financial institutions take exposure on TCB in Trade Finance area (next slide)

(1) Expert Magazine, 9M2011(2) Includes perfumery, clothing, shoes, pharmaceutical, textile, printing & household products

Trade Finance Focus

Cooperation with ECAsTCB established long-term relationship with major ECAs worldwide:

Trade Finance by Industry 9M2011

Trade Finance Turnover

(2)

Reputation of a reliable and professional partner enables TCB to successfully develop cooperation with banks all over the world.

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Corporate Banking: Trade Finance (2)

BNP-ParibasVTB-France

Standard Chartered RBS

DB Trust Company AmericasPNC (National City)CoBankCitibank

DBS Bank

Banco SabadellLa Caixa

UBI Banca Monte dei Paschi di SienaUniCreditIntesa SanPaoloBanca popolare di VicenzaBanca popolare dell’Emilia RomagnaBanca Popolare Group

Nova Ljubljanska Banka

RBIBank AustriaOberbank

UBSBCP Credit Suisse

Deutsche BankCommerzbankAKA Export Finance BankLBBWLandesbank BerlinVTB-DeutschlandHypoVereinsbankBHF Bank

Danske Bank Svenska Handelsbanken

KBC Bank NV

ABN AMRO/RBS ING BankCredit Europe Bank

Nordea Bank

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Plastic Cards

Retail Portfolio by Product (9M2011 vs YE)

(1) RBC Rating 1H 2011Currency Rates (RUR/USD): 2007- 24.5462 2008 – 29.3804 2009 – 30.2442 31.12.2010 – 30.4769, 30.09.2011 – 31.8751

Retail Banking Developments

Retail Banking

+60%

+30%Summary (RURbn)

• Strong focus on mortgages – currently #19 in Russia(1); while consumer loans remain available only to corporate customers

• Increase in product spectrum for depositors (e.g. introduction of “deposit-builder” feature on website) and borrowers (e.g. “mortgage without borders” – first offset mortgage in Russia)

• Significant efficiency improvements in 2011: Completed implementation of Siebel CRM system Launch of FICO scoring platform

Outer circle = 9M2011Inner circle = YE2010

+49%

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TCB’s Business Strategy (2011-2015)

SMEs to remain a priority Special corporate focus on TF,

guarantees, leasing & factoring Mirco-lending portfolio to grow

quicker Increase retail customers through

unique product offering (e.g. offset mortgage)

Cross-sell of retail products to corporate customers

Own processing center to further boost card growth

Create global customer database & front-office interface on the basis Siebel CRM

Launch state of the art mobile & internet banking platform

Introduce sophisticated customer-loyality program to boost retainment

Develop IT-intensive retail and corporate products

Automate internal processes & reporting

Increase ATMs 2.5x and payments terminals by 9x

Maintain emphasis on information secutity

Increase of business in newly opened offices in the regions: Ukhta, Barnaul, Labinsk, Novosibirsk & Kaliningrad

New mobile & internet banking to help access regions with lower population densities

Increasing contribution of regions to funding

Promotion of retail services in regions and development of agency networks in regions

Staff training and optimization of remuneration practices

Improve fee and commission income through cross-selling and service quality

Further improvement of financial controlling & planning

Reduce the share of Top 20 borrowers Bond issues for Rb9bn during 2012-13, sub-debt

issues and 2 mortgage securitisations planned Reduce LT CTI to <45%

Long-term ROE of >15%

&stable growth ofmarket share

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RISK MANAGEMENT

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Strong Risk Management

• Centralized credit risk management with appropriate limits at regional level

• Modernisation of lending risk management procedures and technologies

• Continuous monitoring of loan portfolio and addressing promptly loan quality issues

• Strengthening of specialization of credit analysts for the purpose of improvement of quality of the analysis

• Daily monitoring of open positions• Stop-loss limits for FX operations• Very low currency mismatch• Active use of hedging tools

• Measuring risk using GAP analysis and duration method

• Contractual ability of loan interest rate revision depending on changes in market interest rates

• Use of hedging tools

• Focus on ensuring diversification of asset-liabilities maturities

• Continuous monitoring of compliance with CBR liquidity requirements

• Maintenance of sufficient level of highly liquid assets

• Operational risk management system in accordance with new Basel II requirements

• Reputational risk management• Standardized anti-money laundering and

KYC standards in place• Increased of level of safety of customer

settlements

Credit Risk €Currency

Risk

OperationalRisk

10%10%Interest Rate

RiskLiquidity

Risk

• Stress testing to possible market changes• Measuring VAR for specific financial

instruments and portfolio as a whole• Hedging equity portfolio with future

contracts• Maintaining of level of limits on high-risk

assets at crisis level• Strict control of obligatory compliance with

all types of limits

Market Risk

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Credit Risk Assessment

Credit Committee develops and supervises current and long-term lending policy Credit Committee takes decisions on the structure of the loan portfolio, overdue debt, foreclosure of pledges, allowance

and extension of loans to customers Minor Credit Committees exist at HQ and branches and take decisions on granting loans to individuals, micro and SME

enterprises within limits and conditions of lending programs. If terms or conditions of a loan differ from an approved lending programs and limits, the Minor Credit Committees have to submit the issue for consideration to Credit Committee

Branches: The Internal Audit Service examines lending activities of the branches and ensures consistent standard are applied The Regional Development Department controls compliance with lending limits approved for the branches and quality of

customers applications Regional back-offices control the performance of credit committees decisions whilst back-office in HQ supervises back-

offices of branches.

appraisal #1

Customer Department

Collateral Department

Underwriting

Legal Department

Security DepartmentCredit Committee or

Minor Credit Committees

Back Office

Customerapplication

Signing of loanagreementIf more information is needed

docu

men

tatio

n #2

#3

#4

Appraisals, Summary & Recommendation

If not approved

If approved

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Asset and Liability Risk Management

Liquidity Profile 9M2011 (RURbn)

Currency Profile as of 9M2011 (RURbn)

Provisions

Corporate Loans by Rating, % Description of TCB Ratings Methodology

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Provisions on Corporate Loans by Rating (RURbn)

DescriptionMinimum Reserve

A1A2A3

Credit risk is practically non-existentMinimal risk: the most reliable borrowersLow risk: reliable borrowers

0%0%0%

B1B2

Low risk: good borrowersModerate risk: fairly reliable borrowers

1%11%

B3B4

B5

Medium risk: average borrowersAcceptable risk: borrowers with creditworthiness below averageMaximum allowable risk: fairly good borrowers

21%31%

41%C1

C2C3

High risk: borrowers with unsatisfactory creditworthinessVery high risk: sub-standard loansLoans with expected default

51%

66%81%

D Default 100%• Transcapitalbank conducts conservative provisioning policy. Credit department analyzes a borrower’s business activity, its financial position, debt service as well as an existence of marketable collateral.

• During 9 months 2011 TCB has written off Rb37M.• Court proceedings are in progress for loans with D-

rating with high probability of claims satisfaction and reimbursements due to realization of collateral and bankruptcy assets.

6.6

Operating Income and Profitability

Operating Income (RURbn)

Operating Income Structure

Share in Provision Expense in 2011

Trading Portfolio (RURbn)

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+60%

+8%

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FINANCIAL OVERVIEW

Balance Sheet Structure

Assets Growth (RURbn)

Shareholder’s Equity Growth (RURbn)

Assets Structure 9M2011 Liabilities & Equity Structure 9M2011

26(1) Financial Assets include: investment securities available for sale, trading securities and repurchase receivables(2) Debt Securities Issued include: Promissory notes, Certificates of depositCurrency Rates (RUR/USD): 2007 - 24.5462 2008 – 29.3804 2009 – 30.2442 31.12.2010 – 30.4769, 30.09.2011 – 31.8751

+27%+27%

CAGR: 22%

CAGR: 29%

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Loan Portfolio

Total Loans by Maturity 9M2011

Total Loans by Currency 9M2011

Total Loans by Region 9M2011

Total Loans by Sector 9M2011

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Loan Quality

Largest Borrowers (% of Gross Loans)(1) Related Party Lending (% of Equity)

Loss Provisions and NPLs(2)Loans by Collateral

28(1) Gross Loans means loans before impairment(2) NPL include over 90 days overdue loans

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Capital Adequacy

Management of Capital (RURbn)

Capital Adequacy

Currency Rates (RUR/USD): 2007 - 24.5462 2008 – 29.3804 2009 – 30.2442 31.12.2010 – 30.4769, 30.09.2011 – 31.8751

Tier 1 Equity was increased by over USD30M in October 2008 and by USD42M in December 2009 In September 2011 Tier 1 Equity was increased by over USD70M 9M2011 CAR was 13.3%, well above the CBR requirement of 10% and BIS requirement of 8%

International and Domestic Funding

* Facility has been repaid 30

USD 52,000,000*Syndicated Loan

L + 2.75%1+1 years

2006

USD 70,000,000*Syndicated Loan

L + 2.95%1+1 years

2008

2 Subordinated Loans from

VnesheconombankRUR 986,747,840

10 years

2009

Loan Facilities from SME Bank for

RUR 420,000,000

3 years

2009

Loan Facility fromSME Bank for

RUR 468,000,000

3 years

2010

Credit Line for Mortgages from

VnesheconombankFor RUB

900,000,000

2011

Vnesheconombank Programme to buy-

out RUB 2,800,000,000 RMBS

2011

USD 164,000 000A+B Syndicated Loan

2010

A LoanUSD 60,000,000

3 yearsL+4.10%

B LoanUSD 104,000,000

1 yearL+3.25%

USD Syndicated Loans

State Support & Development Programmes

USD 175,000,000*RegS senior issue

9.125% fixed3 years

2007

USD 100,000,000LT2 issue, 10NC5

10.50% fixed10 years

2007

USD 28,200,000Repurchase of RegS

senior issue viatender (MDA)

2009

International Bonds

RUB 1,800,000,000Domestic Bond issue

8.15%due Mar 2016put Sep 2012

2011

RUB 800,000,000*Domestic Bond issue

10.50%due Jun 2009

2006

Domestic Bonds

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CONCLUSION

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Key Investment Highlights

Regional diversification Regular risk assessment by

EBRD, IFC, DEG, Moody’s & PwC

Good asset quality with >2x coverage for NPLs

Lending of real sector High social importance

results in state support Strong name

recognition in regions Access to IFIs

Higher margins & lower concentration of banks

Organic market penetration with long-term perspective

Higher customer retention

1/ Market Positioning

2/ Regional

3/ Prudent Risk Management

4/ Shareholders

EBRD, IFC & DEG own over 45%

Supranationals provide LT funding at attractive terms

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APPENDICES

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Corporate Banking: Track Records with ECAs & OPIC

TCB is recognized by various ECAs which enables TCB to support medium & long-term investment projects of its customers.

USD 885 0005 year loan

Equipment & Services

2004

USD 885 0005 years loan


2004

USD 6 000 0005 year loan

Construction Services

2005



2004

EUR 2 500 0005 year loan


2006



2004



2006



2004

EUR 2 300 0003.5 year loan


2007

EUR 1 200 000 5 years loan

Power Equipment

2007

USD 10 000 0003 year facility

Agricultural Commodities

2007



2007


Agricultural Commodities

2007

EUR 800 0005 year loan


2007



2007


SME Lending

2007


Plastic Packing Equipment

2008


Packing Equipment

2008

SEK 30 000 0005 year loan

Wood-working Equipment

2008

EUR 850 0005 year loan


2008

EUR 1 000 0003,5 years loan

Hydraulic press-shear

2008



2008


Oil Production Plant

2008


Aviation Equipment

2010


Aviation Equipment

2011

EUR 1 500 0003.5 year loan

Mineral Water Equipment

2011

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Management Projections for 2012

Audited IFRS (RURbn) 9M2011 YE2012 /\ %

Total Assets 94.1 125 +33%

Total Loans 73.8 95.8 +30%

Total Liabilities 83.2 109.9 +32%

Total Deposits from Customers 50.3 73.9 +47%

Tier 1 Equity 10.9 15.1 +39%

ROAE 4.8% 14.7% +206%

ROAA 0.6% 1.7% +183%

CTI 53.2% 51.0% -4%

CAR 13.3% 13.4% 1%

Contacts

Contacts of TCB’s International Business:

Mr. Sergei Sisoshvili Vice-President – Head, International Business Division

Tel.: +7 (495) 797-32-00 (ext. 1377)E-mail: [email protected]

Mr. Mikhail TimofeevHead, Trade & Structured Finance

International Business Division


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HQ: Building 1, 24/2, Pokrovka str.Moscow, 105062Russian Federation

Tel.: +7 (495) 797-32-00Fax: +7 (495) 797-32-01

E-mail: [email protected]: www.transcapital.com

Address:

Mr. Evgeni IvanovskiDeputy Chairman of the Management Board


Testing TKB

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