PRESENTATION. July 2010

Transcription

1 PRESENTATION July 2010

2 INFORMATION ABOUT THE BANK 2

3 B&N Bank today is a huge and reliable financial organization 3 B&N Bank at a glance Financial highlights B&N Bank is a successfully developing universal bank with a wide sales network over 118 offices in different regions of the Russian Federation. Bln. RUB B&N Bank aspires to hold leading position at Russian financial market rendering advanced and high-quality financial services to corporate and individual customers. The main trends of the Bank s strategy are enhancement of the customer base, permanent monitoring of the loan book quality, widening of spectrum and quality of services, strengthening of the Bank s position at regional markets, conservative approach to risk management. Assets Capital Loans to customers Customer accounts Net (loss)/income CAR (Total) % % (1.7) 14.1% B&N Bank is among TOP-50 Russian banks. As of May 1, 2010 the Bank is ranked 43 rd in terms of assets according to rating of the well-known business magazine Profile. Moreover, the Bank is included in TOP-30 biggest Russian banks according to CBR Consolidated Statistical Data for major Russian banks as of June 1,2010. NPLs 1.6% 4.4% 9.6%

4 B&N Bank gains a number of advantages over its peers 4 B&N Bank s main advantages Strongly developed branch network in Moscow and regions Well-diversified customer base B&N Bank Visible player on banking market Effective risk management policy

5 B&N Bank has transparent ownership structure 5 Shareholding structure June 30, % 3% 1.16% LLC "Trade West" Missola Investments Ltd. NVK MC Investment Ltd. Other Ultimate beneficial shareholders: Mikail O. Shishkhanov 98.84% Other 1.16% 87.07%

6 B&N Bank s ratings reflect its solid financial position 6 Long-Term B- Short-Term С National rubbb- Outlook Stable Long-Term A3.ru International credit ratings Long-Term B2 Short-Term Not Prime Financial Strength E+ Outlook Stable National credit ratings Short-Term BBB- Outlook Stable Current ratings of the Bank reflect its solid position on the banking market, healthy capitalization, balanced liquidity and effective risk management policy. In March 2009 national rating agency RusRating positively assessed the Bank s financial condition notwithstanding any market volatility and upgraded its rating from BB+ to BBB-. According to the agency s report B&N Bank obtains adequate support of the state and its major shareholder and demonstrates high level of liquidity and capitalization. In December 2009 international rating agency Moody s Investors Service assigned B2/NP/E+ ratings to the Bank, focusing on such strong points of the Bank as its visibility on retail deposits market, geographic diversification of its business, adequate capital and well-balanced liquidity profile. The outlook on all the ratings is stable. In 2009 Standard & Poor s revised the outlook on the Bank s ratings to Negative in relation to its massive rating action on Russian banks. S&P action reflected some concern of international rating agencies towards Russian banking sector amidst financial turmoil. Nevertheless, due to weakening of credit risks, stabilization of situation on financial market and good loss-absorption capacity of the Bank, Standard & Poor s revised the outlook on B&N Bank s ratings from Negative back to Stable in April 2010.

7 Wide branch network provides advantages 7 Bank s s branch network As of the end of 2009 the Bank s branch network includes 118 offices: 29 branches over the Russian Federation, 84 subbranches, 3 representative offices and 2 exchange offices. Moreover, the Bank s sales network is supplemented by branches of two banks consolidated in the banking Group (14 points of Bashinvestbank and 27 points of Vyatka-Bank). Despite the optimization of operating costs in 2009, expansion of the branch network remains one of the most important trends of the Bank s strategy. Throughout the year the Bank opened 8 new offices and 7 of them started their operating activity in Among them there is one branch in Krasnodar, operating office in Moscow and 5 subbranches in Yekaterinburg, Chelyabinsk, Rostov-on-Don and Omsk. According to decision of the Management Board in January, 2010 a new plan of branch network development for 2010 was adopted. The following actions are stipulated in the plan: - Opening of 5 universal subbranches in Moscow, St. Petersburg, Yaroslavl and Novosibirsk; - Opening of 1 remote universal office in Solnechnogorsk; - Transformation of B&N Bank s representative office in Irkutsk into the branch.

8 Financial result in

9 Despite the unstable situation on financial market in 2009, B&N Bank continued its dynamic development 9 Operating result of the Bank in 2009 Consolidated data on the Group including Vyatka-Bank and Bashinvestbank Balance-sheet Income statement In 2009 total assets of the Bank grew by 17.6% and comprised about RUB 85.3 bln. Loan portfolio (loans to customers) grew by 11.8% and reached RUB 46 bln. Customer accounts grew by 32% from RUB 49.7 bln. to RUB 65.8 bln. Volume of international funding as of the end of 2009 substantially decreased due to successful redemption/repayment of huge international borrowings. Under the influence of credit risks and increased provisioning costs capital of the Bank declined to RUB 9.7 bln. Due to increased provisioning costs the Bank registered net loss amounted to RUB 1.7 bln. Expenses for creation of loan loss provisions increased up to RUB 1.9 bln. As a result the total amount of loan loss provision reached RUB 4.9 bln. Interest income grew by 6.6 % and amounted to RUB 9.1 bln. However, due to increase in interest expense, net interest income declined from RUB 4.5 bln. to RUB 2.9 bln. Net non-interest income remained unchanged totaling RUB 1.3 bln. Operating expenses decreased from RUB 4 bln. to RUB 3.8 bln.

10 B&N Bank demonstrated positive dynamics of its assets, though its profitability 10 Dynamics of the main financial highlights Assets (RUB mln.) Equity (RUB mln.) Net profit (RUB mln.) Loans to customers (RUB mln.) was pressured by increased credit risks

11 B&N Bank has well-balanced structure of assets and liabilities 11 Assets breakdown Liabilities breakdown 7.30% % 17.90% Cash & balances with CBR Due f rom banks Securities 3.60% 2.30% 17.60% % Indiv idual customer accounts Corporate customer accounts Due to banks 54.00% 13.20% Loans to customers Other 66.20% Debt securities issued Other Total assets of the Bank increased from RUB 72.5 bln. to RUB 85.3 bln. (+17.6%), that significantly exceeds the average growth of assets in Russian banking sector. Growth of B&N Bank s assets is split equally between client loans, investments in securities and medium-term interbank credits. Total loan portfolio amounted to RUB 46 bln. demonstrating stable growth from the beginning of 2009 (+11.8%), mostly due to increase in corporate lending. Security portfolio is basically represented by government securities and bonds of Russian issuers included in the Lombard List of CBR. As of December 31, 2009 total liabilities of the Bank increased by 23% since the beginning of the year and totaled about RUB 78.6 bln. Retail deposits were the Bank s largest source of funding which progressed from RUB 35.5 bln. up to RUB 51.9 bln.(+47%). This growth was backed by the Bank s visibility on retail deposit market. Share of funds drawn from international financial markets significantly declined due to successful redemption/repayment of $100 mln. Eurobond issue and $27 mln. syndicated loan throughout the year.

12 Bank pays special attention to monitoring of the loan portfolio quality 12 Quality of the loan portfolio Loans to customers (RUB mln.) % 1.60% % 4.42% % 11.00% 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% The Bank s loan portfolio as of December 31, 2009 amounted to RUB 46 bln., mostly due to increase in corporate lending. Changes in loan book structure were in line with the global market trend. Primarily they were related to increase in problem loans which came to its maximum at midyear However, starting from July, the volume of overdue loans notably decreased. As of December 31, 2009 the volume of NPLs 90+ decreased by 9.4% compared to amount as at mid As a result the share of NPLs 90+ in the total loan portfolio came to 9.56%. In order to adjust the loan book, the Bank has implemented a number of loan restructuring schemes for its corporate and retail customers. Loans to customers NPLs

13 Increase of concentrations in the loan portfolio reflects the Bank s eagerness to cooperate with reliable customers generating minimum risk 13 Main concentrations of the loan portfolio Industry breakdown 15.00% 2% 2% 4.00% 9.00% 22.00% Individuals Real estate Trading Construction Finance Services Oil & Gas Hospitality Other 11.00% 23.00% 12.00% 60% 50% 40% 30% 20% 10% 0% 40% 26% Largest borrowers 24% 16% 38% 43% 28% 29% Top 20 larges t borrowers 2.00% 1.00% 0.00% Top 10 larges t borrowers Related parties 1.45% 1.20% 0.90% 0.80%

14 The Bank has solid deposit base with a special focus on individuals 14 Customer accounts Main concentrations Deposit base (RUB mln.) 3.00% % Industry breakdown % % 10.00% Corporate customers Individuals Breakdown by type of deposits 15.00% 79.00% Individuals Insurance & other financial services Trade Construction Services Other 85.00% Term deposits Repayable on demand

15 B&N Bank has registered net loss due to increased credit risks in Financial result RUB 000 Interest income 389 Net interest income (before LLP) Fee and commission income received Net non-interest income Operating income Operating expenses Net profit (RUB mln.) ( ) ( ) ( ) In the context of deterioration of the operational environment in the beginning of 2009 and increase in expenses related to provision for impairment losses B&N Bank registered net loss amounted to RUB 1.7 bln. ( $55 mln. with the Bank s assets totaling $ 2.8 bln.). As of December 31, 2009 the total amount of the loan loss provision reached RUB 4.9 bln. The main increase in expenses for provisions occurred in the first half of 2009; in the latter half of the year additional provisions recognized were not so substantial as a result of credit risks stabilization. Interest income grew by 6.6 % and amounted to RUB 9.1 bln. However, due to increase in interest expense, net interest income declined from RUB 4.5 bln. to RUB 2.9 bln. Net non-interest income remained unchanged totaling RUB 1.3 bln. In 2009 the Bank optimized its operating costs, including staff costs, which were decreased from RUB 4 bln. to RUB 3.8 bln. If the trend for stabilization of credit risks level and improvement of financial market conditions continues, the Bank will be in position to return to its pre-crisis profitability in Net (loss)/profit ( )

16 B&N Bank maintains healthy capitalization 16 Capital adequacy profile Equity (RUB mln.) % 17% % 30.00% 20.00% In 2009 the Bank s capitalization was pressured by credit risks aggravated by the crisis, which resulted in increased expenses for loan loss provisions. Under influence of operating losses the Bank s capital decreased by 15% from RUB 11.4 bln. to RUB 9.7 bln. In this context total capital adequacy ratio declined from 19.3% to 14.1%. Nevertheless, B&N Bank maintains its capital adequacy ratio at the level over Basel minimum of 8% % 14.50% 14.10% Q2010 4Q2010 Total equity CAR (Basel) 10.00% 0.00% For the purpose of increasing capitalization in March 2010 the Bank received a subordinated loan amounted to $50 mln. Likewise, the Bank intends to place $100 mln. additional shares issue till the end of 2010 if it is necessary to maintain capital adequacy at the required level. The Bank has good opportunities for capitalization improvement due to strong commitment of its owner for any adequate support.

17 Maintenance of a strong liquidity position is one of the Bank s priorities 17 One of the most important tasks of the Bank is effective placement of its own and customers funds in working assets alongside with maintenance of high level of liquidity. High proportion of the liquid assets in the total Bank s assets and stable compliance with prudential ratios of CBR governing liquidity (2x or 3x surplus) ensure financial soundness of the Bank amidst adverse external environment. Liquidity profile as of April 14, 2010* * (RUB( RUB 000) Nostro accounts Cash Highly liquid securities (Lombard List of CBR) Reserve investments in foreign government bonds TOTAL Liquidity ratios as of January 1, 2010 CBR ratio Instant liquidity Н2 >= 15% Bank s compliance with CBR ratios % Comments Significant excess of the minimum ratio proves financial strength of the Bank due to highly liquid assets. Current liquidity Н3 >=50% Long-term liquidity Н4 <= 120% % % In the short term the Bank has substantial liquidity reserve accumulated due to major share of liquid assets in the total Bank s assets. The Bank s long-term liquidity ratio is better than satisfied as well. * Liquidity profile is based on financial statements prepared for Central Bank of Russia (RAS)

18 B&N Bank at interbank market 18 Currency BYR CAD CHF DKK EUR GBP JPY KZT NOK SEK UAH USD Main nostro accounts Bank Belgazprombank, Belarus VTB Bank (Deutschland) AG, Germany UBS AG, Switzerland ING Belgium SA/NV, Belgium Commerzbank AG, Germany ING Belgium SA/NV, Belgium RZB-Austria, Austria UBS AG, Switzerland VTB Bank (Deutschland) AG, Germany J.P. Morgan AG, Germany Standard Chartered Bank, UK Bank of Tokyo-Mitsubishi UFJ, Japan Kazkommertsbank, Kazakhstan ING Belgium SA/NV, Belgium ING Belgium SA/NV, Belgium PrivatBank, Ukraine JPMorgan Chase Bank, USA Standard Chartered Bank, USA UBS AG, USA B&N Bank is among those Russian banks which primarily obtained access to uncollaterized credit resources of the Central Bank of Russia. The Bank has widely developed international correspondent network which includes more than 250 banks all over the world. In 2009 the Bank continued to develop its correspondent network. B&N Bank established relationships with one of the leading global financial institutions - JPMorgan. In November JPMorgan Chase Bank, N.A., New York, opened USD account and in December J.P.Morgan AG, Frankfurt am Main, opened EUR account for B&N Bank. New accounts will be used for acceleration of settlements under clients international trade contracts as well as under own deals of the Bank. Due to high volatility on financial market the Bank revised limits extended to its counterpart banks. In particular, the Bank increased limits to a group of Russian state-owned and major commercial banks. Mostly, interbank limits were opened in favor of the above mentioned reliable institutions. Solid reputation and strong position of a net lender enabled B&N Bank to extend the volume of counter limits from its correspondent banks including Russian state-owned and major commercial institutions.

19 The Bank continued its active work in trade finance 19 Trade finance partners B&N Bank pays special attention to international trade finance operations, representing one of the Bank s core activities and being traditionally popular with the corporate customers interested in expanding their businesses. As of the end of 2009, total amount of short- and long-term trade finance deals exceeded USD 130 mln. Usually, financing of the customers deals was made in form of L/Cs (including stand-by) and guarantees. Throughout 2009 B&N Bank issued L/Cs and guarantees under import deals in the total amount exceeding USD 22.5 mln. Meanwhile export L/Cs totaled about USD 10 mln. In the long term the Bank s strategy provides for substantial increase of trade operations and ECAcovered structured financing in its international activities. Bank Austria Creditanstalt (Austria) Banque de Commerce et de Placements (Switzerland) Commerzbank AG (Germany) HypoVereinsbank (Germany) Landesbank Berlin AG (Germany) Monte dei Paschi di Sienna (Italy) RZB Austria AG (Austria) Standard Chartered Bank (UK) VTB Bank (Deutschland) AG (Germany) Atradius (Netherlands) EULER HERMES (Germany) EFIC (Australia) KUKE (Poland) SACE (Italy) UBS AG (Switzerland) UniCredit S.p.a. (Italy) AKA Ausfuhrkredit-Gesellschaft (Germany) Banca Agricola Mantovana (Italy) Banca Nazionale del Lavoro (Italy) Banco Bilbao Vizcaya Argentaria (Spain) Bank DnB NORD Polska S.A. (Poland) Landesbank Baden Wuerttemberg (Germany) Main Export Credit Agencies (ECAs( ECAs) US Ex-Im Bank (USA) CESCE (Spain) SERV (Switzerland) OeKB (Austria) EDC (Canada)

20 In 2009 B&N Bank successfully repaid huge international borrowings decreasing refinancing risks and confirming its reputation of a reliable partner 20 Bank s s credit history Syndicated loans In April 2006 the Bank drew a 1-year syndicated loan amounted to $40 mln. with a prolongation option for next 12 months. LandesBank Berlin AG, RZB (Austria) and VTB Bank acted as MLAs under the loan. In March 2007 the Bank extended a syndicated loan drawn in 2006 up to $52 mln. The loan was fully repaid. In August 2008 the Bank drew a 1-year syndicated loan for amount of $27 mln. LandesBank Berlin AG and VTB Bank were mandated as lead arrangers of the loan. The loan was fully repaid in August Eurobonds and loan notes In August 2005 B&N Bank launched a program for loan participation notes (LPN) for the total amount of $ 50 mln. BCP Securities acted as arranger of the program. In the framework of the program the Bank utilized 4 trenches: $11 mln./$ 13 mln./$ 16 mln. and 5.5 mln. Euro. The last trench was fully repaid in June In May 2006 the Bank placed 3-year bonds for the total amount of $ 200 mln. (coupon rate 9.5%), which was one of the largest debut transactions among Russian private banks. Mandated lead arrangers were Commerzbank Capital Markets AG and Merrill Lynch. In May 2007 the Bank redeemed $ 100 mln. (put option) according to terms and conditions of placement. Eurobonds were fully repaid in May High business reputation of the Bank on international market and long-term experience in cooperation with foreign financial institutions enable the Bank to obtain international funding using the following instruments: issue of Eurobonds and short-term notes by private subscription raising of syndicated loans bilateral loans and deposits from foreign investors In 2009 the Bank successfully repaid all external debts and affirmed its reputation of a reliable partner. In April 2009 the Bank increased the maximum amount of the LPN program up to $500 mln. After stabilization of the economic environment the Bank plans to raise financial resources from international market as separate shortterm trenches.

21 B&N Bank amidst financial turmoil 21

22 B&N Bank maintains stable market position due to competent policy of the management 22 Main instruments for supporting liquidity in the current conditions ons Internal support Possible external support Solid deposit base (RUB 65.8 bln.) Security portfolio of issuers included in the Lombard List of CBR, which can be pledged under loans. Support of the major shareholder in the form of subordinated loans and additional share issues ($50 mln. subordinated loan in March 2010 and registration of $100 mln. additional share issue till the end of 2010). Drawing of funds from open markets (the Bank registered two ruble bond issues; one of them of series 02, state registration number B as of Dec , amounted to RUB 1 bln., was successfully placed in April 2010 by public subscription). Credit resources from CBR: - Limit for uncollaterized loans amounted to RUB 8.6 bln. (the Bank repaid the loan in 2009 and currently this limit remains unutilized). - Limit for loans backed with assets and sureties amounted to RUB 8 bln. As of December 31, 2009 the outstanding amount of the loan totaled RUB 4.7 bln. In April 2010 this loan was fully repaid. Establishment of new credit limits from counterpart banks (the Bank has enough limits for ensuring high liquidity level if necessary). Increase of capital by subordinated loan from Vnesheconombank (the Bank has not utilized this instrument due to excessive liquidity). Main instruments for improving assets quality Tightening of lending conditions for the customers and lowering of growth rate of the loan portfolio. Programs of restructuring of the overdue indebtedness for creation of favorable operating conditions for customers and maintenance of their status as creditworthy borrowers.

23 B&N Bank has kept its client base and ensured comfortable interaction with its customers 23 Problem Way of solution Result Customers deposits withdrawal The Bank elaborated a number of new products with the following advantages: attractive interest rates prize drawing option enabling the customer to open one deposit in several currencies option enabling the customer to translate ruble deposit into any other currency in connection with concerns towards devaluation Volume of term deposits of the corporate and retail customers has exceeded pre-crisis figures. Throughout 2009 the volume of term deposits grew from RUB 33.4 bln. to RUB 49 bln. (+47%) demonstrating customers confidence towards the Bank. Customers term deposits dynamics (RUB mln.).)* Corporate term deposits Individual term deposits TOTAL * Unconsolidated data (only B&N Bank)

24 B&N Bank has kept and strengthened its liquidity reserve 24 Problem Negative influence on the Bank s liquidity position Way of solution Active attraction of customers deposits Constraining of the retail loan portfolio Lending of the reliable and trustworthy corporate customers Composition of liquid securities portfolio included in the Lombard List of CBR Result As of December 31, 2009 share of highly liquid assets in the total assets of the Bank comprised 14%. CBR prudential ratios governing liquidity were performed better than required. Prudential liquidity ratios of CBR 180% 160% 140% 120% 100% 80% 60% 40% Min. 15% Max. 120% Min. 50% Instant liquidity (H2) Current liquidity (H3) Long-term liquidity (H4) 20% 0%

25 B&N Bank s actions for prevention of overdue indebtedness positively reflect on the Bank s loan book quality 25 Problem Increase of NPLs Way of solution Establishment of Emergency Team for prevention of bad loans Strengthening of collateral structure monitoring Implementation of loan restructuring schemes with the purpose of optimization of financial burden and settlement schedules for loan debtors Introduction of Portfolio Managers System in the framework of retail lending Result As of July 1, 2009 NPLs climbed up to 11% of the total loan portfolio. Furthermore, due to restructuring programs and repayment of some portion of corporate loans, NPL rate is gradually decreasing. As of December 31, 2009 NPL stood at 9.56% of the total loan portfolio. Dynamics of NPL* in the Bank s s loan portfolio 14.00% 12.00% 10.61% * NPLs shall be calculated as loans that are 90 or more days overdue and shall include undue principal amount on these loans 10.00% 11.09% 8.00% 7.32% 9.56% NPL 6.00% 4.00% 4.42% 2.00% 0.00%

26 In order to overcome financial turmoil B&N Bank intends to work in the following fields 26 Business strategy of B&N Bank for 2010 Effective Risk Management Policy Focus on the further development of risk management system Asset quality monitoring Credit risk diversification Business efficiency and market position Expansion and diversification of the customer base Widening of a range of services to be rendered to its customers Maintenance of the dominant market position as one of «Top Retail Banks» Maintenance of loan portfolio quality at high level Constant monitoring of the loan book quality Restructuring of the problem loans in order to decrease financial burden and optimize settlement schedules of its loan debtors Conservative approach to loan loss provisioning (internal requirements are even stricter than international ones) Branch network expansion Maintenance of its strong position in regions Expansion of its presence in new strategically important regions

27 Effective risk policy is one of key aspects in the Bank s corporate governance 27 Credit risk Establishment of limits for credit operations Pledge of liquid wealth and its insurance Regular monitoring of the key risk factors Establishment of stop-parameters for credit products Limits for product type/industries Work with problem loans Interest risk Implementation of a procedure for assessment of the interest rate on the basis of gap analysis Procedure for monthly monitoring of the interest risk and stress testing of the Bank s balance sheet Scenario simulation for influence of changes in interest rates on the Bank s financial result Currency risk Scenario simulation for influence of changes in exchange rates and currency structure of the balance sheet on the Bank s financial result Minimal FX position (net FX position stands at 3% of the Bank s capital) Liquidity risk Daily monitoring of CBR prudential ratios governing liquidity Preparing of the payment schedule (planning) Creation of the additional liquidity reserves