UKRAINE WEEK HIGHLIGHTS

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1 UKRAINE WEEK HIGHLIGHTS July 30, 2012: Ukraine s current account deficit increased to USD billion in the first half of 2012 from USD billion for the same period last year, National Bank of Ukraine reported. According to NBU, in June 2012 the current account deficit totaled USD billion compared with a negative balance of USD 128 million in June The main reason of deficit growth is the increase of deficit international trade, which reached USD billion in January-June 2012 compared to USD billion in January-June In 2011 the current account deficit of Ukraine increased to USD billion from USD billion in. Ukraine's GDP growth in II quarter of 2012 compared same period of previous year (in constant prices) amounted to 3%, and compared to I quarter of 2012 (taking into account seasonal factors) GDP grew by 1.9%, Ukrainian Statistics Committee reported. The state budget of Ukraine for 2012 was laid down with GDP growth of 3.9%. Most international organizations and experts forecast Ukraine s GDP growth in the range of % in July 31, 2012: Smart Holding (controlled by Russian businessman Vadym Novinskiy) agreed with Commerzbank AG to acquire 96% share in Bank Forum, the holding informed in its press release. "We believe in the potential of Forum bank and Ukrainian banking market", - CEO of the holding Aleksey Pertin commented. The parties agreed not to disclose terms of the transaction. Net loss of Forum Bank in 2011 decreased by 4.2 times to UAH million, compared with a loss of UAH 3.3 billion in. The result of I half-year of 2012 was positive with UAH 5.2 million of net profit. August 01, 2012: Budget revenues in the I half of 2012 compared to the same period of 2011 increased by 16.9% up to UAH million, at the same time budget expenditures compared to the same period of 2011 increased by 13.3% up to UAH million, the press service of the Ministry of Finance of Ukraine informed. The balance of credits from state budget was UAH million. So that state budget deficit of Ukraine in I half of 2012 amounted to UAH million, that is 83.2% more than in January-May 2012 (in that period budget deficit amounted to UAH million), but 38.8% less than during I half of 2011 (in that period budget deficit amounted to UAH million).. August 02, 2012: The World Bank is concerned that the drought in Ukraine, United States of America, Russia and Kazakhstan, and continuous rains in many European countries will lead to an increase in food prices. The organization noted that due to bad weather conditions and lack of rain in Russia, Ukraine and Kazakhstan grain harvests significantly decreased. Prime Minister of Ukraine Mykola Azarov during the meeting in Zaporozhye region confirmed that due to inappropriate weather conditions Ukraine will harvest about 8 million tons of crops less than previous year, but promised that prices of bread and other food products in Ukraine will remain stable despite the poor harvest in Ukraine due government s large reserves of food and grain, which will support the Ukrainian market. August 03, 2012: Ukrainian office of Forbes magazine named Ukrainian companies with the biggest revenue growth in Only 2 companies ( Khleb Investbud and Crimean Vodka Company) succeeded to stay in Top-10 since the previous rating. According to Forbes the Top-10 companies according to revenues growth in 2011 was as follows: 1. Khleb Investbud (grain trader) +454%; 2. Styrol (chemical plant of Dmitry Firtash) +147%; 3. Eldorado (retail trade with household equipment) +95%; 4. Nissan Motor Ukraine (auto importer) +93%; 5. Porsche Ukraine (auto importer) +90%; 6. Southern Mining Company (mining and processing plant) +87%; 7. Azot plant (chemical plant of Dmitry Firtash) +82%; 8. Aerosvit (airways) 77%; 9. Crimean vodka company (vodka producer) +74%; 10. DEMZ (Donetsk Electro-Metallurgical plant) +73%. I M P O R T A N T N O T I C E : This is promotional. Please see the last page for important information and disclosures concerning eventual conflicts of interest and contacts. 30 July 03 August,

2 66 UKRAINE ECONOMIC OVERVIEW USD/UAH exchange rate Nominal GDP, mln $ GDP per capita, $ Economic Growth, % Industrial Production Index, % CPI, % PPI, % Current Account Balance, % of GDP Budget Balance, % of GDP Total Foreign Debt, mln $ State Foreign Debt, mln $ Reserves, mln $ Population, thnd people Unemployment rate, % Q Exp Source: National Statistics Committee of Ukraine, National Bank of Ukraine, Ministry of Finance of Ukraine Distribution of GDP according to economic sectors in Ukraine in 2011 Gross Domestic Product and State Debts in Ukraine, % 17% 7% Agriculture 1 20 Mining & quarrying 1 00 Manufacturing industry 14% 14% 5% 3% 15% 10% Electricity, gas & water 3% 4% 80 Construction 60 Trade 40 Transport and communication 20 Education 17.7% 14.8% 12.3% 34.6% 39.5% 36.0% 2% Healthcare & social aid 2005 Taxes Others GDP, nominal, bln UAH 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 2011 To tal State Debt, bln U AH State Debt to GDP ratio, % Government Incomes and Expenses in Ukraine, Dynamics of Export & Import of Ukraine, Q % % -5.0% % Q Consolidated Government Incomes, mln UAH 2005 Exp ort, mln USD Q Imp ort, mln USD 30 July 03 August, 2012 Consolidated Government Expenses, mln UAH Budget deficit, % to GDP 2

3 BANKING SECTOR OVERVIEW Rating Agency STANDARD & POORS MOODY S FITCH RATINGS Last Update July October July 2011 Sovereign Rating of Ukraine B+ (stable) B2 (stable) B (positive) 2011Y, mln USD 2012 Q2, mln USD Ratio to net assets, % Dynamics since the beginning of year, % Total assets % 3.3% Net assets % 4.7% Loans to corporate % 3.2% Loans to individuals % -6.2% Interbank loans % -4.8% Securities % 19.3% Fixed assets % -0.2% Deposits of corporate % -6.9% of them current,% Deposits of individuals 55.33% % % 10.4% of them current, % Share capital 22.11% % % 5.0% Retained earnings % 22.8% Loss provisions % -6.4% Net profit % 246.2% * - Compared to same period of previous year (losses of banking sector of Ukraine in 2Q 2011Y were UAH mln) Official NBU USD/UAH exchange rates were used for calculations (7,9898 as of ; as of ) Capital % Assets ratio for different groups of Ukrainian banks as of % 13.4% 15.6% Top 10 banks Top banks Others ( banks) 10% 8% 6% 4% 2% % Net assets, mio UAH Own capital, mio UAH Capital vs assets, % Profitability structure of Ukrainian banks, in mio UAH Q Operating income Pre-provision income Net income 30 July 03 August,

4 INTERNATIONAL FINANCIAL MARKETS KEY DRIVERS July 30, 2012: Spanish economy in the II quarter of 2012 decreased by 0.4%, the National Institute of Statistics of the country reported. This means that shrinking of Spanish economy accelerated (previous quarter it was -0.3%). Recession in domestic demand, which amounted to 3.2%, is called the main reason of decrease. Situation on labor market also worsened - the unemployment rate is 24.6% (5.7 million people). Austerity measures taken by the government, which include sharp reduction in government expenditures and higher taxes, also negatively effect the GDP growth. It is expected that in 2012 country's GDP will decrease by % and will be able to grow only in European Union already agreed to lend Spain EUR 100 billion to save its banking sector, therefore there is some possibility that Spain will need up to EUR 366 billion to keep its economy up. The survey by The Emnid company revealed that 51% of citizens of Germany believe that their country should leave the Eurozone, and this will improve living standards in the country. Only 29% of respondents believe that the withdrawal of Germany from the Eurozone will have negative effect for the country. Besides, 71% of respondents think that Greece should leave the Eurozone, if their government fails to implement promised austerity measures. July 31, 2012: American economics professor Nouriel Roubini, who predicted the financial crisis in, believes that the Eurozone will collapse in maximum 6 months. According to him, the situation in Greece will not improve, but the main problem is not Greece, but Italy and Spain, which are about to lose access to capital markets. "Without Portugal and Cyprus the euro may yet do. But not without Italy or Spain. Of course, Germany can stay together with Austria, Finland or the Netherlands. And even if the core will exist, it would mean the collapse of the Euro zone. Probability of this outcome in the next 3-5 years is nearly 50%, "- Roubini said. Besides, the economist also spoke against saving countries in crisis. "If the debtor lived beyond his means, but saves by others regularly through providing new loans, he will not change his behavior in future," professor said. August 01, 2012: International rating agency Standard & Poor's confirmed the long-term rating of Spain at the level of "BBB+" with the Negative outlook. The agency explained this decision with the fact that "commitment of Spanish government to continue implementation of comprehensive fiscal and structural reforms remains strong". August 02, 2012: International agency Standard & Poor's downgraded the credit rating of Cyprus from "BB +" to "BB" (2 grades below the investment grade) with a "negative" outlook. Analysts of the agency explained their decision with the growth of financial risks in the short term due to the fact that the negotiations about the credit support from the European Union may not be finalized by September. Parliamentary coalition in Greece agreed on new austerity measures in the amount of EUR 11.5 billion in Thus, the Greek government confirmed its intention to comply with the demands of its 3 creditors (European Union, European Central Bank and International Monetary Fund) without any counter conditions. Recently the President of European Commission Jose Manuel Barroso said that Greece will not leave the Eurozone and Brussels will continue to support Greece, if the country will continue to reform. August 03, 2012: Head of the International Monetary Fund (IMF) Christine Lagarde believes that all countries in the world should maintain the austerity regime. Speaking at the headquarters of the IMF, Lagarde confirmed that the main concern is the financial situation in the Euro area, but this is not the only problem. In case the U.S. Congress will not be able to overcome ideological differences about the programs of taxes reduction and other financial matters, the USA may face serious financial problems. Representatives of the Republican and Democratic parties in the USA this week reached a tentative agreement that will help them to postpone unpleasant procedure of automatic reduction of government expenditures for 6 months. Such agreement will allow both parties to focus on the upcoming presidential elections in November, ignoring the fact that the federal authorities even before the elections may be not be able to pay the salaries of military personnel and finance health programs. 30 July 03 August,

5 MONEY MARKETS World Money Market indicators Ukraine Money Market indicators Value as of Change in Value as of Change in Week, % 1 Month, % Week, % 1 Month, % Euribor 3m % % -42.3% KievPrime O/N % % -45.5% Euribor 6m % % -28.8% KievPrime 1m % % -26.0% Euribor 12m % % -23.1% KievPrime 3m % % -4.9% Libor 3m % % -4.6% KIEIBOR O/N % % -45.0% Libor 6m % % -1.5% KIEIBOR 1m % % -16.9% Libor 12m % % -2.2% KIEIBOR 3m % % 3.5% Source: Reuters Source: Reuters, NBU USD/UAH exchange rate, 3 months EUR/USD exchange rate, 3 months USD/RUB exchange rate, 3 months USD/TRY exchange rate, 3 months July 03 August,

6 CONTACTS Head of Treasury and FI FX operations Correspondent relations and TF Financial market research Igor Tykhonov Vladimir Priymak Oleksandr Turbovets Server Sadykov PJSC CREDITWEST BANK Treasury and FI Division Ukraine, Kiev, str. Kovpaka Reuters: WFCB DI S C L AIMER This research is prepared by analysts of Public Joint Stock Company WEST FINANCE AND CREDIT BANK (hereinafter - PJSC CREDITWEST BANK ) for information and promotional purposes only and should not be interpreted as the advice to make any transaction on financial markets. It is not investment advice or an offer for the purchase or sale of any financial instrument. The information has been obtained from/based upon public information sources that PJSC CREDITWEST BANK considers reliable as of the date hereof but PJSC CREDITWEST BANK does not represent that it is accurate and complete. This research reflects our current views which may be subject to change without notice. The information and analyses discussed herein may be unsuitable for investors depending on their specific investment objectives or financial position. Any investments and trends referred to herein may fluctuate and/or be affected by changes in exchange rates. Past performance is not indicative of future results. Opinions, estimates and recommendations expressed herein may not be relied on as the only ground to effect any transaction in the financial market. Investors should make their own investigations and investment decisions without relying on this report. PJSC CREDITWEST BANK has no responsibility for third parties operations including but not limited to any other action and/or failure to act of such third parties together with positive and/or negative results of such operations carried out on the grounds of opinions, estimates and recommendations expressed herein. In addition, PJSC CREDITWEST BANK may provide banking services for, or solicits such business from, any company referred to in this report. Neither PJSC CREDITWEST BANK nor any of its officers or employees accepts any liability for any direct or consequential loss arising from any use of this report or its contents. Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without written permission of PJSC CREDITWEST BANK. 30 July 03 August,