Update of KKB story Investor Call Presentation 15 October 2007
Disclaimer Representatives of JSC Kazkommertsbank (the "Bank") will be conducting a call (the "investor call") with equity and bond investors on 15 October 2007. During the course of the call, the Bank will discuss preliminary unaudited unconsolidated results of operations as of and for the nine month period ended 30 September 2007 (the "preliminary unaudited unconsolidated results of operations"), which results of operations are contained herein. Although the Bank's management believes that the preliminary unaudited unconsolidated results of operations provide a meaningful representation of the Bank's performance, investors are hereby notified that there could be differences between preliminary unaudited unconsolidated results of operations contained herein and discussed during the call and the unaudited consolidated results of operations as of and for the nine month period ended 30 September 2007 reviewed by the Bank's auditors, which will be available at a later date. There may also be differences between the preliminary unaudited unconsolidated results of operations and the audited consolidated results of operations as at and for the year ended 31 December 2007. The Bank's management is not able to estimate the impact of the differences, if any. This document contains forward-looking statements. Although the Bank and its subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those contained herein and discussed during the call. 1
Management team on the call Nina Zhussupova CEO Askarbek Nabiyev CFO Andrey Timchenko MD, Retail Banking/ Financial Institutions Magzhan Auezov MD, Corporate Banking Adil Batyrbekov MD, Risk Management Maral Amrina Head, Investor Relations / Capital Markets 2
Agenda Preliminary 3Q2007 results Funding and liquidity Construction and real estate Appendixes 3
Strong results USDm 2006 2Q07 3Q07 Total assets 18,205 23,279 23,166 Shareholders equity 1,957 2,264 2,407 Net customer loans 11,989 17,714 18,277 Deposits 5,087 7,523 6,551 Net income 220 204 331 2006 2Q07 3Q07 Key ratios Cost/income 16.4% 14.6% 13.9% RoAE 2 22.1% 18.6% 19.5% Tier I 3 6.0% 8.1% 8.2% CAR 3 11.7% 11.4% 11.7% NPLs / Gross Loans 1.0% 1.0% 0.8% Provisions / NPLs 456.7% 439.9% 587.7% Provisions / Gross Loans 4.4% 4.3% 4.9% Source: unconsolidated unaudited accounts of the Company 1 30 September 2007 figures. 2 Averages are based upon average daily balances 3 Calculated according to Basel I requirements 4
5 Network roll-out continues 191 240 71 111-123456789 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 43 43 44 44 45 45 46 46 47 47 48 48 49 49 50 50 51 51 52 52 53 53 54 54 55 55 56 56 57 57 58 58 59 59 60 60 61 61 62 62 63 64 64 65 65 66 66 67 67 68 68 69 69 70 70 71 71 72 72 73 73 74 74 75 75 76 76 77 77 78 78 79 79 80 80 81 81 82 82 83 83 84 84 85 85 86 86 87 87 88 88 89 89 90 90 91 91 92 92 93 93 94 94 95 95 96 96 97 97 98 98 99 99 100 100 101 101 102 102 103 103 104 104 105 105 106 106 107 107 108 108 109 109 110 110 111 111 112 112 113 113 114 114 115 115 116 116 117 117 118 118 119 119 120 120 121 121 122 122 123 123 124 124 125 125 126 127 127 128 128 129 129 130 130 131 131 132 132 133 133 134 134 135 135 136 136 137 137 138 138 139 139 140 140 141 141 142 142 143 143 144 144 145 145 146 146 147 147 148 148 149 149 150 150 151 151 152 152 153 153 154 154 155 155 156 156 157 157 158 158 159 159 160 160 161 161 162 162 163 163 164 164 165 165 166 166 167 167 168 168 169 169 170 170 171 171 172 172 173 173 174 174 175 175 176 176 177 177 178 178 179 179 180 180 181 181 182 182 183 183 184 184 185 185 186 186 187 187 188 188 189 190 190 191 191 192 192 193 193 194 194 195 195 196 196 197 197 198 198 199 199 200 200 201 201 202 202 203 203 204 204 205 205 206 206 207 207 208 208 209 209 210 210 211 211 212 212 213 213 214 214 215 215 216 216 217 217 218 218 219 219 220 220 221 221 222 222 223 223 224 224 225 225 226 226 227 227 228 228 229 229 230 230 231 231 232 232 233 233 234 234 235 235 236 236 237 237 238 238 239 239 240 240 241 241 242 242 243 243 244 244 245 245 246 246 247 247 248 248 249 249 250 250 251 251 252 2005 2006 2007* 2008* Branch network growth * - Forecast Opened in October 2007 (3) Location of outlets is idenified (22) Opened as at 30.09.2007 (166) Current status Comments Bank significantly expanded its branch network in 3Q2007 from 111 as at 31 December 2006 to 166 branches as at 01 October 2007.
Agenda Preliminary 3Q2007 results Funding and liquidity Construction and real estate Appendixes 6
Changes in deposit market Corporate deposits market shares Retail deposits market shares 22,5% 26,9% 23,9% 23,0% 21,8% 18,0% 22,8% 22,6% 21,9% 21,0% 21,0% 16,2% 15,0% 18,2% 5,3% 4,9% 7,5% 4,4% 13,1% 8,8% 18,2% 18,0% 13,9% 15,4% 19,7% 19,9% 18,6% 15,4% 7,0% 6,5% 6,5% 3,6% 4,9% 5,4% 10,3% 9,9% 10,0% 21,4% 21,7% 21,2% KKB Halyk BTA BCC Alliance ATF Others 18,7% 19,0% 10,8% 11,2% 6,7% 15,7% 17,5% 20,3% 22,4% 24,4% 19,2% 19,3% 18,9% 18,5% 11,0% 10,4% 10,2% 9,4% 9,6% 8,4% 7,3% 7,0% 8,7% 8,3% 8,6% 8,9% 11,1% 10,8% 10,9% 10,9% KKB Halyk BTA BCC Alliance ATF Others Dec.'06 June '07 July '07 Aug. '07 Sept. '07 Dec. '06 June '07 July '07 Aug. '07 Sept '07 Source: Company information 7
Liquidity ratios Liquidity Ratios as of 3Q 2007 Highly Liquid Assets / Demand Liabilities Liquid Assets / Short Term Liabilities ( < 3 months) Ratio: 114% 88% Minimum requirements: 30% 50% Based on non-consolidated financial statements 8
Maturity and currency profiles Maturity Profile, 3Q 2007(USDm) 7 068 5 517 5 085 4 893 3 745 3 211 2 882 2 547 2 679 2 818 1 671 1 388 421 0 < 1 month 1-3 months 3-6 months 6-12 months 1-5 years >5 years Perpetual Currency Profile, 3Q 2007 (USDm) 13 355 11 169 Assets Liabilities 8 236 5 600 1 064 2 673 36 12 476 1 306 KZT USD EUR RUR Other Assets 9 Liabilities
Strong internal cash generation Repayment plans, US$ millions 2 162 2 378 1 318 1 191 1 250 1 426 676 441 Oct. '07 Nov.-Dec. '07 Jan.-Mar. '08 Apr.-Sept. '08 Repayments of customer loans to be received Customer deposits, syndicated loans and debt securities to be repaid Total amount to be received from loan repayments fully covers KKB s customer deposits, bonds and syndicated loans repayments. 10
Agenda Preliminary 3Q2007 results Funding and liquidity Construction and real estate Appendixes 11
Structure of the loan portfolio Total loan portfolio by sectors, 3Q07 Construction and real estate breakdown, 3Q07 2% 28% 3% 4% 6% 7% 7% 22% 21% Construction Trade Real estate Transport&telecom Hotels and catering Financial services Food Agriculture Other 17% 10% 5% 2% Residential 42% 24% Land and properties Office Retail Industrial Hotels 12
Market fundamentals - residential real estate market in Almaty 18,4 Sq. meter per resident in Almaty 17,8 18,7 Comments Since the year end 1999 up until 30 June 2007: (1) 3.28 million sq. meters of residential property was built 16,4 16,4 16,5 16,6 17,1 (2) Housing stock reduced by 2.56 million sq. meters as a result of zoning and transformation of residential property into commercial (3) Population of Almaty grew to 1.29 million from 1.13 million New housing stock built since 2000 until 1H2007 per capita has only partially replenished the stock outflow into commercial 1999 2004 2005 2006 1H2007 2007* 2008* 2009* * Projections Housing stock growth, sq. meters 829,7 As of 1H2007 total residential stock was around 21.5 million sq. meters compared to 20.8 million sq. meters as of the year end 1999. Square meter per Almaty resident as of 1H2007 has fallen to 16.6 from 18.38 as of the year end 1999 615,9 541,7 New housing stock put into operation since the year end 1999 represented 15% of total housing stock of Almaty and only satisfied about 4.5% of households of Almaty. 240,9 266,1 291,5 311,4 Most of these purchases were to improve living conditions. For comparison, average square meter per resident ratio in Western Europe is between 35 and 40 2001 2002 2003 2004 2005 2006 1H2007 13
Fundamentals driving the demand Housing stock is represented by obsolete and low quality premises As of 1999 vast majority of population wanted to improve living conditions 3.28 mln sq.m. of new housing has satisfied needs of only 4.5% households in Almaty, therefore major unsatisfied demand Square meters per resident ratio in Almaty is twice lower than in Western Europe Sq.m. per resident ratio has fallen as a result of zoning, outflow of residential property into commercial and growth of population Most of population still need to improve living conditions Strong macro fundamentals supporting effective demand Oil prices grew to $80 per barrel as of 3Q2007 from $24.42 as of year end 1999 Grain prices grew to $360 from $130 for the same period Because fundamentals are strong in the medium term, we expect strong real estate prices in 12-18 months perspective despite potential temporary turbulence 14
High quality retail loan book Retail portfolio by products Quality of retail loans by products 1,9% 5,0% 1,0% 0,2% 5,3% Mortgages 1,4% Consumer loans secured by real estate Express loans 0,3% 0,55% 31,6% 56,9% Car loans 0,02% 0,02% Credit cards Consumer durables Consumer loans secured by real estate Mortgages Express loans NPLs, % Net write-offs, % 15
Results of stress testing (Monte Carlo simulation) Following are results based on 95% VaR: With 5 fold increase in the default rate and 50% decrease in average real estate price, mortgage portfolio is profitable (annual portfolio profit compensates annual credit losses) Mortgage portfolio reaches break even point if real estate prices decrease by 60%, with simultaneous increase in the default rate by a factor of 5 We consider 60% fall in real estate prices and 5-fold increase in the default rate as an extreme scenario. We believe the correction in real estate market will be less dramatic, given the positive underlying fundamentals of the market Even if this scenario is reached for several months or a even year, it will not undermine long-term profitability of the product (calculated over lifetime of the portfolio). 16
Corporate portfolio - steps taken to address real estate exposure concerns Steps taken Date Limit Real estate sector limit introduced June 2007 Requirements Financial leverage requirements tightened LTV requirements up Tenors reduced Interest rates increased Eligibility criteria tightened taking into account market conditions, construction segment, type of real estate June 2007 Safety factor 42% is a safety factor for transactions approved during last 12 months calculated as difference between full cost of the project and sale price per square meter August 2006 August 2007 17
Target setting Most important issue: Liquidity shortage for completion of ongoing construction projects Measures to address the issue: Prioritization of ongoing projects, putting early-stage projects on hold Banks are continuing mortgage programs & selected project funding Additional liquidity injected by government: Delay and softening of minimal reserve requirements for banks Kazakhstan Mortgage Company to increase portfolio purchases from banks Direct purchases of apartments by state from construction companies Up to US$ 4bln announced to be allocated for support of construction companies 18
Questions? Nina Zhussupova CEO Askarbek Nabiyev CFO Andrey Timchenko MD, Retail Banking/ Financial Institutions Magzhan Auezov MD, Corporate Banking Adil Batyrbekov MD, Risk Management Maral Amrina Head, Investor Relations / Capital Markets 19
Agenda Preliminary 3Q2007 results Funding and liquidity Construction and real estate Appendixes 20
Construction company case study Kuat Rapid reduction of outstanding debt: Date 01.04.2007 01.07.2007 11.10.2007 Outstanding debt, $ mln 360 386 270 Construction volume on the final stage of completion (to be commissioned within next 2 months): approx. 30% of total construction-in-progress The largest number of buyers under pre-sale agreements: 6 100 as of 01.08.2007 Implied financing commitment by state to finalize construction of all buildings partially or fully presold Potential government offtake of office space 21