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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
5
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%
6
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
7
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)
9
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
10
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
• 49% of the total loan book
• Middle segment• Mortgages, credit cards, debit
cards, car loans, cash loans, deposits, settlements
• Special focus on employees of corporate clients
• 12% of the total loan book
Added-value services and important funding base Bank’s core focus in lending Higher margin lending and
alternative funding base
12
13
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
14
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.
16
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
17
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%
18
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
19
RISK MANAGEMENT
20
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
21
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
22
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
23
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)
24
+60%
+8%
25
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%
26
Loan Portfolio
Total Loans by Maturity 9M2011
Total Loans by Currency 9M2011
Total Loans by Region 9M2011
Total Loans by Sector 9M2011
27
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
29
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
31
CONCLUSION
32
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
33
APPENDICES
34
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
Equipment & Services
2004
USD 6 000 0005 year loan
Construction Services
2005
USD 885 0005 years loan
Equipment & Services
2004
EUR 2 500 0005 year loan
Equipment & Services
2006
USD 885 0005 years loan
Equipment & Services
2004
EUR 2 300 0005 year loan
Equipment & Services
2006
USD 885 0005 years loan
Equipment & Services
2004
EUR 2 300 0003.5 year loan
Equipment & Services
2007
EUR 1 200 000 5 years loan
Power Equipment
2007
USD 10 000 0003 year facility
Agricultural Commodities
2007
EUR 1 200 0004 year loan
Equipment & Services
2007
USD 10 000 0001 year loan
Agricultural Commodities
2007
EUR 800 0005 year loan
Equipment & Services
2007
EUR 7 500 0005 year loan
Equipment & Services
2007
USD 15 000 0007 year loan
SME Lending
2007
EUR 1 300 0005 year loan
Plastic Packing Equipment
2008
EUR 1 800 0005 year loan
Packing Equipment
2008
SEK 30 000 0005 year loan
Wood-working Equipment
2008
EUR 850 0005 year loan
Plastic Packing Equipment
2008
EUR 1 000 0003,5 years loan
Hydraulic press-shear
2008
EUR 1 000 0005 year loan
Plastic Packing Equipment
2008
EUR 6 800 0005 year loan
Oil Production Plant
2008
EUR 1 200 0005 year loan
Aviation Equipment
2010
EUR 1 000 0005 year loan
Aviation Equipment
2011
EUR 1 500 0003.5 year loan
Mineral Water Equipment
2011
35
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: ssm@transcapital.com
Mr. Mikhail TimofeevHead, Trade & Structured Finance
International Business Division
Tel.: +7 (495) 797-32-00 (ext. 1265)E-mail: timofeev@transcapital.com
36
HQ: Building 1, 24/2, Pokrovka str.Moscow, 105062Russian Federation
Tel.: +7 (495) 797-32-00Fax: +7 (495) 797-32-01
E-mail: info@transcapital.comWebsite: www.transcapital.com
Address:
Mr. Evgeni IvanovskiDeputy Chairman of the Management Board
Tel.: +7 (495) 797-32-00 (ext. 1151)E-mail: e.ivanovski@transcapital.com
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