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trust investment bank national bank trust

TRUST Investment Bank & National Bank TRUST

1st Half 2007 Results and Business Strategy

20 September 2007

slide2

Disclaimer

This presentation has been prepared and issued by National Bank TRUST and TRUST Investment Bank (collectively and jointly known as “TRUST”). This publication is intended for professional and institutional customers. Any information in this presentation is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by TRUST with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. This presentation is for information purposes, it is not intended to be and should not be construed as an offer or solicitation to acquire, or dispose of any of the securities or issues mentioned in this presentation. TRUST and/or its subsidiaries may use the information in this presentation prior to its publication to its customers. TRUST or its employees may also own or build positions or trade in any such securities, issues, and derivatives thereon and may also sell them whenever considered appropriate. TRUST may also provide banking or other advisory services to interested parties. TRUST accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation.

1 executive summary
1 Executive Summary

2 Rationale for Merger

3 Group History & Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

executive summary
Executive Summary
  • The shareholders of Investment Bank TRUST (“IBT”) and National Bank TRUST (“NBT”) announced the merger of the two banks on July 17th, 2007
  • The merger will optimise both the capital and asset structure of the merged bank
  • Although the merged bank will be a universal bank, the focus of growth will be on the retail and SME portfolios
  • The branch expansion plan will be largely completed by the end of 2008 allowing management to greater focus on achieving higher ROAE targets
  • Including the announced and funded RUB3.4bn capital increase of NBT, the merged bank will have sufficient capital for at least 24 months and will be in the top 20 financial institutions in Russia by capital and assets
executive summary nbt s stand alone profile
Executive Summary: NBT’s Stand Alone Profile

NBT in Figures:

1H 2007 IFRS (RUB mln.)

    • Total Assets:54,977
    • Net profit (6 month): 145
    • Shareholders’ equity: 5,497
    • Loan portfolio:32,676

Branch Network as of 20 September, 2007:

171 offices in 118 cities of Russia and in process of opening 42 offices by the end 2007

  • Employees: 6,357
  • Ratings:
  • “B1”, outlook “Positive” by Moody’s
  • “B-” , outlook “Positive” by Fitch

What We Are:

NBT provides full range of commercial banking services to corporate and private clients. Bank primarily focuses on Retail and SME loans to corporate and individual customers and federal / municipal governmental entities. NBT is a member of Deposit Insurance System.

Key Clients:

Mass Retail segment, Trade and Service Industries, SME

Current Geographical Coverage:

Strong presence in cities with population of over 100,000 and satellite towns of large cities

Strategic Goal:

In the next two years to become a TOP 5 Russian retail and SME bank in Russian regions with high growth potential based on

  • Size of assets
  • Number of clients
  • Coverage of branch network
executive summary tib s stand alone profile
Executive Summary: TIB’s Stand-Alone Profile

TIB in Figures:

H1 2007 IFRS (RUB mln.)

    • Total Assets:43,647
    • Net loss (6 month): (36)
    • Shareholders’ equity: 6,633
    • 2007 YTD League Tables:

1st Qtr 2007, #2 CLNs (37.5%)

1st Qtr 2007, #2 Domestic Owned Bank, Eurobonds (1.3%), #17 overall

1H 2007: #1 Domestic owned Bank, Eurobonds and CLN

1H 2007: #3 Domestic Owned Bank, IPOs

Employees: 409

  • Ratings:
  • “B1”, outlook “Positive” by Moody’s

What We Are:

TIB provides a full range of investment banking services to corporate and institutional clients. The Bank’s primary focus is to act as an intermediary between second and lower tier corporate Russia and domestic and international investors. Key products include DCM, ECM, Hybrids, Securitizations, Real Estate, Corporate Finance, Investment Banking and Principal Investments.

Key Clients:

Primary: Second and lower tier Russian & Ukrainian corporates with an appropriate size within the next 18 months to be seen as a qualified issuer of debt or equity to investors.

Investors: Global Hedge Funds, International and Domestic Banks, Insurance Companies, Pension Funds, Private Clients and Asset Managers

Location:

Moscow based with FSA registered office in London with plans of expansion to Asia (licensed office in Hong Kong) within next 12 months.

Strategic Goal:

In the next two years:

  • Remain in top 3 domestically owned banks in fixed income credit product (CLNs, Eurobonds, Hybrids)
  • Move into top 3 domestically owned banks participating in IPOs, by number of deals
  • Retain research leadership in Fixed Income and Second Tier Equity
1 executive summary1
1 Executive Summary

2 Rationale for Merger

3 Group Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

rationale for merger
Rationale for Merger
  • Focus remains to grow branch network to cover all cities with population greater than 100,000 people. However the management recognises that the expansion plan will discontinue by the end of 2008
    • Further asset growth and diversification, namely across retail and SME
  • ROAE is forecasted to start to pick up in 2007 and normalize during 2008
  • Release app. $150mln of capital from Investment Bank TRUST by optimising asset structure through spin-off of the proprietary position to an asset management structure – needed in 12 months time (including current capital increase)(1)
  • Yukos deposits no longer represent a material component of the group balance sheet(2)
  • Become one of the top 20 Russian banks and reduce cost of funding
    • For every 50bp improvement to overall effective funding rate the earnings of the merged bank will increase by approximately $13mln leading to an improved ROE of additional app. 2.1%
  • Recognised cost synergies of at least $7.5mln per year; headcount reduction of 80 people
  • Merger advisors: Merrill Lynch as exclusive financial advisor, Allen & Overy as legal counsel and KPMG as auditors and financial advisors

(1) See page 47 for further information

(2) See page 55 for further information

executive summary1
Executive Summary

Rationale for Merger

Group History & Structure

Group Strategy

Group Business Overview

Group Risk Management

Group Financial Forecasts

Group Merger Implementation Plan

nbt s history

NBT (AKB “Menatep SPb”) was founded as a 50/50 JV between Yukos (Menatep) and Gazprom

  • Servicing Menatep and Gazprom
  • In 2002 Menatep purchased Gazprom’s stake
  • 2003 IBT management takes over management of NBT
  • May 2004 - Management Buyout (IBT management)
  • Re-branding of TRUST: The Two Banks
  • Hired professional retail banking team
NBT’s History

1995–2002

2003–2004

2005

2006

  • May 2005 – MBO fully paid
  • Branch Network & Product Expansion
  • Hired team from one of the top SME banks’ in Russia
  • Continue Branch Network & Product Expansion
  • Leading Retail and SME Bank

“New Era”

2005-present

  • March 2005 – First Auto Loan
  • April 2005 – First Cash Loan
  • July 2005 – Retail loan program available at all branches
  • March 2006 – First SME Loan
  • April 2006 – Credit Cards program launched
  • October 2006 – First Mortgage Loan
tib s history

Bank was founded by Group Menetep

  • Leading Fixed Income and Investment Bank in Russia
  • May 2004 - Management Buyout (IBT management)
  • Re-branding of TRUST: The Two Banks
TIB’s History

1998–2003

2003–2004

2006 – 1H2007

Beyond

  • September 2006, hired new CEO
  • Restructured institution to meet the demands of clients and investors
  • Built equity platform (trading, research, sales)
  • Opened regulated sales office in London
  • Execution of broader product range
  • Derivatives platform (JV)
  • Expanded distribution with non-exclusive relationships with international banks and funds
  • Alternative Investments (Private Equity, Hedge Fund and Asset Management)
  • Open regulated sales office in Asia

“New Era”

2H2006 to Present

  • Summer 2006 – Institutional Investor Ranked Research Team
  • Sept. 2006 – TIB $150m, Reg S Eurobond placed. First Capital Markets Transaction post the MBO
  • Dec 2006 – First Subordinated CLN placed (BSP)
  • Jan 2007 – Announced Bank restructuring and staff upgrade program
  • April 2007 – First non-group Eurobond lead manger role
  • May 2007 – First Official IPO role (Nutritec & Dixy)
slide12

Current Shareholding Structure

Other

shareholders

Terzyan Artashes

Beliaev Sergei

Fetisov Nikolai

Yurov

Ilia

8,12%

16,44%

21,55%

21,55%

32,33%

Beliaev Sergei

Fetisov Nikolai

Yurov Ilia

100%

100%

100%

TIB Holdings Limited (Cyprus)

Neaspal InvestmentsLimited (Cyprus)

Winsala InvestmentsLimited (Cyprus)

Zaploma InvestmentsLimited (Cyprus)

68,10%

9,12%

9,12%

13,66%

Yurov Ilia– 18,1699%

Beliaev Sergei – 3,8225%

Fetisov Nikolai – 1,1589%

Terzyan Artashes– 1,031%

Other

shareholders

Management company TRUST (Russia)

Other shareholders

Yurov

Ilia

24,18%

0,55%

0,1%

99,35%

68,38%

7,44%

National bank TRUST (Russia)

TRUST Investment Bank (Russia)

slide13

Pro-forma Post Merger Shareholder Structure

Other

shareholders

Terzyan Artashes

Beliaev Sergei

Fetisov Nikolai

Yurov

Ilia

8,12%

16,44%

21,55%

21,55%

32,33%

Beliaev Sergei

Fetisov Nikolai

Yurov Ilia

100%

100%

100%

TIB Holdings Limited (Cyprus)

Neaspal InvestmentsLimited (Cyprus)

Winsala InvestmentsLimited (Cyprus)

Zaploma InvestmentsLimited (Cyprus)

68,10%

9,12%

9,12%

13,66%

Yurov Ilia– 5,99%

Beliaev Sergei – 1,25%

Fetisov Nikolai – 0,38%

Terzyan Artashes– 0,34%

Other

shareholders

Management company TRUST (Russia)

89,24%

7,96%

2,8%

  • Calculation based on the following numbers
  • NBT BV multiple = 2.5 X IBT multiple
  • Total equity NBT, thousand RUR 5492425
  • Total equity IBT, thousand RUR 6651134

National bank TRUST (Russia)

merged bank organisational structure

Retail

Origination

SME

Markets

Network

Research

Sales & Syndicate

Asset Management

Merged Bank Organisational Structure

Board of DirectorsChairman: Yurov

CEO & Chairman of

Management Board

Eggleton

Management CommitteeChairman: Fetisov

President

Fetisov

CFO

CRO

CIO

COO

Treasury

HR

Retail Bank

Investment & Corporate Bank Committee Chairman: Eggleton

group management structure post merger
Group Management Structure (Post Merger)

Board of Directors

Chairman: Yurov

Credit CommitteeChairman: Yurov

Investment &Corporate Banking CommitteeChairman: Eggleton

Management CommitteeChairman: Fetisov

ALCO CommitteeChairman: Eggleton

Retail

Risk

Commitments Committee

Technology Committee

Products

Committee

SME Risk

Corporate Risk

1 executive summary2
1 Executive Summary

2 Rationale for Merger

3 Group History & Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

group strategy
Group Strategy
  • Upon the completion of the merger, become and remain one of top 20 Russian banks based on capital, assets, number of clients and branch network in Russian regions with long term recurring ROAE of >20%
    • In top 5 banks by full city coverage by end of 2008
    • In top 5 banks by portfolio and number of retail clients within 3 years
    • In top 5 SME banks by loan portfolio by the end of 2007
    • In top 2 Russian-owned banks league table for CLNs and Eurobond
    • In top 3 Russian-owned banks league table for IPO by 2009
    • At least 2 Institutional Investor ranked team members
  • Continue to provide a full range of banking and investment services to its existing corporate clients, but primarily focus on the retail and SME clients in order to grow the balance sheet while remaining a leader of financial intermediation of Russian corporate sector to international and domestic investors
  • Reduce leverage and absolute MTM securities portfolio across both banks by spinning off IBT proprietary position into asset management JV with internationally recognised partner
  • Focus on ROAE growth through deceleration of branch expansion by the end of 2008 and increased product penetration through the network
  • Utilise the experience of the management and sales department, the large regional network and cross-selling opportunities to increase the scope and depth of its banking business
  • Continue to introduce new risk management systems to make operations within the retail and SME sectors of the business more efficient
1 executive summary3
1 Executive Summary

2 Rationale for Merger

3 Group History & Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

integrated multi product platform
Integrated Multi-Product Platform

RETAIL

SME

CORPORATE

CAPITALMARKETS

  • Auto loans
  • Cash loans
  • Consumer loans
  • Credit cards
  • Savings products
  • Current accounts
  • Funds transfer
  • Safe custody
  • Debit cards
  • Micro loans
  • Medium loans
  • Small loans
  • Overdrafts
  • Factoring
  • Payments and cash management
  • Savings products
  • Working capital facilities
  • Collateralised loans
  • Overdrafts
  • Trade finance
  • Export-import finance
  • Payments and cash Management
  • Treasury products
  • Savings products
  • Asset management
  • Commercial banking
  • Debt products
  • Equity products
  • Hybrid and structured products
  • Fixed income
  • Equities
  • Derivatives
  • Corporate finance
  • Focus on car loans, cash loans and mortgage lending
  • Diversify and standardise product lines
  • Reclassify loans less than RUB 30mln to SME, and focus corporate business on loyal client base
  • Further reclassify loans less than RUB 75mln to SME in 2008
  • Broaden the product and services base
  • Focus on mid-cap companies

Investment and Corporate Banking

retail banking

281.0

21.8

68.0

30.0

15.8

17.5

12.7

183.0

4.3

3.1

07B

08E

1Q 2007

Retail Banking

Retail Strategy

Net Retail Portfolio Size (RUB bn)

  • Enter TOP 5 by portfolio and number of clients within 3 years
  • Offer the widest and most flexible product lines
  • Focus on mass market segment of clients living in the Russian regions
  • Serve clients in all cities with the population of over 100,000

40.6

5.7

2.8

7.7

23.6

1.1

16.9

0.1

1.6

0.8

6.7

13.9

12.2

0.05

5.7

10.0

0.6

24.4

8.1

0.5

5.3

5.3

0.3

5.2

0.2

10.3

5.1

14.2

3.2

1.9

7.9

6.5

4.7

4.6

3.4

2Q 07

1Q 06

2Q 06

3Q 06

4Q 06

1Q 07

07B

08E

Cash

Auto

Cards

Mortgage

Number of Clients in Portfolio (‘000)

Retail Deposits (RUB bn)

341.0

CAGR: 48%

97.0

234.0

33.0

48.0

158.0

29.0

13.5

19.0

12.3

128.0

11.7

11.0

27.0

211.0

85.0

7.3

23.0

10.0

8.9

8.3

157.0

4.5

19.0

4.1

112.0

94.0

2.2

66.0

3.5

3.4

3.4

3.2

2.3

2Q 07

2004

2005

2006

1Q07

1Q 06

2Q 06

3Q 06

4Q 06

2Q 2007

Call Deposits

Term Deposits

Cash

Auto

Cards

sme banking

3,285

858

51

2,376

1Q2007

SME Banking

Overview

SME Loans Classification as of 2Q07

  • Hired professional team from one of the top Russian SME banks in 2005
  • At 30.06.2007 SME loans accounted for 13.5% of NBT’s total loan portfolio
  • Even though SME lending was launched in March 2006, in 2006 NBT was ranked 9th among Russian banks by loan portfolio
  • Number of clients at the end of June 2007 reached 8,207 comparing to 3,842 at the end of 2006. It is expected to reach 15,000 by the end of 2007.
  • Factoring business is expected to reach RUB6bn by the end of 2007 and RUB10bn by the end of 2008

SME Portfolio Size (RUB mln)

34,700

SME Strategy

5,187

  • Diversify SME loan portfolio
  • Increase the range of banking services to SME clients
  • Standardise the products
  • Increase service efficiency
  • Be in top 5 SME bank by loan portfolio by the end of 2007

18,144

20,127

2,638

(2)

(2)

4,399

11,372

2,274

1,353

718

(1)

9,386

48

296

22

540

156

4,134

669

2,890

1,734

2Q2007

1Q2006

2Q2006

3Q2006

4Q2006

2007B

2008E

Micro

Small & factoring

Medium

(1) Doesn’t include factoring

(2) Off balance sheet factoring of RUB 3.3bn as of 2Q 2007 , currently RUB3.5bn

pro forma corporate banking

31.3

32.7

(1)

12.1

9.7

21.9

10.1

21.6

20.6

11.8

1Q 07

07B

08E

Pro- forma Corporate Banking

Net Corporate Loans (RUB bn)

Overview

  • Number of corporate clients as of 31 July 2007 was c.13,400 (compared to 13,800 corporate customers as of 31 December 2006)
  • Reorganization: focus on relationship with medium-sized clients (up to RUB 5bn annual turnover), interested in multiple value-added banking services, while small clients are redirected to SME banking
  • Cross-sell opportunities for capital market products to regional customer base
  • Approximately $300mln higher yielding structured deals (collateralised) to be retained on Balance Sheet as support to distribution, however this business is not active through the end of the 2nd quarter.
  • Widening of existing product range

CAGR: 8%

23.8

18.7

17.7

14.4

14.0

13.1

7.9

1Q 07

2Q 07

2004

2005

2006

07B

08E

Corporate Deposits (RUB bn)

30.7

30.4

29.3

(1)

9.6

10.5

13.1

17.8

1.0

16.2

21.1

19.9

16.8

2Q 07

2004

2005

2006

Call Deposits

Term Deposits

(1) Expected budget due to withdrawal of Yukos-related deposits during 2007

capital markets
Capital Markets

Overview

Strategy

  • The Bank provides various services including:
    • Lending and structured lending
    • Private placements
    • Corporate finance
    • Capital markets (ECM and DCM)
    • Client flow trading
    • Research
    • Sales
    • Asset management
  • National and international presence through:
    • 450 international clients
    • 400 domestic clients
  • Institutional Investor ranked research team members
  • Diversify revenue stream and investor base by expanding products and services
  • Focus on mid-cap companies providing bridge to global capital markets
  • Focus on origination to distribution model
  • $13.5m of risk free origination income, including $11.2mln of fee income for 1H 2007 vs. less than $7mln for all 2006. Adjusted Target $25mln for full year 2007
slide25

Head of Domestic

Sales

Coordination

CAPITAL MARKETS OVERLAY

TRUST INTERNATIONAL Global Syndication & IBT Alternative Investment Products

Investment & Corporate Banking Committee

Origination

Markets

Sales

Investment Banking and

Structured Solution

Fixed Income & Equity

Sales & Distribution

  • Proprietary (Asset Management JV)
  • Client Flow
  • Repo
  • Derivatives (negotiating JV)
  • Corporate Book (Lending & Structured Credit)

Products

Research

DCM & Private Placements

Macro & Quantitative Analysis

DCM & Private Placements

Head of

International Sales

Coordination

ECM, Hybrids & Private Placements

Corporate

Fixed Income

Transaction Management Group

Fixed Income

  • Primary/Secondary
  • Flow

Equity

  • Primary/ Secondary
  • Flow

Treasury

  • Funding
  • Treasury Products
  • Alternative Investments

Capital Markets

Securitization

Equity

Real Estate

Real Estate

IBSS Legal Counsel

Corporate Finance and

Investment Banking

Domestic Syndication

Financial

Institutions

Prinicpal Investments

Structured

Solutions

Origination

Distribution

DEAL FLOW

nationwide branch network domestic distribution

Top 10 Banks in RF Cities as of September 20, 2007

No

Bank

# of Cities

1

Sberbank

938

Target area of regional expansion

2

Russian Agricultural Bank

268

3

Rosbank

220

4

Russky Standard

175

5

VTB

118

6

National bank Trust

118

7

Uralsib

104

8

Vozrozhdenie Bank

74

9

VTB Retail

73

10

Investsberbank

73

Nationwide Branch Network (Domestic Distribution)

Critical Regional Indicators (as of September 20, 2007)

Network Expansion Targets

As of

As of

As of

As of

2007

As of 2008

2005

2006

20/09

/

07

(planned)

(planned)

Regions

47

50

55

59

70

Cities

74

77

118

150

-

160

220

Sales offices

125

128

171

190

-

200

300

The bank owns app. 80% of the branches

The average branch reaches break-even at app. 2 years

*

Source: NBT estimates

* - at the end of December 2006 with the exception of NBT

established and recognised global platform international distribution

Latvia

Estonia

Sweden

Germany

Denmark

USA

UK

Luxembourg

Switzerland

Kazakhstan

France

Italy

USA

Turkey

Spain

Portugal

Greece

Thailand

Israel

Hong Kong

Philippines

Singapore

Chile

South Africa

Established and Recognised Global Platform (International Distribution)
1 executive summary4
1 Executive Summary

2 Rationale for Merger

3 Group History & Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

pro forma credit portfolio diversification
Pro-forma Credit Portfolio Diversification

Loan Portfolio Regional Breakdown as of 2006YE

Corporate

Retail

SME

Far East

2.5%

North-West

Central

8.6%

22.0%

Ural

11.2%

Siberia

West

12.2%

16.2%

Privolzhskyj

South

13.2%

14.0%

Loan Portfolio Regional Breakdown as of 2Q 2007

credit portfolio diversification cont d

Individuals

Individuals

Trading Enterprises

Trading Enterprises

Financial Intermediaries

Financial Intermediaries

Manufacturing

Manufacturing

Engineering and Metal Processing

Engineering and Metal Processing

Construction

Construction

Energy

Energy

Chemicals and Petrochemicals

Chemicals and Petrochemicals

Oil and Gas

Oil and Gas

Transport

Transport

State Administrations

State Administrations

Pharmaceuticals

Pharmaceuticals

Other

Other

Credit Portfolio Diversification (Cont’d)

Industry Breakdown as of 2006YE

Top 10 Credit Concentration - NBT

Top 10 Credit Concentration - IBT

Industry Breakdown as of 2Q 2007

* Fully repaid as at 30.06.2007 (total amount is RUR 1 945 mln)

credit portfolio quality

11.68%

11.33%

3.00%

2.22%

2.50%

10.60%

1.80%

10.00%

2006

2Q 2007

2007B

2008E

2006

2Q 2007

2007B

2008E

Small

21.0%

19.7%

-

-

Auto

25.7%

24.9%

-

-

ive

Interest Rate

Micro

23.4%

22.8%

-

-

Cash

35.8%

33.6%

-

-

ffect

E

Blended

-

-

18.38

%

16.38

%

Blended

-

-

28.0

%

21.75

%

Credit Portfolio Quality

Non-Performing Loans / Total Loans (%)

Provisions / Non-Performing Loans (%)

6.98%

6.67%

5.23%

5.16%

5.12%

4.28%

4.19%

3.70%

3.62%

3.80%

77.12%

72.23%

70.20%

61.33%

62.85%

2005

2006

2Q 2007

2007B

2008E

2005

2006

2Q 2007

2007B

2008E

Provision / NPL

Provision / Gross Loans

Retail NPL / Total Loans (%)

SME NPL / Total Loans (%)

Corporate NPL / Total Loans (%)

1.30%

0.54%

0.33%

0.25%

2006

2Q 2007

2007B

2008E

-

-

-

-

-

-

-

-

Blended

13.6%

11.5

%

16.

5

0

%

16.25

%

managing retail credit risk

25%

20%

15%

10%

5%

0%

06.2005

12.2005

06.2006

12.2006

06.2007

Managing Retail Credit Risk

Auto

Cash

Level of defaulted loans

16%

14%

14%

12%

12%

10%

10%

8%

8%

6%

6%

4%

4%

2%

2%

0%

0%

06.2005

12.2005

06.2006

12.2006

06.2007

06.2005

12.2005

06.2006

12.2006

06.2007

SPD, second payment default rate

FPD, first payment default rate

AUTO

CASH

Credit cards

TPD, third payment default rate

  • Measures applied in 2006/2007
  • The reorganisation of retail risk management department was completed.
  • “Welcome calls” were introduced in order to identify frauds at the earliest possible stage.
  • Anti-fraud training and equipment were provided to the retail banking employees to improve their capabilities of spotting fraudulent customers.
  • Credit products were modified or eliminated to avoid high risk combinations, for instance 0% equity auto loans. Credit documentation requirements were standardised and clarified.
  • Risk management targets:
  • Probability of default – 11%
  • Expected losses – 5%-7%
  • Risk based pricing
  • Further diversification of the portfolio
1 executive summary5
1 Executive Summary

2 Rationale for Merger

3 Group History & Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

nbt financial overview
NBT - Financial Overview

Key indicators, RUR mln

Key financial ratios, %

Headcount 2,698 3,505 5,529 5,860 6,357

ibt financial overview
IBT-Financial Overview

Key indicators, RUR mln

Key financial ratios, %

Headcount 537 436 475 387 409

timeline convergence of expense to revenue generation capacity
Timeline: Convergence of Expense to Revenue Generation Capacity

This is one of the main profitability drivers of the bank.

slide39

Increasing loan portfolio in assets structure 2006 vs.1Q07

2Q 2007

2007 Budget

NBT – Total assets and Loan portfolio

Total assets & loan portfolio. RUR mln.

nbt loan portfolio structure
NBT - Loan portfolio structure

Changes in loan portfolio structure

2005

2Q07

2007 Budget

2006

Retail

50.0%

Corporate

41.3%

SME

8.7%

93% of retail and SME business is conducted in the Regions

slide44

TRUST Investment Bank - Assets structure

2006

1H07

2007 Budget

Cash and

cash

Cash and

Other

equivalents

Cash and cash

Other

Other

cash

3.4%

equivalents

0.5%

10.9%

8.5%

equivalents

Loans to

10.9%

Loans to

12.0%

Loans to

customers

customers

customers

6.7%

6.2%

21.2%

Financial

Financial

Financial

assets

assets

assets through

through profit

through profit

profit and loss

and loss

and loss

72.0%

74.8%

72.9%

1H2006 to 1H2007

2006 to 2007

Total assets

Financial assets at fair value

Total assets

Financial assets at fair value

50 000

50 000

45.4%

-11.4%

40 000

40 000

34.0%

30 000

30 000

-21.0%

47 396

43 647

41 973

20 000

20 000

34 528

32 581

31 441

27 285

21 629

10 000

10 000

2006

2007B

1H2006

1H2007

trust investment bank financial assets at fair value structure
TRUST Investment Bank - Financial assets at fair value structure

Changes financial assets at fair value structure

2005

2006

1H07

Other

Other

Other

14%

15%

21%

Eurobons of RF

Corporate debt

Eurobons of RF

11%

securities

0%

43%

Eurobons of RF

20%

Corporate debt

Corporate debt

securities

securities

58%

OFZ

60%

17%

OFZ

OFZ

5%

36%

rating breakdown of securities portfolio ibt
Rating breakdown of Securities Portfolio - IBT

Ruble bond portfolio rating breakdown

BBB+/Baa1 (incl.

sovereign)

BBB/Baa2

21%

BBB-/Baa3

Currency bonds portfolio rating breakdown

0%

BB+/Ba1

1%

BBB+/Baa1 (incl.

44%

BB/Ba2

sovereign)

1%

BBB/Baa2

8%

BB-/Ba3

2%

2%

B+/B1

BB+/Ba1

19%

9%

B/B2

BB/Ba2

B-/B3

1%

3%

BB-/Ba3

6%

4%

52%

No rating

B+/B1

16%

Ruble bond without rating portfolio breakdown

B/B2

B-/B3

Banks

7%

2%

3%

No rating

Electric utilities

18%

18%

1%

Municipality

2%

OFZ Futures

1%

13%

Private enterprises

State enterprises

9%

Subfederal financial

37%

institutions

Subfederal

governments

trust investment bank liabilities structure
TRUST Investment Bank - Liabilities structure

Funding structure

2006

1H07

2007

Other

Other

Other

Long term

8%

Long term

7%

10%

financing

Long term financing

financing

10%

12%

8%

Short term

Short term interbank

Short term

interbank

Payables

10%

interbank

Payables under

6%

under REPO

12%

49%

REPO

Customer

53%

accounts

9%

Payables

Customer accounts

under REPO

Customer

19%

66%

accounts

21%

pro forma key ratios merged bank targets
Pro-forma Key Ratios; Merged Bank Targets

3 year plan has not been amended due to current market conditions

pro forma securities portfolio optimising for the future

36,181

17,704

10,575

6,056

7,650

Treasury and Asset Management

5%

1,262

2,396

765

5%

574

15,434

5%

526

6,885

5,100

5,483

4,422

6,302

17,089

6,120

2,228

6,302

2,227

1Q 2007

2007B

2008E

1Q 2007

2007B

2008E

Pro-forma Securities Portfolio – Optimising for the Future
  • In order to optimise the asset structure of the bank and allow the expansion of the retail and SME business, the bank has decided to reduce its position in trading securities to 10% of total assets by the end of 2009

Pro-forma Trading Securities (RUB mln) - Proprietary

Pro-forma Trading Securities (RUB mln) – Client Flow Business

27,897

19,691

35,688

1,494

4,974

4,948

6,181

1,525

1,690

6%

1,512

2,420

5%

16,258

370

1,376

941

12,949

6,181

5,799

4,604

2%

16,215

11,575

11,016

137

1,357

2Q 2007

2Q 2007

2005

2006

2005

2006

Total

Government and municipal bonds

Corporate bonds

Equities

Equities

Asset Management & Other

Corporate bonds

% of total assets

pro forma funding structure
Pro-forma Funding Structure

2006

2Q 2007

3Q-4Q 2007

2008E

2009E

  • $100mln CLN by NBT (Dec)
  • $150mln Eurobond by IBT (Sep)
  • $20mln NBT sub-debt (Mar)
  • $50mln NBT CLNs (Apr)
  • $200mln NBT Eurobond (May)
  • €150mln funding from securitisation (May)
  • €150-200mln securitisation bond
  • $100mln private placement
  • $100mln one year syndicated loan
  • $400-500mln funding from securitisation
  • $350mln new Eurobonds issued
  • $100mln raised in syndicated loans
  • $50-100mln of other securities issued
  • $400-500mln funding from securitisation
  • $150-300mln new Eurobonds issued
  • $100mln raised in syndicated loans (new)
  • $50-100mln of other securities issued (new)

Increasingly Diversified Funding Structure

2006

2Q 2007

2007 Budget

2008E

pro forma capital structure
Management estimates that after the merger, National Bank TRUST would reach TOP 20 Russian banks in terms of assets

1.5bln of 3.4bln of announced capital increase has been provided. The remaining 1.9bln will be provided by the end of October

Significant room to overperform asset growth targets in model

RUB 7bln capacity for tier 2 subdebt issuance

23,367

19,057

15,997

12,130

2Q 2007

2007B

2008E

2009E

16.89%

13.16%

2Q 2007

Pro-forma Capital Structure

Total Shareholders Equity (RUB mln)

Comments

CAGR: 29%

Capital Adequacy Ratio

20.6%

18.2%

17.6%

16.0%

16.1%

15.3%

14.73%

12.24%

1Q 2007

2007B

2008E

2009E

Tier 1 Ratio

Total Capital Ratio

BIS Requirements (8%)

Central Bank (10%)

pro forma related party transactions
Pro Forma Related Party Transactions

Amounts Due to RPCustomers

Loans to RP

Transactions with related parties:

  • Carried out on an arm\'s-length basis
  • Subject to the same approval procedures and limits as transactions with unrelated parties

6.03%

728

2.62%

2.31%

1.72%

543

647

610

2004

2005

2006

1H2007

pro forma employee structure

409

6,357

6%

18%

94%

82%

IBT

NBT

Pro-forma Employee Structure

Employee Structure

2006

2Q 2007

Pro-Forma 2007

Pro-Forma 2008

Total: 5,631

Total: 6,766

Total: 8,200

Total: 9,100

  • Post merger, the group expects a minimal impact to its headcount due to different business operations of the banks being merged; however due to spin-off of proprietary and alternative investments combined with synergies and back office redundancy will lead to savings of at least $7.5mln a year
  • Expected redundancies of appr. 80 people due to merger (23 front office, 57 back/middle office)
  • In light of the bank’s network expansion plans, management anticipates to have approximately 3,000 new employees to grow the business in 2007 and 2008. The new employees will receive introductory training to ensure that high standards are maintained
  • Headcount not due to increase significantly after 2009
1 executive summary6
1 Executive Summary

2 Rationale for Merger

3 Group History & Structure

4 Group Strategy

5 Group Business Overview

6 Group Risk Management

7 Group Financial Forecasts

8 Group Merger Implementation Plan

indicative timetable expected completion in 2q 2008
Indicative Timetable: Expected Completion in 2Q 2008
  • Announced Merger to market, staff and regulators on 17 July 2007
  • Engaged A&O as legal counsel
  • Finalizing Capital Increase of National Bank TRUST by late October 2007
  • Informal Discussions with regulator on Merger
  • Official request will be filed with CBR during October 2007
slide60

Yukos Related Deposits

Post Yukos related company auctions the

Unfrozen Yukos-Related deposits have effectively

been reduced to zero

balance sheet rub mln
Balance Sheet (RUB mln)

NBT

IBT

2005

2

2006

2

Q

2007

2005

2

2006

2

Q

2007

Cash and cash equivalents

13,970

11,147

1

6

,

326

5,350

5,696

4

,

774

Amounts due from credit institutions

15

15

15

1,891

1,320

519

Trading securities

7,302

6,150

2

,

655

13,887

34,529

3

1

,

441

2,695

Net loans to cust

omers

16,379

24,847

32

,

676

4,381

3,166

16,934

Total retail loans

4,691

12,715

-

-

-

2,695

11,343

4,381

3,166

Corporate

11,688

9,891

4,399

SME

-

2,241

-

-

-

Property, equipment and intangibles

1,203

1,965

2,633

417

604

5

82

Tax and other assets

484

546

672

2,421

2,081

3,

6

35

Total Assets

39,360

44,670

54

,

977

28,347

47,396

4

3

,

646

Amounts due to credit institutions

2,875

1,126

1,423

3,959

3,983

4

,

395

Payables under repurchase agreements

-

-

-

7,013

21,842

18

,

333

Amounts due to customers

30,564

34,868

38,

787

7,235

7,899

7

,

637

Retail

7,299

11,886

176

-

-

13,482

7,637

7,899

Corporate

23,265

22,867

7,059

25,305

SME

-

-

-

-

-

-

Funding from securitisation

-

-

-

-

-

-

Obligations to return securities received as

-

-

-

846

1,885

2,092

collateral

Debt securities issued

1,002

3,713

8

,

6

40

2,714

4,914

4,

312

Tax and other liabilities

726

625

6

30

348

204

2

44

Total Liabilities

35,167

40,333

4

9

,

480

22,114

40,727

37

,

013

Shareholders\' Equity

4,193

4,337

5

,4

97

6,233

6,669

6,6

33

income statement rub mln
Income Statement (RUB mln)

NBT

IB

T

2005

2

2006

2

Q

2007

2005

2

2006

2

Q

2007

Interest income

2,726

4,622

3

,

337

1,354

2,383

1,55

8

Due from credit institutions

208

321

243

145

290

143

Debt securities and other financial instruments

615

679

179

555

1,581

1,126

-

Reverse repurchase agreements

-

-

117

117

62

2,915

Loans to customers

1,904

3,622

440

395

226

Interest expense

(788)

(1,373)

(

1,140

)

(659)

(1,439)

(

1,077

)

Due to credit institutions

(73)

(27)

(26)

(125)

(237)

(153)

Repurchase agreements

-

-

-

(301)

(739)

(617)

Deposits by customers

(634)

(1,247)

(870)

(109)

(225)

(116)

Debt securities issued

(81)

(99)

(244)

(123)

(238)

(153)

Net interest income

1,938

3,249

2,197

695

944

481

Provision for impairment

(304

)

(665)

(417)

(238)

(295)

7

Net interest income after provisions

1,634

2,584

1,780

457

649

488

Fee

and commission income

876

925

461

187

318

2

90

Fee and commission expense

(163)

(159)

(

96

)

(51)

(45)

(

27

)

Net Fees and commissions

713

766

365

136

274

263

Total operating income

3,310

3,619

2,290

2,262

1,784

707

Operating expense

(2,463

)

(3,317)

(

2,174

)

(1,324)

(1,518)

(

748

)

Salaries and benefits

(1,318)

(1,855)

(

1,288

)

(828)

(946)

(

442

)

Administrative expenses

(815)

(1,148)

(

687

)

(359)

(426)

(2

56

)

Depreciation and amortization

(153)

(165)

(

115

)

(77)

(95)

(4

0

)

Other expenses

(178)

(

148)

(

84

)

(61)

(51)

(

10

)

Profit before taxation

847

303

116

938

265

(41)

Income tax expense

(

558

)

(

111

)

29

(

213

)

(

87

)

5

Net income

288

192

145

726

178

(36)

russian banking sector summary
Russian Banking Sector: Summary

Banking Sector Summary

Total Assets

  • Retail lending is increasingly the focus for banks and, despite explosive growth in consumer credit, Russia still lags behind emerging market peers. There is potential for several years of further strong growth in credit card, auto credit, as well as mortgage lending as personal income levels rise
  • Mortgages, although quickly becoming a mass product, still account for only 0.75% of GDP vs. 5.3% in Kazakhstan and 7.3% in Poland and amid enormous demand for new housing, still make up only c.10% of total retail loans
  • Mortgage lending is forecasted to grow by 80% in 2007
  • There is increasing emphasis on providing banking services in the under-banked regions as economic wealth spreads into the regions responsible for much of Russia\'s industrial output
  • The key constraints for all Russian banks are capital and funding. With some of the leading private banks growing at over 100% per annum, sourcing capital is challenging
  • VTB successfully listed in May 2007 and several other banks have IPO in the pipeline
  • In 2006, total NPLs of the banking system has increased by 2.5x from $765m as of January 2006 to $2.0bn whereas lending to individuals rose by 75% in 2006

$bn

%

Total Deposits

Key Banking Statistics

$bn

%

With the fast growth of retail lending, an increasing number of banks face capital constraints as the capital ratio decreases to the minimal level acceptable by the CBR

Source: RosStat, CBR

slide66

Russian Banking Sector: Forecasts by Product

Total Banking Assets

Total Deposits

Mortgages

Credit Cards

Car Loans

Corporate Loans

Source: Deutsche Bank Equity Research (20-Sep-06) and Merrill Lynch Research (23-May-06)

slide67

Russian Banking Sector: Benchmarking

Banking Assets in % of GDP

Total Loans in % of GDP

Total Deposits in % of GDP

(1)

(2)

(1)

(2)

(1)

(2)

Note: Total banking assets, loans and deposits data as of 31 December 2005 unless otherwise stated

Sources: European Banking Federation, Bank of Ukraine, Economist Intelligence Unit and broker research

(1) Includes Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia and Ukraine

(2) Includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Norway, Netherlands, Portugal, Spain, Sweden, Switzerland and the United Kingdom

slide68

Top Russian Banks

Main Financial Indicators of Top 20 Banks, as at April 1, 2007

Source: Interfax

(1) Includes capital increase of RUB 3.4bn

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