Russian Standard Bank

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Russian Standard Bank Investor Presentation April
2006
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Important Information
This document does not or form a part of, and
should not be construed as, an offer or
invitation to subscribe for or purchase any
securities and neither this document nor anything
contained herein shall form the basis of, or be
relied on in connection with, any offer or
commitment whatsoever. Russian Standard Bank has
not, and will not, register any securities under
the U.S. Securities Act of 1933, as amended, and
no securities may be offered or sold in the
United States absent registration or an exemption
from the registration requirements of that
act. This document contains certain
forward-looking statements that involve known and
unknown risks, uncertainties and other factors
which may cause Russian Standard Banks actual
results, performance or achievements to be
materially different from any future results,
performance or achievements express or implied by
such forward-looking statements. This document
contains statistics and other data on the Russian
banking industry that have been derived from
third party sources and have not been
independently verified by Russian Standard Bank.
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Russian Standard Bank at a Glance
The largest privately-owned consumer lending bank
in Russia Total assets at US3.9bn as of 31 Dec
2005/ US4.8bn as of 01 April 2006 The most
profitable bank in the Russian Banking sector
(ROE 59.7 ROA 7.7) 7th largest bank by
absolute profit in Russia 4th bank by profit on
capital and profit on assets in the
world Comprehensive risk management framework RSB
maintains an advanced proprietary customer
database in Russia Historic and ongoing lending
relationships with IFC and EBRD Business model
based on Western standards in cooperation with
international advisors Audited by PWC since
2000 Rated B/Stable by SP and Ba2/Stable by
Moodys
1Q2006 financial info based on Russian
Accounting Standards
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Market Leader in Russian Retail Banking Sector
TOP 10 RUSSIAN BANKS BY PROFIT, 2006 (EXCL.
SBERBANK)
TOP 10 RUSSIAN BANKS CONSUMER LENDING,
2006(EXCL. SBERBANK)
No. 1 amongst Russian Banks in returns on
investment
Source Profile Magazine ?08/March 6, 2006,
Rankings as of January 1, 2006, based on RAS
Source Profile Magazine ?08/March 6, 2006,
Rankings as of January 1, 2006, based on RAS
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RSB A Positive Rating Story
"Since 2003 the bank has consistently
outperformed its peers, and is expected to
continue generating above-average returns for the
foreseeable future, capitalising on its pioneer
position in the still immature Russian consumer
finance sector."
1 September 2005
Ba2/BB
Ba3/BB-
B1/B
"The rating action reflects Russian Standard's
ability to preserve good loan performance while
maintaining fast lending growth, and the bank's
sustained strong profitability and adequate
capitalization. The ratings also benefit from
Russian Standard's leading position in the
nascent Russian consumer finance market
successful business model geographical
diversification of business and wider funding
resources. 18 July 2005
B2/B
B3/B-
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Operating Environment
General Overview of Russian Standard Bank
Russian Standard Banks Business
Risk Management
Strategy
Investment Summary
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Russian Economy Remains Highly Unleveraged
It is estimated that nearly 128 million people in
Russia (or 89 of the population) have never
taken a bank loan In 2004, the Russian consumer
borrowing stood at only 4 of GDP compared with
71 in the UK and 49 in the Eurozone By
comparison, CEE economies have consumer borrowing
levels 3 to 6 times higher than Russia,
indicating substantial medium-term growth
potential in Russia
2004 CONSUMER BORROWING1/GDP RATIO
RETAIL LOAN GROWTH
Source EIU forecast reports, US Federal
Reserve, ECB and CEIC database, CBR, Broker
research
NOTE 1 Consumer borrowing includes car loans,
POS loans, mortgages, credit cards, overdrafts,
etc
Source Central Bank of Russia, Bulletin of
Banking Statistics, 2005 Broker Research
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Growth Opportunities in Russian Retail Lending
Personal Loans/Overdrafts
Points of Sale Consumer Finance
Genuine Credit Cards
Mortgages
Car Loans

• c. USD 2 billion

• c. 13 million payment cards in issue, but only
  c.2 million genuine credit cards
• Estimated outstanding balances of c. USD 600
  million

• c. USD 1.2 billion

• c. USD 1.3 billion

• c. USD 15 billion

Estimated Market Size

• Lending products available from most commercial
  banks. Collateral and third party guarantees
  (often from employers) are almost always required
  
• Overdrafts have not been widely available to the
  mass-market, although this is changing rapidly

• Credit approvals for smaller loans typically
  provided in1530 minutes
• Rouble-denominated Typical tenors of 3, 6, 10,
  12, 24 and 36 months
• APRs typically 1520
• Down-payment of c. 10
• Pledge on goods financed and personal guarantee
• Retailers charge commissions of up to 15

• American Express, Mastercard and VISA cards, as
  well as own brand cards
• APRs typically c. 15 for USD cards and c. 30
  for Rouble cards
• Majority of transactions are ATM cash advances
  cash advance fees c. 5
• "Non-genuine credit cards (e.g. cards secured by
  deposits) are widespread

• Typical interest rates of 11 for USD loans and
  17 for Rouble loans
• Typical tenors of515 years

• Only c. 8 of car purchases are financed with a
  loan
• Interest rates typically1020
• Lenders charge retailers commission
• Pledge on vehicle and third party guarantees are
  normally required
• Average loan size USD 4,000
• Term between 12 and 36 months

Product Characte-ristics
Market Shares
Commercial Banks 30
Sberbank 22.3
Other 14.8
Sberbank 50
Investsberbank 3.5
Other 9.3
Finansbank 6.6
RSB 75.4
Other 35
Other 42.7
RSB 39.9
Sberbank 60
Rosbank 3.6
Investsber-bank 6.7
RSB 68
Alfa 4.0
Rosbank 14.6
Rosbank 13.8
Homecredit 4.1
Bank of Moscow 5
Bank of Moscow 10
RZB 9.6
RSB 1.9
Alfa 5
Home Credit 18.2
Delta Credit (SG) 5
Uralsib 8.9
Source CBR, 01 January 2006
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RSB has Extensive Regional Coverage
CONSUMER LOANS BY REGION, 2005

• RSB distribution network covers 93 of the
  Russian population
• RSB has 22 branches, 13 regional centres, 174
  representative offices in major Russian cities
• Over 36,000 POS in retail outlets throughout the
  country
• 78 ATMs and 256 cash-in machines
• RSB employs over 20,000 people throughout Russia
  
• The number of loans originated outside Moscow is
  growing, accounting for 90.3 of new loans by
  value in 2005, compared to 73 in 2004 and 57 in
  2003

RSB TOTAL REVENUES BY GEOGRAPHY
Source Russian Standard Bank
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Operating Environment
General Overview of Russian Standard Bank
Russian Standard Banks Business
Risk Management
Strategy
Investment Summary
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Shareholder Commitment to Long-Term Development
RSBs shareholder base is committed to RSBs
long-term development, and the bank has strong
support from supranational corporations. The
major shareholders are
RSB'S SHAREHOLDER STRUCTURE

• Mr. Roustam Tariko 93.57
• RSBs founder and majority shareholder(through
  Roust and Russian Standard Company)
• A Russian entrepreneur with 20 years of
  experience in the Russian consumer sector
• International Finance Corporation ("IFC") 6.42
  
• first IFC's equity investment after the 1998
  Russian crisis
• IFC also provides debt financing to RSB
• In addition, EBRD has been a strong supporter of
  RSB through various debt financings
• RSB is audited by PricewaterhouseCoopers

Source Russian Standard Bank, December 2005
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Operating Environment
General Overview of Russian Standard Bank
Russian Standard Banks Business
Risk Management
Strategy
Investment Summary
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RSB is Focused on Consumer Finance
Russian Standard Bank is fully focused on retail
lending, mostly consumer lending 15.5 million
loans issued as of 2000 8 million loans issued in
2005/over 2 million loans issued in 1Q2006
POS CONSUMER LOANS
CREDIT CARDS

• 48 of total loan portfolio
• term 3-36 months
• amount up to RUB 150,000 (5,400)
• effective interest rate 55.1
• down payment N/A
• collateral none

• 48 of total loan portfolio
• Term 2 years
• amount up to RUB 150,000 (5,400)
• effective interest rate US - 63.8 RUB - 68.6
• down payment N/A
• collateral none

CAR LOANS
AMERICAN EXPRESS

• - Launched on 6 December 2005
• - offers Centurion, Platinum, Gold and Green
  AmEx cards, Revolving credit cards (Gold and
  Green), Blue Card
• - access to all American Express Travel Service
  Offices, local and international ATM networks and
  merchants where Amex cards are accepted
• - services are provided locally and in Russian
  language
• - AmEx provides all insurance, travel and
  lifestyle benefits in Russia

• 3 of total loan portfolio
• term 12-48 months
• amount up to US 20,000
• effective interest rate 55.1
• down payment N/A
• collateral vehicle itself

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RSB Has a Strong Consumer Lending Platform
Market Characteristics

• Large market (USD 38 billion loans issued as of
  December 2005)
• Strong growth potential, high margins
• First mover advantage, limited competition from
  other/large multinational banks

Products and Distribution

• Consumer loans are provided for purchases of
  Household goods, Cars, Services
• Credit card types issued include MasterCard,
  Amex, VISA
• Extensive point-of-sale (POS) network

Infrastructure andTechnology

• Powerful and tested IT system (TUV SERT ISO 9001)
• Processes approx. 35,000 loan applications per
  day (max. capacity of 200,000)
• 24/7/365 call centre covering all Russian regions
  (8 time zones)

Credit Risk Management

• Centralised credit scoring and risk control
  systems
• Diversified granular loan portfolio
• Efficient debt collection process loan recovery
  rate is approx. 95
• NPLs (between 20012005) are less than 5 of
  total loans

Source Russian Standard Bank
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RSBs Consistent Loan and Asset Growth
INCOME AND PROFIT GROWTH, 2002 2005
BALANCE SHEET GROWTH, 2002 2005
NET INTEREST MARGIN, 2002 2005
COST/INCOME RATIO, 2002 2005
Source Russian Standard Bank
Source Russian Standard Bank
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Operating Environment
General Overview of Russian Standard Bank
Russian Standard Banks Business
Risk Management
Strategy
Investment Summary
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Financial Performance
As at the end of 1Q 2006 the Bank showed a net
profit of USD 82.8 million
1Q2006 financial info based on Russian
Accounting Standards
Source Russian Standard Bank
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Market and liquidity risk management overview
MATURITY OF ASSETS AND LIABILITIES

• Fully hedged currency risk
• Established FX forward lines
• Limited trading operations
• 1 of total operating income
• Proprietary position is limited to 3 million
• EBRD and IFC covenants
• Standalone open foreign exchange in any single
  currency not to exceed 10 of its net equity
• Maintenance of positive cumulative liquidity gaps
  in 30, 90 and 180 day maturities
• Broad access to funding
• 1.5bn EMTN program
• Established bilateral loan facilities from
  international banks
• Lending relationships with IFC and EBRD
• CBR included RSBs bonds into refinancing list
• Securitisation of the consumer loan portfolio
  completed in April 2006 EUR 300 million Senior
  and Mezzanine asset backed floating rate notes
  due 2012
• Short-term loan portfolio allows RSB to refund
  debt through maturing loans
• RSB is extending the maturity of its liabilities

DEBT MATURITY PROFILE
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NPLs Remain Low After Expansion into Regions

• Strategic focus for RSB franchise
• Average interest rates on consumer loans and
  credit cards 44.9 and 48.4
• Loan losses at 3.5 in 2005
• Loan loss provisions for the consumer finance
  portfolio at 187 of NPLs
• Despite expansion into less developed regions
  RSBs levels of NPLs remain low
• In 2005, the ratio of NPLs was slightly lower
  than in 2004
• Loan losses in the regions expected to decrease
  further with adapting of the scoring system to
  specific conditions
• RSB carefully manages the "risk-reward" ratio of
  its portfolio and builds "product baskets
• Higher risk products carry higher margins (e.g.
  mobile phones carry approx. 70 effective
  interest rate)

NPLs AND PROVISIONING COVERAGE (INCL. DEBT
COLLECTION AGENCY)
Source Russian Standard Bank
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ROE
Russian Standard Bank within Its Peer Group
Total Equity/Total Assets
Cost-to-Income Ratio
Net Interest Margin
Source Companies annual reports for 2004,
Bankscope
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Comprehensive Risk Management Framework
Credit Risk

• Scoring Analysis is used for consumers
• Rating System is used for corporate
  clients/counterparties

Market Risk

• Value-at-Risk Method is used for measuring
  interest rate, exchange rate and capital markets
  risks. RSB hedges open positions

Liquidity Risk

• Gap-reporting based structural liquidity
  management. Under the EBRD loan covenants, RSB is
  required to maintain positive liquidity gaps in
  30, 90 and 180-day maturities

Operational Risk

• Automated System of registration and analysis of
  emerging operational risks

Legal Risk / Compliance

• Know Your Customer rules and internal controls
  are implemented to prevent money laundering

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Delinquency Management and Debt Collection
RSBs DEBT COLLECTION PROCEDURE
Days after loan origination
Stage 1 30 days
Stage 4 120 days
Stage 3 90 days
Stage 2 60 days
150 days
420 days
180 days
Reminder, RUB 300 fine is charged
Reminder, RUB 1,000 fine is charged
Reminder, RUB 2,000 fine is charged
Assessment followed by either write-off or
transfer to DCA
Final write-off
1st Missed Payment
2nd Missed Payment
3rd Missed Payment
DCA
4th Missed Payment
Reminder, no fine
Debt Collection Process
Defaults

• Debt collection results in 2005
• - 85 of the overdue loans are collected during
  Stage 1
• - 6 are collected during Stage 2
• - 2.7 are collected during the Stage 3
• - Debt Collection Agency (DCA) has historically
  recovered approx. 40 of the assigned loans

Combination of prudent customer assessment and
effective debt collectiontechniques result in
approx. 95 loan recovery rate
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Operating Environment
General Overview of Russian Standard Bank
Russian Standard Banks Business
Risk Management
Strategy
Investment Summary
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Strategy Going Forward Challenges and Strengths
Entry of new competitors
Russian Standard Bank has number of competitive
advantages presence in smaller population
centers with untapped demand larger customer
base brand recognition extensive experience in
consumer finance.
Deteriorating asset quality
Adequate policies as to loan losses
provisioning Further development of advanced
proprietary credit scoring system Consistent
application of adequate risk management policies
Falling interest margins
Current healthy level of net interest margin of
34.5 Penetration of Russian regions where
interest margins are still high Growth of loan
portfolio
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Operating Environment
General Overview of Russian Standard Bank
Russian Standard Banks Business
Risk Management
Strategy
Investment Summary
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Questions and Answers
Thank you for your attention