Financing in Serbia

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Financing in Serbia 15th European Annual
Meeting European Consultants Unit
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TABLE OF CONTENTS

• Development of Banking Sector
• Banking and Economy
• Development of Raiffeisenbank a.d.
• Precondition of Financing Limitations
• Outlook

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DEVELOPMENT OF BANKING SECTOR
Prior to Political Changes in October 2000

• Steady deterioration in the past 12 years prior
  to political changes
• Large number of banks
• Majority of banks undercapitalized
• Most banks overstaffed
• Banking sector small and not active enough
• Politically directed loans dominate the market
• Only basic banking products offered
• Lack of public trust in the banking sector

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DEVELOPMENT OF BANKING SECTOR
After Political Changes

• NBS creates the basis for healthy development of
  financing sector
• Significant reduction in number of banks through
  mergers closures Beobanka, Beogradska banka,
  Jugobanka, Investbanka..
• Increased demand in terms of capital and quality
• Level of trust increased
• Increase in deposits volume
• June 2001 total retail deposits reached EUR 31
  mio
• September 2006 total retail deposits over EUR
  2,74 bn
• Increase in loans volume
• Until 2001 loans to customers were very modest
• During the last 3 years loans volume is
  increasing
• Payment system transferred to commercial banks
• Ownership structure of banks changed

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TABLE OF CONTENTS

• Development of Banking Sector
• Banking and Economy
• Development of Raiffeisenbank a.d.
• Precondition of Financing Limitations
• Outlook

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BANKING AND ECONOMY
Banks Assets - Share in GDP

• CONCLUSION
• Due to the closure of large banks and
  restructuring process undergoing in state-owned
  banks in Serbia the banks asstets participation
  in Serbian GDP has declined. Nevertheless, result
  of new entrants into Serbian banking sector, this
  ratio is expected to increase.

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BANKING AND ECONOMY
Total Credits - Share in GDP

• CONCLUSION
• Evident decrease of this indicator is a result of
  assets restructuring of state-owned banks (i.e.
  Write-offs of bad loans). Following the
  resructuring of banking sector and presence of
  foreign banks, participation of total credits in
  GDP has begun to increase (126 YoY 2003/04)

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BANKING AND ECONOMY
Retail Loans - Share in GDP

• CONCLUSION
• Retail market segment is the most dynamic in term
  of growth rates. The large increase is primarily
  generated through much larger supply of retail
  loans in recent years. There is still enough
  scope for further growth.

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BANKING AND ECONOMY
1M BELIBOR
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BANKING AND ECONOMY
EUR/CSD ANALYSIS AND FORECAST

• In 2005 CSD nominal depreciation towards EUR was
  8.4, effective depreciation was amounting to 7
• In 2006 up to now CSD depreciated for 1.29
• It is expected that the EUR/CSD would be around
  87.5-88.5 level at the end of 2006
• Expectations are that CPI would be in range
  9.5-13.5

This commentary is for information only and the
comments and forecasts are intended to be of a
general nature and are current as at the date of
issue. Issued by Raiffeisenbank A.D., Belgrade
who takes no responsibility for any individual
investment decisions based thereon. This
documentation is not intended as an offer,
solicitation or recommendation to buy or sell
currency. Information is obtained from sources
that are believed to be reliable but their
accuracy cannot be guaranteed. Relevant economic
data has been taken from Statistical gazette of
NBS, Economical gazette of NBS, Ministry of
finance of Serbia internet page, NBS internet
page, Republic of Serbia statistic department.
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Market position and growth rates
Market- position
-
No. of NWBs
Bosnia and Herzegovina
Albania
3
Serbia
-
Kosovo
8
(1)
Top 1
Belarus
Romania
Croatia
Slovakia
Bulgaria
6
-
3
Top 4
Hungary
Czech Rep.
(2)
Ukraine
Slovenia
Russia
(3)
4
gt6
Poland
Ø EU-12 3,6 p.a.
gt
0
2
4
6
8
10
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Average nominal GDP-growth 2004e 2007 p.a.
____________________ (1) av. nom. GDP-growth
2004e-2007e (p.a.) 19,0 (2) av. nom.
GDP-growth 2004e-2007e (p.a.) 14,0 (3) av.
nom. GDP-growth 2004e-2007e (p.a.) 14,4
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TABLE OF CONTENTS

• Development of Banking Sector
• Banking and Economy
• Development of Raiffeisenbank a.d.
• Precondition of Financing Limitations
• Outlook

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RZB Group in CEE
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RAIFFEISENBANK a.d. Belgrade

• First bank established with 100 foreign capital
  in the country
• The Banks shareholders
• Raiffeisen International
• IFC, World Bank Group
• Equity EUR 200 mio
• More than 365,000 clients
• 54 branches
• Universal bank for 4 main business segments
• Corporate Banking
• Retail Banking Private individuals
• Retail Banking SMEs (small micro enterprises
  and professionals)
• Treasury Investment Banking

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TOP 15 BANKS - by total assets
As at 30/06/2006 in million EUR Source NBS,
under local statutary requirements, prepared by
Raiffeisenbank
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TABLE OF CONTENTS

• Development of Banking Sector
• Banking and Economy
• Development of Raiffeisenbank a.d.
• Precondition of Financing Limitations
• Outlook

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Preconditions for financing-limitations

• Profile of the borrower
• Privately owned companies with undisputable
  ownership rights
• Subsidiaries of Multinationals
• State owned and mixed companies with good
  prospects of privatization
• Track record of at least 2-3 years
• Credit profile
• Purpose working capital financing, financing
  of investments, project/trade financing
• Amounts up to EUR 50 mio (current legal
  lending limit)
• Tenors working capital financing up to 2y
• investments/project financing up to
  10y
• Collateral Mortgage, pledge on equipment and
  inventory, bank/corporate guarantees and cash
  deposits, assignment of receivables,
  unsecured etc

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Preconditions for financing-limitations

• Limitations
• Country risk maximum tenor, costs of
  refinancing, maximum country limit
• Lack of country-wide land register
• Lack of available construction/industrial land in
  towns
• Legal restrictions Law on Foreign Credit
  Transactions, necessity of registration of
  international financing with National Bank of
  Serbia (reduction of flexibility)
• Costs of refinancing mandatory reserve costs
  (60), costs for political risk
• Still limited transparency of balance sheets but
  strongly improving
• Improvements
• Significance of balance sheet, International
  Accounting Standards
• Positive track record with the bank, willingness
  and capability to repay
• Increasing of competition in the banking area

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TOP 15 BANKS - by total loans
As at 30/06/2006 in million EUR Source NBS,
under local statutary requirements, prepared by
Raiffeisenbank
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TABLE OF CONTENTS

• Development of Banking Sector
• Banking and Economy
• Development of Raiffeisenbank a.d.
• Precondition of Financing Limitations
• Outlook

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Outlook - Plans

• Outlook
• Increased competition due to entrance of new
  banks into the market
• Increased mandatory reserve requirements
• Positive development of the country current
  country rating Standard Poors BB-
• More foreign Greenfield investments expected
• EU entry and further stabilization expected on
  mid term
• Summary
• Serbia is no longer a high risk country,
  currently ideal proportion between opportunity
  and risk

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Thank you for your attention!