Why regions

1
Philippe Delpal Rusfinance Societe Generale Group
Why regions? Potential of the Russian regional
market. Rusfinance vision on the regional
expansion
November 15th, 2005
Moscow
2
Major points of the presentation

• Short introduction of Rusfinance Bank major
  cornerstones of development of SocGen Consumer
  Finance project in Russia
• Consumer Finance market in Russia dynamic market
  with huge potential of the Russian regions
• Key elements of Rusfinance Bank regional
  strategy focus, speed, operational flexibility
  and innovative channel-approach

A
B
C
3
Short introduction of Rusfinance Bank three
distinct development periods
A
Organic growth
Acquisition
Foundation

• Rapid growth through regional expansion (15
  regional offices opened within 7 months)
• Active promotion of consumer loans at POS and via
  direct sales
• Filing for the bank license
• Validation of our business model

• Acquisition of Promek Bank large regional
  retail bank based in Samara
• Rationale for the deal highly professional team,
  experience in car loans and extensive regional
  network
• Brand Rusfinance (rebranding to start early 2006)
• Societe Generale now control 100 of Rusfinance

• Joint venture
• Commercial company specializing in consumer loans
  
• Brand name
• First loan granted on June 15th, 2004

December 24th, 2003
July 2004-July 2005
July 2005-October 2005
4
The new legal entity a bank operating under one
brand with one organization and common business
processes
A
Highlights about the new Rusfinance Bank
Bank Banking licence to be kept in Samara
Legal status
One company one brand Rebranding campaign to
start in early 2006
Brand strategy
One organization with two centers Samara and
Moscow Business functions to be distributed
between Moscow and Samara depending on the
prevailing business competence
Organi-zation
Standard core business processes based on the
SocGen Consumer Finance know-how and technology
as well as available car loans expertise of the
former Promek-Bank
Business processes
5
Rusfinance and Promek-Bank perfect fit of teams
and expertise
A
United ambitious team with the same growth
oriented business philosophy
6
Despite the high share of Central Russia in the
total market, regions account for 70 of the
market
B
Share of different regions in the total retail
market, January 1st, 2005
Total retail loans dynamics in Russia, 2001-2005
USD bln
Far-Eastern Federal District
Southern Federal District
Central Federal District
North-Western Federal District
120
21.6
118
Urals Federal District
9.8
41
Volga Federal District
4.5
3.2
Siberian Federal District
7
Low saturation of retail loans as of GDP in
Russia overall high growth potential
B
Retail loans as of GDP, 2004
Major growth drivers

• Improving macroeconomic conditions and increasing
  real wages
• Increasing retail consumption thanks to improving
  life standards and rapid development of Russian
  and international retail chains
• Growing understanding of the benefits of retail
  loans by the consumers

Great Britain
Switzerland
Germany
Poland
Hungary
Slovenia
Russia
Significant growth potential
8
Low saturation as measured by USD per capita
Russian have just started to borrow
B
Retail loans saturation - international
comparison (USD per capita)

• As compared to the East European countries,
  Russia has a low retail saturation rate as USD
  per capita (for comparison Slovenia more than
  2000 USD per capita, Hungary more than 1500
  USD, Poland 1000 USD per capita)
• The saturation level in some regions is below the
  avarage in Russia (Volga region, Far East,
  Southern Federal District)

Average East-European
1064
233
Urals
Central Russia
171
160
Siberia
North-Western
157
Russia average
149
139
Volga
129
Far East
Southern
74
9
The share of the regions and the regional retail
saturation are set to grow in the coming years
B
Retail market forecast (USD bn)
Major assumptions
As of the market 2004 vs. 2009

• The average retail saturation as measured in USD
  per capita will amount to the average USD 1065 in
  Russia (current avarege East-European level), to
  USD 1000 in the regions, and to USD 1100 in
  Cenral Russia
• Population decrease from ca. 145 m to ca. 140 m
  given the recent unfavorable demographic
  development (natural decrease of the population)
• 64 of the retail market will be pure Consumer
  Finance (loans for durables, RCC and car loans)

2004
2009
149.0
70
73
21.6
30
27
Regions
Central Russia
10
Improving life standards and further market
development by the major players will facilitate
regional decentralization of the market
B
Life standards
B.1
Wealth is not concentrated in Central Russia.
Further regional decentralization of the income
distribution will take place
Market development
B.2
Russian people are getting more familiar with
different loan products thanks to the intensive
development of the regional market by the major
players
11
Even today not all wealth is concentrated in
Central Russia growing importance of the Eastern
part
B.1
Regional distribution of per capita income,
August 2005
Income per capita
Up to 40,000 RUR
40,000 60,000RUR
60,000 100,000 RUR
More than 100,000 RUR
n.a.
12
Growing retail sales, especially non-food retail,
and increasing car density as good prerequisites
for stimulating further loan growth
B.1
Car density and GDP per capita, 2004
Retail sales in Russia, 2002-2009 USD bn
Cars per 1000 inhabitants
Forecast
700
600
CAGR 12.9
Germany
354
500
328
France
292
400
265
42
CAGR 26.9
Czech Republic
42
231
300
43
193
44
Poland
45
200
147
46
120
Russia
46
100
58
58
Food
47
57
56
55
54
Non-food
0
54
53
0
10000
20000
30000
40000
GDP per capita USD
13
Major Consumer Finance players have developed
extensive regional network and plan to expand
further into the regions
B.2
Russian Standard
Home Credit
Rusfinance

• 20 standard offices in 16 regions (as of March
  2005)

• 57 offices in the 44 regions (as of October 2005)

• 38 standard offices in 35 regions (as of October
  2005)

Regions

• 88 cities

• n.a.

• 136 cities

Cities

• 12,000 points of sales

• 11,000 points of sales

• 2000 points of sales

POS
Ca. 750 points of sales per region
Ca. 250 points of sales per region
Ca. 57 points of sales per region
14
Focus, prioritization and clustering of the
regions, multiple formats are the key elements
for successful operation in the Russian regions
C
15
Our strategy in a nutshell focused product
portfolio and sales channels
C
Strategic cornerstones of Rusfinance Bank
Focused product portfolio Consumer loans only
(loans for durables, cars, RCC)
Focused target customer group Partner-oriented
sales (close collaboration with merchants,
dealers and producers)
Focused distribution channels Push
distribution strategy (presence at POS and direct
sales)
16
Rapid expansion is the cornerstone of the
regional strategy of Rusfinance Bank
C

• Currently, Rusfinance Bank has 38 standard
  regional offices

• By 2007 the target number of standard regional
  offices is ca. 65-70

2005
2006
2007
17
Rusfinance regional network is structured into 6
macroregions to facilitate the management
C
Macroregions

• Role of the macroregions
• Facilitation of the network management in the
  country with 11 time zones
• Additional macroregions to be added while
  expanding further eastwards
• Network coverage
• Total number of regions 35
• Total number of POS ca. 2000

North-Western Macroregion
Moscow macroregion
Ural macroregion
Samara Macroregion
Southern macroregion
Sibir macroregion
18
Rusfinance has a set of selection criteria to
target regions with most potential first and
determine the optimal presence format
C
Branch with cash unit
Standard branch
Mini office
Home office
POS
Operational formats

• Market indicators
• Overall macroeconomic and consumption potential
  of the region
• Competitive landscape
• Company specific indicators
• Presence of important partners
• Overall client base
• Possibility to manage from a neighboring region

Evaluation Criteria
Entry of a new region is possible with any of
these formats
Head count
Headcount and branch structure depending on the
type of the operational format
Legislative format
Respective regulations of the Central Bank of
Russia taken into account
19
New channels to reach far regions unique for
Russia 6-step direct sales approach
C

• To allow to All Russian people to apply for loans
  staying at HOME !
• 3 main way of contacts by Phone, by Post, by
  Internet

1.Sending or placing credit proposals
3. After pre approval, automatic sending of
documents directly by Post to the customer
Phone
2. Way of contacts
Post
4. Filling of the application at customers home
and sending to RusFinance by Post
Internet
6. Sending of credit amount to customer bank
account
5. Automatic decision making about credit
20
Direct sales you can try it with Rusfinance
yourself
C

• Need Money NOW ?
• Call us 514 05 05
• Mail us P/O Box 106
• 111396 Moscow
• Web us
• credit_at_rusfinance.ru
• www.rusfinance.ru

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Thank you for your attention

• Philippe Delpal
• Division of Specialized Financial Services
• Societe Generale Groupe
• Rusfinance