Kazakhstan at times of market turmoil

1
Kazakhstan at times of market turmoil

• Kazakhstans Banking market from the viewpoint of
  ATF Bank

Alexander Picker, Chief Executive Officer JSC
ATF Bank
Almaty, September 2008
2
AGENDA

• Macroeconomic analysis yesterdays drivers of
  growth are todays problems
• Competitive environment a mature, if not
  saturated market
• ATF Bank

3
ECONOMIC GROWTH DRIVEN BY RESOURCES SECTOR,
STRONG CONSTRUCTION AND FINANCIAL INDUSTRIES SO
FAR MOTORS FOR FUTURE GROWTH MOST LIKELY
RESOURCES, INFRASTRUCTURAL PROJECTS, FOOD AND
SOME TRADE

• Loans, Investment and GDP by sectors

• Kazakhstan world mineral resources

Source Kazakhstan Agency on Statistics Aton
research report, EIU
4
RAPID EXPANSION OF FINANCE AND CONSTRUCTION
INDUSTRIES WAS FUELLED BY MASSIVE EXTERNAL BANK
BORROWING
Kazakhstan banks borrowed massively from abroad
...to finance the construction industry
As a result, both exploded in the last two years
Overheating

• Loans to construction
• industry of top 5 banks, bln

• External borrowing by banks, bln

• real growth, y-o-y

• 72

19.5
10.3
12.2
7.5
6.1
3.5

• 2005

• 2006

• 2Q 2007

• 2005

• 2006

• 3Q 2007

• 1Q06

• 2Q06

• 3Q06

• 4Q06

• 1Q07

• 2Q07

• Construction

• Financial services

• GDP

Source Aton research report
5
STRONG SLOWDOWN IN 2008 / RECOVERY IN 2009 ?

• Macroeconomic scenario

  2004 2005 2006 2007 2008f 2009f 2010f
Nominal GDP, bln KZT 5870,1 7590,6 10139,5 12726,0 15253,0 17832,3 20692,8
Real GDP, yoy change 9,6 9,7 10,6 8,5 5,0 8,0 8,5
- Personal consumption, yoy change 14,1 10,9 12,7 13,7 6,0 8,0 9,0
- Investment, yoy change 22,5 28,1 29,7 18,0 4,0 12,0 15,0
- Government Consumption, yoy change 10,6 10,8 7,3 6,0 8,0 9,0 10,0
- Exports of goods and services 10,9 1,1 6,5 5,5 5,0 7,0 7,0
- Imports of goods and services 14,8 12,5 12,1 14,4 12,0 14,0 16,0
Inflation (CPI) yoy, eop 6,7 7,5 8,4 18,8 9,5 7,0 6,9
average 6,9 7,6 8,6 10,8 14,2 8,3 7,0
Avg. Wage monthly, lc yoy change 21,6 19,7 20,6 26,0 15,8 19,2 13,3
Exchange rate /, eop 177,1 158,5 167,1 175,4 173,6 166,1 158,6
average 169,0 165,4 158,3 167,7 175,2 168,3 161,7
Exchange rate /USD, eop 130.0 133.8 127.0 121.0 124.0 123.0 122.0
3M KazPrime, eop     5,50 12,35 8,00 7,00 7,00
Current Account/GDP () 0,8 -1,8 -2,2 -7,0 -4,0 -5,0 -5,5
FDI/GDP () 9,6 3,5 7,6 5,4 4,6 5,2 5,5
Budget Balance/GDP () 2,5 5,8 7,5 4,3 2,0 2,0 3,0
Source National Bank of Kazakhstan, Statistical
Agency, UniCredit New Europe Research Network
6
AGENDA

• Macroeconomic analysis yesterdays drivers of
  growth are todays problems
• Competitive environment a mature, if not
  saturated market
• ATF Bank

7
BANKING SECTOR ANALYSIS - TOP-6 BANKS CONTROL 84
OF ASSETS
KZT bn
Assets
Market share
Growth
2 940 24.1 3.6
2 603 21.4 -4.2
1 700 14.0 3.0
1 090 9.0 -1.5
1 047 8.6 -3.2
900 7.4 1.0
BTA
KKB
Halyk
ALB
ATF
BCC
Loans
Provisions
Growth
2 170 6.5 2.6
2 180 12.5 5.6
1 153 7.5 1.7
738 7.6 3.9
788 5.2 2.5
619 6.3 2.8
BTA
KKB
Halyk
ALB
ATF
BCC

• BTA- Bank Turan Alem KKB Kazkommerstbank
• ALB Alliance Bank BCC Bank Centr Credit

Source Banks financial statements (local
standard)
8
BANKING SECTOR ANALYSIS
Assets
Deposits
Borrowings
Loans to customer, net
Source FMSA (local standard)
9
THE MAJOR PLAYERS
Rank Bank Loans/ Depo Assets (KZT bln) Market share () Ownership Strategy
1. 2.65 2 732 22.0 Controlled by senior management Minority stake held by EBRD Free float Very strong in corporate banking Moving to SME and middle-to-upper end retail banking
2. 3.60 2 602 23.1 Controlled by local individuals Minority stakes owned by East Capital, EBRD, FMO, and IFC Focus on corporate clients Medium-term goal to bring share of retail business to 50
3. 1.12 1 629 12.1 Majority stake held by local individuals Free float Successor to the Soviet Savings bank Focus on retail and SME lending Largely deposit-funded
4. 3.82 1 153 9.8 72.04 of voting shares owned by SAFC company Free float Successor to the Soviet Savings bank Focus on retail and SME lending Largely deposit-funded
5. 1.95 1 037 8.8 owned by Bank Austria Mostly focused on corporate clients Recently started to actively expanding into SME and middle-to-upper end retail banking Extensive branch network development underway
1. As of 31 March 2008 Source USB, RenCap,
Banks financial statements
10
THE POSITIONING OF THE MAJOR PLAYERS
Market shares per volume in
Movement since EOY 2005
KKB
Halyk
31,8

• Apart from Alliance all banks are heavily
  positioned in the Corporate Segment.
• From 2005 to 2007 Alliance had a very aggressive
  growth in Assets and also increased its Retail
  portfolio.
• ATF will increase its Retail Business, but
  without any substantial changes in the
  positioning

ATF 2007
BTA
29,6
11,9
ATF 2010
10,2
of Retail Loans
11,6
ALB
of Corporate Loans
Loans / Deposits
Data as of 3Q07 Source Banks Financial
Statements and ATF estimations ATF data
consider SME assets as part of Retail
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BANKING SECTOR - SUMMARY AND OUTLOOK

• SUMMARY
• Banking Sector seems to have successfully managed
  the liquidity
• Crisis
• This has impacted the real sector and now returns
  as a
• Bad Loan Problem
• NPLs increased between 36-106 ( average 86)
  and LLP
• by 17- 83 ( average 36)
• Reported 6m Profits of Banks down between 30-50

• OUTLOOK
• Repayments on international debt in 2009
  estimated at USD 2bn
• Bad Loan Problem is continuing
• Major changes in ownership foreign shareholders
  but also domestic
• oligarchs taking the chance
• Slow growth of sector and significant
  redistribution of market shares

12
AGENDA

• Macroeconomic analysis yesterdays drivers of
  growth are todays problems
• Competitive environment a mature, if not
  saturated market
• ATF Bank mixed but promising outlook

13
ATF WILL INCREASE THE BRANCH NETWORK FROM
CURRENTLY 140 TO 210 BY 2010, COVERING ALL THE
MAIN AREAS IN KAZAKHSTAN
1.1
5.3
1.7
6.3
9.3
8.7
1.4
8.5
25.7
4.8
1.7
3.4
1.0
12.2
8.2
4.0
Existing ATF outlets
XX
Gross Regional product per capita (K)
new ATF outlets
14
Breakdown of Loan Portfolio by sectors
Breakdown of Loan Portfolio by sectors as at 31
December 2006
Breakdown of Loan Portfolio by sectors as at 31
December 2007
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ATF MAIN SERVICES AND CONTACTS

• Multi Business Bank
• Corporate banking
• Loans in USD, KZT and EUR
• Structured finance
• Trade finance, Transactional banking
• International desk
• Retail SME banking
• Account Services
• Cards
• SME services
• Private banking
• Treasury Product range
• Contact
• Alexander Picker, CEO, picker_at_atfbank.kz
• Can Tekin Yildirimer, Head of International Desk
  dzhan-tekin_at_atfbank.kz

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• Thank you for your attention

Alexander Picker, Chief Executive Officer JSC
ATF Bank
Almaty, September 2008