Guidance for 2013-2014

Investor Presentation January 2014

Disclaimer •

This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of BSPB or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The sole purpose of this presentation is to provide background information to assist the recipient in obtaining a general understanding of the business of BSPB and its outlook.

•

The information contained in this presentation has not been independently verified. The information in this presentation is subject to verification, completion and change without notice and BSPB is under no obligation to update or keep current the information contained herein. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of BSPB, or any of its respective members, directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith.

•

This presentation contains "forward-looking statements" which include all statements other than statements of historical fact. Such forward-looking statements can often be identified by words such as "plans", "expects", "intends", "estimates", "will", "may", "continue", "should" and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond BSPB's control that could cause the actual results, performance or achievements of BSPB to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding BSPB's present and future business strategies and the environment in which BSPB will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and neither BSPB nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained herein to reflect any change in BSPB's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice.

2

Agenda

Introduction Financial Highlights and Business Overview Guidance for 2013-2014 and New strategy 2014-2017 Acquisition of Bank Evropeisky Appendix

3

Bank Saint Petersburg at a glance Regional leader

Focused on the North-West



The leading privately-owned universal bank in St. Petersburg and Leningrad region



Client base: more than 1.3 million retail and 43.0 thousand corporate customers 5 branches and 38 outlets (primarily in St. Petersburg), 579 ATMs



  

Operating and Financial Highlights







Net income: RUB 3.6 bn Cost/Income ratio2: 40.7% ROAE: 11.20%



2,886 employees



9M 2013

14th largest bank by assets and 16th by retail deposits in Russia 1 Ratings: Fitch BB- (Stable), Moody’s Ba3 (Negative) Total assets: RUB 403.4 bn Total capital: RUB 53.9 bn Total capital adequacy ratio (calculated under Basel I): 13.0%



Note 1: According to Interfax Note 2: Cost/Income ratio is calculated is as follows: operating expenses divided by sum of net interest income, net trading income, net fee and commission income and other net operating income

Source: In accordance with IFRS Condensed Consolidated Interim Financial Information for the period ending 30 September 2013

4

St.Petersburg market structure Loans, market share

Deposits, market share

.



BSPB is a top 3 bank in St. Petersburg in terms of loans and deposits



BSPB Market share in St Petersburg:



•

Assets: 12.5%

•

Loans: 12.6% - corporate, 6.1% - retail

•

Deposits: 8.4% - corporate, 8.0% - retail

More than 1.3 million retail and 43.0 thousand corporate customers as of Jan 1, 2014

Source: Central Bank of Russia’s statistics, Association of North-West banks, Bank Saint Petersburg own estimates Date: Oct 1, 2013

5

Shareholders structure and corporate governance

• 3 management control bodies reporting to the Supervisory ca. 11,500 shareholders *(acc. to the latest available information )

Case of the year 2013 – Dividends Despite the uncertainty around dividend payment on type A preferred shares in 2013, the Supervisory Board has prioritized the principles of corporate governance and recommended AGM to pay dividends in full. This recommendation has largely determined the positive decision taken by AGM. Case of the year 2013 – Pre-emptive rights execution During SPO in August 2013, the Bank effectively extended preemptive rights to holders of type A preferred shares.

Board (Audit and Risk Management Committees) and General Shareholders Meeting (Revision Committee)

• Supervisory Board is composed of 12 members,

incl. 7 independent directors: Susan Gail Buyske (nominee from EBRD) Andrey Bychkov (representative from VEB) Vladimir Garyugin (CEO of SPb Subway) Felix Karmazinov (CEO of SPb Water Utility Company) Marlen Manasov (Board Member at Sovkomflot) Indrek Neivelt (chairman of the Supervisory Board) Zakhar Smushkin (chairman of the Board of Directors at Ilim Group)

6

Agenda


7

Stable Profitability and Growth Assets, RUB bn

Capital, RUB bn

Income dynamics, RUB mln

Income and expenses data1, RUB mln

Note: Results calculation: net result on recognition/early redemption of loans granted at non-market rates is included in provisions. Provisions for FY 2012 reduced by the gain from disposal of investment property. Revenues calculation: net gains from investment securities available-for-sale are excluded from revenues as one-off

8

Operating Efficiency at the Core of Strategy Cost/income and NIM, %

Operating expenses1, RUB mln

Net income and ROAE dynamics, RUB mln

Comments • Upward trend in Net interest income despite pressure on margin • Trading income contributes to strong revenues • Market leader in cost-efficiency • ROAE and provisions normalised after difficult 2012 • IFRS treatment of Investment securities available-for-sale disposal in 3Q 2013 results in a one-off RUB 586 mln income increase with no impact on equity

Note: Property tax is excluded from other administrative and operating expenses and included in expenses related to premises and equipment

9

Asset and Liability Structure Trading securities portfolio1

Assets and liabilities structure Due from banks 0.5% Amounts under reverse repo 3.7% Fixed and other assets 6.4%

Other 0.7% Capital markets 6.2%

Cash 11.3%

Shareholders’ equity 11.4%

Securities portfolio 14.3%

Due to banks 16.6%

Trading shares 0.06% Trading bonds 13.7%

Corporate shares 0.06% Corporate Eurobonds 4.6%

Trading bonds pledged under sale and repurchase agreements 86.2%

Corporate bonds 83.9%

Customer accounts (individuals) 29.8% Municipal bonds 8.8% Federal loan bonds (OFZ) 2.6%

Loans and advances to customers 63.8%

Comments Customer accounts (corporates) 2 35.2%

• Loans/Deposits Ratio strategic target is 100% • Conservative approach to risk: approximately 95% of the debt securities belong to the CBR Lombard list

• Average duration of the securities portfolio is 1.4 years • Approximately 80% of assets and liabilities represented in RUB

Note 1: Trading securities portfolio includes trading securities and trading securities pledged under sale and repurchase agreements Note 2: Calculated as a sum of customer accounts and promissory notes and bills of exchange (other debt securities in issue)

10

Business Highlights: Diversification into Retail Retail loan portfolio growth 

Retail loans 89% growth y-o-y, 15% growth q-o-q*



Large customer base: over 1.3 mln retail customers



Number of cards issued – 781,600

Consumer loans: 

Impressive growth on the basis of the Bank's own customer base providing a low risk profile

Internet banking: 

Successful internet bank platform – 231,160 users



Top-3 Internet-Bank in Russia (Internet Banking Rank 2013 by Markswebb Rank & Report)

Mortgage, market share in Saint-Petersburg

Mortgages:

•

Note: Retail loans include mortgages, car and consumer loans



BSPB ranked 3d among all banks and 1st among the privately-owned banks in St. Petersburg mortgage lending market



BSPB share in new mortgage lending in St.Petersburg during 9M 2013 – 19%

11

Loan portfolio and quality Loan portfolio breakdown 284 bn

Loans granted in 2011-2013

69%

197 bn

284 bn

standard 157 bn

Corporate 168 bn

31%

87 bn

standard 20% 57 bn

Corporate 81 bn Retail 6 bn

55% impaired not past due1% overdue 2%

11 bn Retail 29 bn Loans granted before 2011

Loan portfolio by sector

24 bn

impaired not past due 5% overdue 4%

Corporate loan portfolio structure Comments • In 2011-2013 loan portfolio considerably renewed (69% - new loans) • Major part of problem loans (RUB 24 bn) relate to “old” loan portfolio • Smaller tickets growth continues

12

Loan portfolio and quality Loan portfolio quality

Provision charge and CoR

Top-20 borrowers concentration

Comments • Gross loan portfolio growth in 9M 2013 of 15.2% • Cost-of-Risk in line with the guidance and going down • Overdue Loans: Corporate – 6.8%; Retail – 3.5% • RUB 1.0 bn of the loan portfolio written off in 9M 2013 • Technical shift in 3Q 2013 between two categories of loans with no impact on provision charge (several formerly fully provisioned loans turned into “overdue” category)

Note: Provision charge calculation: net result on recognition/early redemption of loans granted at non-market rates. Provisions for 3Q 2012 reduced by the gain from disposal of investment property. Overdue loans and impaired not past due loans include the whole principle of loan at least one day overdue or impaired

13

Capital and Funding Capital adequacy1, %

Repayments schedule for 2014-2017+, USD mln

Risk-weighted assets (RWA), RUR bn

Comments • In October 2013, Bank placed 5.5-year USD 100 mln subordinated eurobonds, which expected to contribute 0.8 PP to Total CAR 414.8

338.1

354.5

Note 1: Calculated in accordance with Basel I

• Capital adequacy ratio (N1) as at 1 October 2013 was 12.2 per cent, in full compliance with CBR requirement of 10% minimum

14

Agenda


15

Guidance for 2013-2014

 Loan portfolio growth 13%

 ROAE 10%1

 Retail loans growth ca. 70%

 Cost of Risk 160-170 bp

 Share of loans to individuals in the loan book 13%

 NIM 3,8-3,9%  Costs growth 9%  Cost-to-Income ratio 40%

 Loan portfolio growth 14%

 ROAE 12-15%

 Retail loans growth 30%

 Cost of Risk 150-160 bp

 Share of loans to individuals in the loan book 14%

 NIM 4%

 Costs growth 10%  Cost-to-Income ratio 40%

Note 1: ROAE adjusted for net profit not including one-off income from Investment securities available-for-sale disposal

16

New strategy 2014-2017 The principal strategic goal for 2014-2017 is to build an efficient bank with a scaleable business model

E-banking: growing importance of remote selfservice banking channels

Higher loan portfolio profitability with due account for the cost of risk Increasing non-interest income and the share of demand deposits

Operating efficiency

Distribution network transformation

RoE ≥ 15%

Standardization of internal reports for better workflow management

Developing process management competencies for mass sales of standard products. Standardisation, optimisation and automation of processes in the mass segments

Moderate growth appetite

Moderate risk appetite

Efficiency

Scaleability  ROAE 15%+

 Loan portfolio growth 10-11% p.a.

 Cost of Risk 130bp

 Retail loans growth 30% p.a.

 NIM 4%+

 Share of loans to individuals in gross loans 20% in 2017

 Cost-to-Income ratio 40%

 Tier 1 capital adequacy ratio 10%+

Note: New Strategy 2014-2017 was approved by the Supervisory Board on November 26, 2013

17

Agenda


18

Transaction rationale In 1Q 2014 Bank Saint Petersburg is planning to complete a transaction on acquisition of a 100% interest in Bank Evropeisky (Kaliningrad)

Well-known region of presence

New strategy for 2014-2017

Pressure on the Kaliningrad region banking system

Targets

 

Kaliningrad branch of BSPB has been successfully carrying out its business for 6 years We want to have at least 10% from the North-West markets where we operate



This acquisition is a pilot project, by which BSPB can test the implementation of its scalable business model



In Dec 2013 the Central Bank revoked the license from a local bank - Investbank Liquidity outflow puts pressure on local privately-owned banks





The acquisition makes Bank Saint Petersburg a top 2 bank in Kaliningrad in terms of loans and a top 3 bank in terms of deposits



Up to 15% from the Kaliningrad market within 5 years (current combined market share: Loans 12.3%, Deposits 9.6%)



Expansion of distribution platform for retail products

19

Bank Saint Petersburg and Bank Evropeisky at a glance Key financials*

Kaliningrad market structure** Loans

Deposits

.

• • • • •

14th largest bank in Russia The leading privately-owned universal bank in St. Petersburg and Leningrad region Client base: more than 1.3 million retail and 43.0 thousand corporate customers 43 branches and outlets (primarily in St. Petersburg) 2,886 employees

• • • • •

245th largest bank in Russia One of the largest regional banks in Kaliningrad and Kaliningrad region Client base: more than 20,000 retail and 4,000 corporate customers 6 outlets in Kaliningrad 350 employees

St Petersburg

Kaliningrad

* Source: the latest IFRS FS (9M 2013 for Saint Petersburg, FY 2012 for Bank Evropeisky) ** Source: Central Bank of Russia’s statistics, Association of North-West banks, Bank Saint Petersburg own estimates. Date: Dec 1, 2013 – for Bank Saint Petersburg, Bank Evropeisky, Energotransbank. Oct 1, 2013 - for Sberbank and VTB.

20

The Western gates of Russia: St. Petersburg & Kaliningrad • GRP growth consistently outperforms national average Gross domestic/regional product, y-o-y growth

• • • • • • •

St. Petersburg and the Leningrad region population – 6.7 million 4th largest city in Europe, a consumer market comparable to the country of Denmark Major trade gateway – sea and river ports Industrial centre for car manufacturing, heavy machinery and shipbuilding Well developed construction sector Cultural center and a major tourist destination Highly skilled workforce

• • • • •

Kaliningrad region population – 955,000 The only Russian ice-free port complex lying on the Baltic Sea The shortest route from Russia to the countries of Western Europe Industrial centre for transport and hoisting machine-building, shipbuilding and fishery Highly skilled workforce

Source: Federal State Statistics Service

St Petersburg

Kaliningrad

21

Agenda


22

Overview of Key Financials In RUB bn

Jan. 1, 2013

Oct. 1, 2013

YTD

Oct. 1, 2012

Jul. 1, 2013

Oct. 1, 2013

Total assets

351.37

403.36

+14.80%

317.24

374.25

403.36

+7.78% +27.15%

Gross Loans

246.50

283.98

+15.20%

246.89

269.18

283.98

+5.50%

+15.02%

Customer Deposits*

228.04

262.37

+15.05%

224.71

248.61

262.37

+5.53%

+16.76%

Total Capital

48.89

53.93

+10.32%

46.21

51.62

53.93

+4.48% +16.71%

9M 2012

9M 2013

3Q 2012

2Q 2013

3Q 2013

q-o-q

y-o-y

Net Interest Income

8.88

9.55

+7.58%

2.92

3.16

3.40

+7.69%

+16.64%

Net Fee and Commission Income

1.64

1.88

+14.16%

0.61

0.63

0.65

+3.18%

+7.01%

Revenues**

11.08

12.72

+14.83%

4.00

4.08

4.51

+10.35% +12.61%

Net Income

0.93

3.62

+288.69%

0.69

0.92

1.61

+74.69% +132.74%

9M 2012

9M 2013

3Q 2012

2Q 2013

3Q 2013

Net Interest Margin

3.91%

3.74%

-0.17 PP

3.75%

3.76%

3.73%

-0.03 PP -0.02 PP

Cost/Income Ratio

46.47%

40.72%

-5.75 PP

43.50%

44.18%

38.65%

-5.53 PP -4.85 PP

ROAE

3.10%

11.20%

+8.10 PP

6.92%

8.97%

14.64%

+5.67 PP +7.72 PP

• •

* Customer deposits are calculated as a sum of customer accounts and promissory notes (other debt securities in issue) ** Revenues calculation: net gains from investment securities available-for-sale are excluded from revenues as one-off

q-o-q

q-o-q

y-o-y

y-o-y

23

Contacts

All information for the investors is available on the Bank’s web site: https://www.bspb.ru/en/investors/

Contact information: E-mail: [email protected] Phone: +7 812 332 78 36

24