Press Release

Home Credit and Finance Bank First-Half IFRS results:
Cash loan portfolio tripled within 1 year; strong financial and business results delivered with net profit of RUB 5.8 billion

Moscow, 30 August 2011: Home Credit & Finance Bank ('HCFB' or 'the Bank'), the Russian operation of Home Credit B.V., announces its audited financial results for the six month period ended 30 June 2011 in accordance with International Financial Reporting Standards (IFRS). HCFB is rated Moody's Ba3, Fitch BB-.

'HCFB demonstrated very strong growth in net loans during the past year, almost tripling its cash loan portfolio. Underpinning this growth is our strategy to expand the distribution network in Russia, which grew substantially in the period, enabling us to succeed in increasing both lending activity and deposit taking. The Bank continues to deliver impressive key business ratios - ROAA of 10.9% and ROAE of 42.4% - which are far above market average. Given the current global market environment, we are closely monitoring developments but we remain confident in our ability to maintain a high level of efficiency within our business while delivering solid, profitable results.'

Ivan Svitek,
HCFB Chairman of the Management Board

HIGHLIGHTS

- Net profit increased 18.6% to RUB 5,773 million for the six month period ended 30 June 2011 compared to RUB 4,868 million in the corresponding period of 2010 due to the improving quality of the loan portfolio and overall portfolio growth

- The net loan portfolio grew 42.0% year on year to RUB 82,855 million as at 30 June 2011, and increased 10.1% since the start of the year (31 December 2010: net loan portfolio RUB 75,275 million)

- Operating income for the six month period ended 30 June 2011 was RUB 14,889 million, a 25.7% increase compared RUB 11,841 million in the corresponding period of 2010. As at 30 June 2011, the share of deposits together with current accounts increased to RUB 28,450 million and comprised 34% of total liabilities

- HCFB maintains a well balanced and strong liquidity position with cash and cash equivalents of RUB 12,086 million and a highly liquid AFS (available for sale) bond portfolio of RUB 5,327 million, which comprised 15.8% of total assets as at 30 June 2011. The cumulative net liquidity position for the next 12 months is RUB 37.5 billion

- In March 2011, HCFB successfully executed a Eurobond transaction for a total amount of USD 500 million

- In April 2011, HCFB successfully placed two domestic bond issues with the aggregate amount of RUB 7 billion

- In August 2011, HCFB closed another landmark transaction raising USD 200 million via a Syndicated Loan Facility

- A strong risk management focus enabled HCFB to improve risks in 2010 and to continue to maintain the quality of the loan portfolio at a high level in 2011, with NPLs down to 6.6% of the loan book (6.9% as at 31 December 2010), and the cost of risk ratio at 6.7% as at 30 June 2011 (5.6% as at 31 December 2010)

- HCFB continues to maintain a strong capital position with a Tier I capital adequacy ratio of 24.3% as of 30 June 2011 (33.5% as at 31 December 2010)

- Robust loan growth supported by further network expansion. As of 30 June 2011 HCFB's multi-channel distribution network consisted of 488 banking offices of different formats, 10 representative offices and over 51,000 point-of-sale facilities across 80 regions in Russia. HCFB also possesses a well developed ATM network which comprises 435 ATMs

- On 26 May 2011, international rating agency Fitch assigned a BB- rating for HCFB with a 'Stable' outlook

BUSINESS
HCFB experienced very strong growth in new lending with a 76.9% year-on-year increase. This translated into growth of net loans of 42.0%, with a loan portfolio of RUB 82,855 million as at 30 June 2011, a 10.1% increase since the end of 2010. With HCFB's focus on further portfolio diversification, the Bank almost tripled its cash loan portfolio within one year resulting in the following portfolio breakdown as of 30 June 2011:

- point-of-sale (POS) loans comprised 44.5% of the gross loan book (RUB 39,783 million),

- the share of cash loans significantly increased to 34.8% (RUB 31,116 million),

- the share of credit cards comprised 13.3% of the gross loan book (RUB 11,886 million),

- mortgages, car loans and corporate loans comprised together 7.4% of the gross loan book (RUB 6,604 million).

HCFB's deposit base together with current accounts grew by 63.0% compared to the corresponding period of last year, and by 19.6% compared to the end of 2010, and amounted to RUB 28,450 million at 30 June 2011 (31 December 2010: RUB 23,785 million), comprising 34% of HCFB's total liabilities.

The HCFB client base increased to over 21 million clients as at 30 June 2011 with 3.5 million active customers, providing HCFB with in-depth market and client insight as well as significant cross-selling opportunities.

HCFB's portfolio and deposit base growth was supported by further extending its distribution network across the entire country. HCFB's well-developed banking infrastructure comprised 488 banking offices of different format (227 of which were opened in first half of 2011), over 51,000 points-of-sale, 435 ATMs as at 30 June 2011. In accordance with the Bank's strategy, HCFB intends to continue expanding its banking network by growing the number of low cost offices and by the further development of the agents' network.

To support HCFB's further business growth, in March 2011 HCFB successfully executed a Eurobond transaction for a total amount of USD 500 million (due 2014) with a coupon of 7% p.a. In April 2011, HCFB placed two domestic bond issues totalling RUB 7 billion. In August HCFB made another landmark transaction raising USD 200 million via a Syndicated Loan Facility. The Bank will continue further diversification of its funding base, including by increasing the share of deposits.

RESULTS
During the six month period of 2011, HCFB continued its strong performance with solid Return on Average Assets (ROAA) of 10.9%, and Return on Average Equity (ROAE) of 42.4% (30 June 2010; ROAA - 10.8%, ROAE - 34.4%). Net profit for the six month period ended 30 June 2011 increased to RUB 5,773 million, as compared to RUB 4,868 million for the corresponding period of 2010. This increase of 18.6% in net profit was due to the improving quality of the loan portfolio and overall portfolio growth.

The operating income for the six month period of 2011 reached RUB 14,889 million demonstrating a 25.7% increase over the corresponding period of 2010.

HCFB continues to manage its operating expenses effectively despite aggressive distribution channel expansion and very strong volume growth with a cost-to-income ratio of 33.1% as at 30 June 2011 compared to 36.1% for the corresponding period last year.

During the reporting period the Bank continued to maintain high asset quality, with the level of NPLs (non-performing loans older than 90 days as a percentage of gross loan book) at 6.6% at 30 June 2011 (compared to 6.9% as at 31 December 2010) and cost of risk ratio at 6.7%. HCFB historically maintains a conservative approach towards provisions and these NPLs were sufficiently covered by provisions at a level of 111.0% as of the reporting date.

HCFB maintains a well-balanced liquidity position with cash and cash equivalents of RUB 12,086 million and a highly liquid bond portfolio of RUB 5,327 million as at 30 June 2011, and holds a cumulative net liquidity position of RUB 37.5 billion for the next 12 months.

HCFB's capital position, supported by its profitability, resulted in a risk-weighted Tier 1 capital adequacy ratio of 24.3% as at 30 June 2011, and HCFB intends to maintain its Tier 1 ratio at about 20 per cent as a long-term target.

HCFB's strong financial and business performance has been recognized by international rating agency Fitch, which assigned HCFB a BB- long term rating with Stable outlook on 26 May 2011.

FINANCIAL SUMMARY

Balance Sheet (RUB million)	As at June 30, 2011	As at Dec 31, 2010	Change, %
Total assets	110,197	101,099	9.0%
Net loan portfolio	82,855	75,275	10.1%
Shareholder's equity	25,608	33,019	(22.4)%

 

Income Statement (RUB million)	6M period as at June 30, 2011	6M period as at June 30, 2010	Change, %
Operating income	14,889	11,841	25.7%
Profit before tax	7,335	6,185	18.6%
Net profit after tax	5,773	4,868	18.6%

 

KEY RATIOS

Income Statement Ratios	6M period as at June 30, 2011	12M period as at Dec 31, 2010	6M period as at June 30, 2010
Cost to average net loans1	12.5%	14.5%	14.7%
Cost to income2	33.1%	37.6%	36.1%
Cost of risk3	6.7%	5.6%	4.7%
ROAE4	42.4%	31.8%	34.4%
ROAA5	10.9%	10.1%	10.8%
CAR	24.3%	33.5%	37.7%

 

Balance Sheet Ratios	As at June 30, 2011	As at Dec 31, 2010	As at June 30, 2010
NPL ratio6	6.6%	6.9%	9.7%

 

1) Cost to average net loans is calculated as general administrative and other operating expenses divided by average net loans.
2) Cost to income ratio is calculated as general administrative and other operating expenses divided by operating income.
3) Cost of risk represents impairment losses divided by average balance of net loans to customers.
4) RoAA is calculated as net profit for the year divided by average balance of total assets.
5) RoAE is calculated as net profit attributable to equity holders divided by average balance of equity attributable to equity holders.
6) NPL ratio is calculated as gross non-performing loans divided by total gross loans. The Group defines non-performing loans as collectively impaired loans that are overdue by more than 90 days as well as loans considered individually impaired.

CONTACTS FOR INVESTORS

Alena Zheltova
Head of Corporate Finance & IR
Home Credit and Finance Bank
Tel: (+7) 495 514 1017
E-mail: alena.zheltova@homecredit.ru

Jaroslav Gaisler
Group Head of Investor Relations and Financial Planning & Analysis
Home Credit B.V. (Home Credit International, a.s.)
Tel.: +420 2241 74081
E-mail: Jaroslav.Gaisler@homecredit.eu

CONTACTS FOR JOURNALISTS

Iren Shkarovskaya
Head of Strategic Communications
Home Credit and Finance Bank
Tel.: (+7) 495 514 1019
E-mail: IShkarovskaya@homecredit.ru

David Sahula
Group Communications Manager
Home Credit B.V. (Home Credit International, a.s.)
Tel: + 420 224 174 485
E-mail: david.sahula@homecredit.eu

NOTES TO EDITORS

Home Credit & Finance Bank [Moody's Ba3, Fitch BB-] is specializing in retail finance in Russia.
HCFB offers its clients a wide range of credit products and banking services. The Bank's database comprises over 21 million clients. HCFB's products are distributed through over 51,000 POS outlets in 8 regions across Russia. The Bank's regional network comprised 488 branches and approximately 435 ATMs across the Russian Federation as of 30 June 2011.
More information is available at www.homecredit.ru

Home Credit B.V. ('the Group') is a leading multi-channel consumer finance provider predominantly in Russia (since 2002) as well as in the Czech Republic (since 1997), Slovakia (since 1999), Belarus (since 2007) and Kazakhstan (since 2005, minority stake). In selected countries, the Group has been successfully developing retail banking services. The Group's database comprises 26 million clients (as of 30 June 2011, incl. Kazakhstan). More information is available at www.homecredit.eu

Home Credit B.V. is wholly-owned by PPF Group N.V. ('PPF'), one of the largest investment and finance groups in Central and Eastern Europe. With approximately EUR 12.4 billion assets under management, PPF's business investments range from banking and insurance to real estate to energy, metal mining and agriculture to retail. PPF's reach spans from Central and Eastern Europe to Russia and across Asia.

Following the success of the Home Credit business model in Europe, PPF provides consumer finance services in Asia, specifically in China (since 2007) and Vietnam (since 2009), and explores opportunities to enter other emerging markets in this region.
More information is available at www.ppf.eu.