Banks

www.fitchratings.com 11 April 2013

Russia

Home Credit & Finance Bank Full Rating Report

Key Rating Drivers

Strong Financials, Some Vulnerabilities: Home Credit & Finance Bank’s (HCFB) ratings are

underpinned by its strong profitability, management expertise in consumer lending, its

considerable loss absorption capacity, the solid cash generation of its retail book, and relatively

diversified funding. On the negative side, the ratings are pressured by high credit risks,

although these are well managed on a risk-return basis, the cyclicality of consumer lending in

Russia, gradually increasing competition and greater reliance of profitability on lending volumes.

Excellent Profitability; Sustainability Concerns: HCFB continued to report exceptionally

strong results in 2012 (ROAA of 8.6%), well ahead of most peers. However, in Fitch Ratings’

view, the bank has become increasingly reliant on new lending volumes, as 46% of pre-

impairment profit in 2012 was earned on insurance commissions, which are recognised upfront.

Borrower Leverage Increasing: In Fitch’s view, HCFB probably relaxed underwriting

standards in 2012, at least moderately, given the almost threefold increase in the cash loan

portfolio during the year and higher loss rates. Average loan tickets also increased.

Losses Increased But Manageable: Relaxed underwriting has resulted in higher loss rates.

Non-performing loans (NPLs, overdue more than 90 days) origination increased to 10.4% of

average performing loans in 2012 from 7.8% in 2011. Loss rates could increase further as the

portfolio starts to season after very rapid growth, but wide margins mean HCFB would be able

to sustain much higher loss rates and still remain profitable.

Group Risks Decreased: Contingent risks stemming from leverage of the broader PPF Group

have decreased as a result of the latter’s asset sales. The sale of a 26.5% stake in NOMOS-

Bank generated more than USD700m in Q312, and in Q113 an agreement was reached to exit

insurance holding Generali-PPF, allowing PPF to repay EUR2.5bn of debt in 2013-2014.

Decent Deposit Collection Capacity: Retail deposits accounted for 61% of liabilities at end-

2012. Given that deposits have been acquired recently and rates paid by HCFB are above the

market average (as at most retail banks in Russia), these might become flighty during a

downturn. However, HCFB’s capacity to pay higher rates to retain customers mitigates this risk.

Moderate Refinancing Risk: At end-2012, the bank had to refinance about RUB8bn of

domestic bonds. This does not appear onerous in the context of a RUB54bn liquidity cushion

and a cash-generative loan book (monthly principal/interest payments of about RUB20bn, or

7% of liabilities, in 2012).

Solid Capital Position: HCFB’s Fitch core capital (FCC) ratio declined to 15.9% at end-2012

from almost 20% at end-2011, driven by rapid growth. However, HCFB’s capitalisation is still

sound in the context of the strong risk-return profile of its business.

Rating Sensitivities

Stable Outlook: The Outlook reflects Fitch’s view that HCFB’s strong financial metrics

sufficiently offset risks from rapid growth, higher loss rates and potentially tighter regulation.

Growth and Performance: HCFB’s ratings could come under downward pressure if there was

a marked downturn in the Russian economy or further sustained very rapid loan growth, either

at HCFB or across the sector. Conversely, an extended track record of more balanced growth

and sound performance could result in moderate rating upside over the medium term.

Ratings

Foreign Currency

Long-Term IDR BB Short-Term IDR B

Local Currency Long-Term IDR BB Viability Rating bb Support Rating 5 Support Rating Floor NF

Outlooks

Long-Term Foreign-Currency IDR Stable Long-Term Local-Currency IDR Stable National Long-Term Rating Stable

Financial Data

Home Credit & Finance Bank

31 Dec

12 31 Dec

11

Total assets (USDm) 11,122.4 4,835.6 Total equity (USDm) 1,690.1 948.8 Operating profit (USDm) 752.7 423.4 Published net income (USDm)

627.4 334.0

ROAA (%) 8.64 9.05 ROAE (%) 51.26 38.36 Fitch core capital/ weighted risks (%)

15.87 19.89

Capital adequacy (%) 21.40 20.50 Loan growth (%) 112.66 48.98

Related Research

2013 Outlook: CIS and Georgian Banks (December 2012)

Russian Banks Datawatch: Full-Year 2012 (January 2013)

Russian Banks Datawatch 2M13 (March 2013)

Analysts

Dmitri Vasiliev +7 495 956 5576 dmitri.vasiliev@fitchratings.com Alexander Danilov +7 495 956 9901 alexander.danilov@fitchratings.com

Banks

Home Credit & Finance Bank

April 2013 2

Overview

POS Lending: Leading Position, Limited Growth Potential

From the start of its operations in 2002, HCFB focused on point-of-sale (POS) lending, which

remained its headline product until 2010. The bank has built strong expertise in consumer

lending, a modern operational platform and nationwide coverage with a 25% market share in

POS lending. The bank’s high-yield business model focuses primarily on customers from

outside large cities in the low to middle mass-market segment.

In the long run, the POS market is likely to become increasingly competitive, due to limited

growth potential and the expected entry of state-owned players with significant cost advantages.

In addition, large federal retailers are eager to charge high commissions to banks for the

origination of loans. HCFB’s concentration by retailer is moderate (the three largest retail

chains contribute 34% of HCFB’s monthly POS loan production).

Shift to Larger-Ticket Consumer Lending Increases Risks

HCFB’s shift to larger cash loans (which tripled in total volume in 2012 and reached 64% of the

gross retail portfolio) is a moderate credit negative, as borrower leverage has increased. In

addition, clients are likely to be more conscious of the pricing of cash loans than more granular

POS loans, take-up of which is driven mostly by credit availability and marketing. As a result,

the bank may face tougher competition in the segment from mainstream lenders (eg, larger

state-owned banks and universal private banks), which have funding cost advantages.

Figure 1 Loan Book Composition

End-2012 End-2011 End-2010

(RUBm) (%) (RUBm) (%) (RUBm) (%)

Cash loans 156,303 55,367 18,424 POS, of which 58,827 44,575 43,150

Home improvement 18,589 8 14,398 12 12,255 15 Electronics 14,001 6 8,737 7 11,564 14 Personal computers 13,707 6 8,781 7 9,795 12 Mobile phones 5,647 2 3,655 3 6,300 8 Other 6,883 3 9,004 7 3,236 4

Credit cards 23,731 15,429 11,569 Mortgages 3,860 5,045 6,704 Total 242,721 120,416 79,847

Source: HCFB, Fitch

Significant Geographical Coverage

HCFB has constantly invested in its geographical coverage, and has significantly expanded its

branch network over the last couple of years. This should not put much pressure on its financial

standing, as new offices are mostly low-cost. HCFB’s branch network is now the third-largest in

Russia after state-owned Sberbank of Russia (BBB/Stable/bbb) and Russian Agricultural Bank

(BBB/Rating Watch Negative/b). At end-2012, the bank had 6,356 offices and outlets, and was

also present in more than 69,000 points-of-sale.

Risks and Rewards of Being a Part of PPF Group

HCFB is owned by PPF Group, which is 94.25% controlled by Czech businessman Petr Kellner.

PPF’s assets are quite diversified by sector (see Annex 2), but HCFB is by far the largest

contributor to group profitability. PPF’s exposure to Russia is high, with assets in several

sectors.

PPF Group Asset Sales Reduce Contingent Risks for HCFB

Potential risks for HCFB as a result of PPF Group’s other investments and leverage have

reduced markedly as a result of recent asset sales. Most importantly, in January 2013, PPF

Group reached agreement on the terms of the sale to Assicurazioni Generali SpA

(BBB+/Negative) for EUR2.52bn of its remaining 49% stake in Generali PPF Holding B.V., a

joint venture owning insurance businesses across Central and Eastern Europe, plus a dividend

Related Criteria

Global Financial Institutions Rating Criteria (August 2012)

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Home Credit & Finance Bank

April 2013 3

payment of EUR172m in the first quarter of 2013 before the closing of the transaction. The first

part of the sale (25% stake; EUR1.3bn) was completed in March 2013, with a further 24%

stake to be sold for EUR1.2bn by the end of 2014. This will enable PPF Group to repay

EUR2.5bn of financing taken on as part of the initial creation of the joint venture.

In September 2012, PPF also sold its 26.5% stake in Russia’s NOMOS-Bank for USD700m.

Following these asset sales, Fitch views PPF Group’s current leverage as low. However, in the

agency’s view, the group’s leverage is potentially quite volatile and dependent on investment

opportunities and strategy. In addition, PPF's performance outside of HCFB appears to be not

that strong, with some of the business segments reporting only marginal profits at best (see

Annex 2). HCFB accounted for approximately half of the group’s net profit in H112 (adjusted for

the non-recurring impairment of the NOMOS investment).

No Major Effect From Home Credit Kazakhstan Acquisition

In December 2012 and January 2013, HCFB consolidated 100% of Home Credit Bank in

Kazakhstan (HCK), following the approval of the Kazakh regulator. The acquisition will not have

a significant impact on HCFB’s credit profile, as the subsidiary accounted for only about 5% of

consolidated assets at end-2012. HCK is strongly capitalised, with a Basel total capital

adequacy ratio above 30% at end-2012, and profitable, with an ROAE of 55.4% in 2012.

Management Strategy and Operating Environment

Strong Management Team

HCFB has an experienced management team, headed by CEO Ivan Svitek, who had extensive

international experience in consumer finance before joining the bank in 2008. In Fitch’s view,

the bank has been generally well managed to date and management has delivered strong

results. Balance sheet integrity and the transparency of the business model are markedly

superior to those of most Russian corporate banks with ratings at similar or slightly lower levels.

Higher Household Leverage; Increasing Penetration Among Formerly Underbanked Customers

Retail lending grew by 39% in Russia in 2012, with unsecured consumer finance expanding still

more rapidly, driven mostly by specialised players, including HCFB. Despite relatively low

overall credit penetration, there are signs that some borrowers’ leverage has increased

significantly. High interest rates and short loan tenors mean that debt servicing burdens are

more onerous than overall indebtedness levels might suggest.

According to leading Russia credit bureau NBKI, the number of borrowers in its database

increased by a rapid 28% to 60m people at end-2012 (80% of the labour force or 86% of the

employed population) from 47m at end-2011. At the same time, borrowers having at least five

loans at a time in different banks increased to an all-time high of 8.5% at end-2012 from 4.6%

at end-2011, and the share could be disproportionately higher for lower-income groups.

Regulatory Initiatives Negative for Growth Prospects, but Credit Positive

The Central Bank of Russia has taken a number of measures to contain consumer lending growth.

From July 2013, the regulator plans to increase risk weights for high-yield consumer lending, and

has already introduced higher provisioning rates on such exposures. HCFB raised USD500m of

subordinated debt in October 2012, in part to offset potential pressure on regulatory capital from

these initiatives. Further regulatory tightening cannot be ruled out if measures so far

introduced/proposed do not achieve the goal of curbing high-yield retail loan growth.

Performance

Strong Performance, but Supported by Revenue/Cost Recognition

HCFB’s performance remained strong in 2012, with an ROAA of 8.6% and an ROAE of 51%,

well above levels at most of the bank’s peers. Profitability is supported by wide margins, good

efficiency and still manageable credit costs.

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Home Credit & Finance Bank

April 2013 4

In 2012, 46% of pre-impairment profit came from RUB19.4bn agent commissions on borrowers’

life and health insurance, which were charged and recognised upfront as at the date of loan

origination. At the same time, HCFB nets certain transaction costs (costs that could be directly

attributed to loan origination and form part of the effective interest rate) against interest income

and defers them during the loan life. In addition, HCFB booked a RUB1.2bn gain (equal to 5%

of pre-tax profit; classified as non-recurring in the attached Income Statement) from the sale of

a performing consumer finance portfolio to a related special-purpose vehicle, reportedly on a

non-recourse basis.

Profitability More Sensitive to Lending Volumes

Although still strong, HCFB’s profitability has become more sensitive to origination volumes, as

insurance commissions are tied to new lending. Greater market saturation, increasing

competition and tougher regulation mean that new loan issuance is likely to decrease in 2013

(HCFB targets above-market growth during the year, while Fitch believes there is some

downside risk to this forecast), with the same factors also putting moderate downward pressure

on margins. Loss rates are also likely to tick up as the loan book seasons following very rapid

growth in H212.

Figure 2 HCFB’s Products, end-2012 Credit cards Cash loans POS

Share of gross retail loans (%) 9.8 64.3 24.2 Average loan life (months) n.a. 34 18 Average loan size (RUB000) 74.1 119.2 29.6 a For credit cards, based on assumption of 70% limit utilisation and payment equal to 5% of outstanding debt

Source: HCFB, Fitch

Notwithstanding these trends, Fitch expects HCFB to perform well in 2013, barring a major

economic shock or unexpectedly aggressive loan underwriting.

Risk Management

Credit risk is the main risk that HCFB faces. Loss rates have been significant to date, but still

comfortably within levels that the bank can sustain while remaining profitable. As for other

mass-market retail lenders, loss rates are potentially very sensitive to the macroeconomic

environment given the bank’s focus on low mass-market borrowers with limited financial

flexibility. Liquidity and refinancing risks are mitigated by strong cash generation of the loan

book, the long track record of attracting wholesale borrowing, and an ability to tolerate

significantly higher funding rates.

Long Track Record of Managing Credit Risk

HCFB’s clients are mostly low to mid mass-market clients, mostly from Russian regions.

Historical loss rates through the cycle are broadly in line with those at other retail lenders. The

bank’s major acquisition channel is granular POS lending (see Figure 2), which can be used to

test the creditworthiness of the borrower before cross-selling a larger loan.

Scoring models were developed internally and have been tested on a large customer base, and

the database now includes more than 20m records, one of the largest among Russian mass-

market lenders. The bank carries out the same checks and verifications on customers who

have not borrowed from it for a significant period as for street customers.

So far, risks have been well managed on a risk-return basis, providing HCFB with a significant

cushion against a potential spike in NPLs.

Shift to Larger-Ticket Loans Increases Risks

HCFB has started to issue bigger-ticket cash loans (the average loan amount increased by

42% in 2012), although real incomes did not grow significantly in 2011-2012, implying higher

Banks

Home Credit & Finance Bank

April 2013 5

borrower leverage. Risks are mitigated by the fact that most recipients of cash loans have a

credit history with the bank, and by various checks and verifications carried out prior to loan

issuance. However, borrowers may still increase their leverage, and the risks for HCFB, by

subsequently taking a further loan from another bank.

Moderate Increase in Loss Rates in 2012; Potentially Significant Downside

The general build-up in household leverage and larger loan tickets at HCFB, combined with the

economic slowdown in Russia, have already translated into higher loss rates, with the NPL

generation ratio rising to 10.4% in 2012 from 7.8% in 2011 (see Annex 3). Given the

unseasoned loan book, a further increase in loss rates is likely in 2013, although strong pre-

impairment profit (equal to 24% of average loans in 2012) provides considerable capacity to

absorb these through the income statement.

Moderate Market Risks

HCFB’s market risks are moderate relative to other risks faced. The bank does not actively

trade securities, and the portfolio held is for liquidity purposes. Bonds held by HCFB are mostly

of Russian banks and corporates; credit risk is reasonable (see Figure 3) and most of the

bonds could be used to obtain repo funding with the Central Bank of Russia. Interest risk could

be significant in the longer term given HCFB’s dependence on high-margin lending and the

potential for greater competition and increasing borrower sophistication to gradually reduce

loan yields. Foreign-currency risk stems from the partial funding of RUB loans with USD

eurobonds (total foreign-currency funding accounted for 11% of liabilities at end-2012), but the

on-balance-sheet position is reasonably hedged with highly rated, mainly foreign-owned banks.

Manageable Operational Risks

Operational risks stem from HCFB’s broad regional coverage. It appears that the bank has

adequately managed these risks so far by investing in modern IT infrastructure, a sophisticated

fraud prevention system based on biometric identity checks and a regularly updated database

containing information about loan issuance behaviour of branches. In addition, credit decisions

are centralised. To date, the bank has avoided large fraud-related losses.

Funding and Liquidity

Strong Capacity to Collect Deposits and to Raise Rates if Needed

HCFB started to collect retail deposits in Q408, before which it was primarily funded by

wholesale borrowings and the parent. Since then, strong deposit collection, supported by the

broad branch network and highly competitive rates offered, has resulted in retail deposits rising

to 61% of liabilities at end-2012 (see Figure 4). In Fitch’s view, HCFB’s depositors (like those of

other consumer finance banks) are relatively mobile and price-sensitive, and could become

flighty during a crisis.

These risks – and the fact that deposits have not been stressed to date – are offset by the

bank’s ability to raise interest rates, which is among the highest of all Russian retail banks.

HCFB’s deposits are quite granular and are mostly covered by deposit insurance, which also

mitigates the early withdrawal risk.

Moderate Near-Term Refinancing Risk

Near-term refinancing needs are not onerous, limited to 13% of total liabilities at end-2012 (see

Figure 5). In addition to short-term interbank funding, which mainly relates to arbitrage

placements used for liquidity management purposes and not included in wholesale refinancing

needs by Fitch, the bank has to redeemRUB4bn of domestic bonds in April 2013, with another

RUB4bn bond containing a put option exercisable in October 2013.

Figure 3 HCFB’s Securities Portfolio, end-2012

Rating Of total

securities (%) Of FCC

(%)

BBB 33.0 18.9 BB 33.4 19.1 B 31.3 17.9 Unrated 2.2 1.3 Total 100 57

Source: HCFB, Fitch

Figure 4

11%

17% 56%

3%13%

18%

62%

7%

5% 3%

5%

Retail

deposits Interbank

Domestic debt

Eurobonds

Subordinated

debtOther

Funding Profile Inner circle - end-2011

Outer circle - end-2012

Source: HCFB, IFRS

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April 2013 6

Strong Liquidity Profile

HCFB’s liquidity buffer equalled 32% of end-2012 customer accounts. The liquidity cushion is

reasonable and the bank generally accumulates additional liquidity prior to lumpy wholesale

repayments. In addition, HCFB’s liquidity benefits from its exceptionally cash-generative loan

book, which provided payments of RUB20bn (equal to 12% of customer accounts) per month in

2012.

HCFB benefits from potential liquidity support from PPF Group. Currently, there are no

committed lines from group entities, although Fitch believes that the shareholder would have a

very strong incentive to provide liquidity support to its best-performing asset.

Figure 5 Estimated Funding Maturity Schedule (RUBm) 2013 2014 2015 2016 2017+ Total

Bilateral bank loans 28,298 - 802 - - 29,100 Senior Eurobonds - 15,186 - - - 15,186 Local bonds 8,000 8,000 5,000 - - 21,000 Subordinated Eurobonds - - - - 15,186 15,186 Total 36,298 23,186 5,802 - 15,186 80,472 % of total liabilities 12.7 8.1 2.0 - 5.3

Excluding REPO Source: HCFB, Fitch estimates

Capital

Reasonable Capital Position

HCFB’s FCC ratio declined to 15.9% at end-2012 from almost 20% at end-2011, driven by

extremely rapid growth of consumer finance receivables. HCFB’s capitalisation is still

reasonable in the context of the strong risk-return profile of its business but is not quite the

outright rating strength it was before. The significant reliance of performance on loan origination

volumes may also negatively affect the bank’s deleveraging capacity, while downside risks for

asset quality have become more significant following recent rapid growth.

At the same time, HCFB’s income statement (in particular, its high margins) offers a

considerable first line of defence to absorb any potential losses. Tighter capital regulation by

the Central Bank also somewhat restricts the extent to which HCFB can leverage up its

balance sheet.

Figure 6 Loss Absorption Capacity End-2012 End-2011

IFRS RAS IFRS RAS

Tier 1 capital (RUBm) 51,334 24,059 30,547 26,031 Tier 2 capital (RUBm) 15,290 24,059 - Total capital (RUBm) 66,624 48,119 30,547 26,031 Tier 1 ratio (%) 16.5 7.4 20.5 15.0 Total CAR (%) 21.4 14.7 20.5 15.0 Risk-weighted assets (RUBm) 311,535 326,584 149,358 173,193 Gross loans (RUBm) 257,362 246,839 121,020 126,398 Current LIR (RUBm) 20,046 24,380 8,187 21,738 Additional LIR capacity (RUBm)

a 30,028 8,137 12,794 4,041

Maximum LIR capacity (RUBm)a 50,074 32,517 20,981 25,779

Current LIR/gross loans (%) 8 10 7 17 Additional LIR cap./gross loans (%)

a 12 3 11 3

Maximum LIR/gross loans (%)a 19 13 17 20

Targeted or covenanted total CAR (%) 13 10 13 10

Note: In analysing capital, Fitch's primary focus is on loss-absorbing capital, as expressed by Fitch core capital. However, the Basel total capital ratio is used here in order to provide comparison with regulatory capital. a LIR which the bank could create without total capital ratio falling below targeted/covenanted total CAR

Source: Fitch, HCFB

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April 2013 7

Annex 1

Figure 7

Liquidity Position at 31 Jan 2013

(RUBm)

Cash sourcesa

Cash on hand 9,677 Correspondent accounts with central banks

b 6,270

Correspondent accounts with other banks 19,572 Overnight placements with other banks 10,581 Cash and cash equivalents 46,100 Due from other banks (short-term) Additional liquidity sources, incl: Unpledged securities eligible for repo with the central bank 7,790 Total additional liquidity sources 7,790 Total available liquidity 53,890 Average monthly proceeds from loan repayments

c 20,000

Cash uses

a

Loans from banks 10,789 Local bonds 8,000 Wholesale/money markets debt repayments in next 12m 18,789 Potential repayments to government related entities, incl Due to CBR (excluding repo) 9,184 Deposits of ministry of finance, state and regional budgets 4,812 Total potential repayments to government related entities 13,996 Total repayments & other potential cash uses 32,785 Total available liquidity net of wholesale/money markets debt repayments in next 12m 35,101 Total available liquidity net of total potential cash uses 21,105 Total available liquidity/сustomer accounts (%) 32.0 Total available liquidity net of total potential cash uses/сustomer accounts

d (%) 12.9

Monthly proceeds from loan repayments/сustomer accounts (%) 11.9 a Excluding loan issuance/repayments and other items

b Excluding restricted cash

с Bank estimate; Fitch conservatively excludes loan proceeds from calculation of liquid assets

d Customer accounts are net of Ministry of Finance/regional budgets/other non-core government deposits

Source: IFRS statements, bank, Fitch estimates

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Annex 2: PPF’s Other Assets

Figure 8 PPF Breakdown by Segments, End-H112

HCFB Russia

Other home credit Real estate Retail Insurance Other banking Agriculture Other

Key assets/PPF shareholding

100% owned

100% owned

Russian business accounted for 62% of

the portfolio

Mostly Russia-based Eldorado (100%

owned)

Generali-PPF JV (will be

sold) NOMOS (Sold in Aug

2012), PPF Banka (93%)

Russia based RAV-Agro Pro

(100%)

Polymetal (Russia based precious metals producer;20.86% owned), EP-holding (leading

energy company in Czech Republic; 40% owned)

Net profit (EURm) 161 20 -4 -45 76 -7b -8 86

Total assets (EURm) 4,769 1,022 728 1,312 2,651a 4,497 63 3,563

Total equity (EURm) 822 305 304 82 2,651a 827 -4 -72

ROAE (%) 41.5 13.7 -2.6 -80.7 5.8 -1.7 n. m. n. m. ROAA (%) 7.6 4.1 -1.1 -7.6 5.8 -0.4 -25.2 5.3 a Generali-PPF is not consolidated in PPF accounts (49% stake held at end-H112)

b Other banking losses were due to EUR76m impairment of NOMOS investment

Source: PPF IFRS accounts, Fitch

Figure 9

PPF Banking Assets, End-H112

No.

Company information BS data at end-2012 Ratios

Name Industry Country of registration

Stake held (%)

Equity (EURm)

Total assets (EURm)

Net income (EURm)

Return on assets (%)

Return on equity (%) Equity/assets (%)

1 Home Credit a.s. Consumer lending Czech Republic 100 78 186 32 18.0 36.9 42.2 2 Home Credit Slovakia, a.s. Consumer lending Slovakia 100 44 172 20 10.8 45.8 25.8 3 Home Credit Bank OJSC Banking Belarus 100 22 121 -4 -4.1 -17.5 18.1 4 Home Credit branded operations in

China (various companies)a

Consumer lending China 100 170 300 5 3.8 6.4 56.7

5 PPF Vietnam Finance Company LLCa Consumer lending Vietnam 100 35 108 5 7.7 28.3 32.8

6 PPF banka, a.s. Banking Czech Republic 93 237 3,065 37 1.3 17.8 - 15.5 Total 561 3,941 a Data is at end-H112 and is based on segment reporting by PPF group

Source: companies IFRS financials, public disclosure, HCFB

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Annex 3: Loan Quality, NPL Origination

Figure 10 At End-2012

Gross loans

(RUBm) Performing loans

(RUBm) Loan impairment

provision (RUBm) Net loans

(RUBm) NPLs 90+

(RUBm) Gross written-off

loans (RUBm) NPLs 90+ (%) Loan impairment

provision (%) NPL coverage (%)

NPLs originated in period / average

performing loans (%)

Mortgages 3,860 3,671 211 3,649 189 277 4.9 5.5 111.6 -0.5 Car loans 279 248 34 245 31 53 11.1 12.2 109.7 -1.1 Cash loans 164,140 153,566 13,588 150,552 10,574 3,499 6.4 8.3 128.5 11.4 POS loans 65,321 61,160 4,618 60,703 4,161 3,639 6.4 7.1 111.0 9.1 Credit cards 23,738 22,014 1,595 22,143 1,724 1,231 7.3 6.7 92.5 10.9 Total retail loans 257,338 240,659 20,046 237,292 16,679 8,699 6.5 7.8 120.2 10.4

Source: IFRS statements, HCFB

Figure 11 At End-2011

Gross loans

(RUBm) Performing loans (RUBm) Loan impairment

provision (RUBm) Net loans

(RUBm) NPLs 90+

(RUBm) Gross written-off

loans (RUBm) NPLs 90+ (%) Loan impairment

provision (%) NPL coverage (%)

NPLs originated in period / average

performing loans (%)

Mortgages 5,045 4,559 392 4,653 486 315 9.6 7.8 80.7 3.5 Car loans 569 481 90 479 88 139 15.5 15.8 102.3 0.4 Cash loans 55,367 53,069 3,488 51,879 2,298 1,062 4.2 6.3 151.8 7.2 POS loans 44,575 41,458 3,313 41,262 3,117 2,995 7.0 7.4 106.3 8.9 Credit cards 15,429 14,454 893 14,536 975 1,328 6.3 5.8 91.6 8.3 Total retail loans 120,985 114,021 8,176 112,809 6,964 5,839 5.8 6.8 117.4 7.8

Source: IFRS statements, HCFB

Figure 12 At End-2010

Gross loans (RUBm) Performing loans (RUBm) Loan impairment

provision (RUBm) Net loans (RUBm) NPLs 90+ (RUBm) Gross written-off loans (RUBm) NPLs 90+ (%) Loan impairment

provision (%)

Mortgages 6,704 6,088 542 6,162 616 401 9.2 8.1 Car loans 1,215 991 222 993 224 65 18.4 18.3 Cash loans 18,424 17,594 1,131 17,293 830 2,052 4.5 6.1 POS loans 43,150 40,689 2,795 40,355 2,461 2,727 5.7 6.5 Credit cards 11,569 10,295 1,102 10,467 1,274 2,891 11.0 9.5 Total retail loans 81,062 75,657 5,792 75,270 5,405 8,136 6.7 7.1

Source: IFRS statements, HCFB

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Home Credit & Finance Bank

Income Statement31 Dec 2012 31 Dec 2011 31 Dec 2010 31 Dec 2009

Year End Year End As % of Year End As % of Year End As % of Year End As % of

USDm RUBm RUBm RUBm RUBm

Audited/Report not seenAudited/Report not seen Unqualified Unqualified Unqualified

1. Interest Income on Loans 1,652.3 50,185.0 18.29 28,778.0 22.57 24,168.0 28.30 25,638.9 33.67

2. Other Interest Income 73.0 2,218.0 0.81 791.0 0.62 1,180.0 1.38 2,939.0 3.86

3. Dividend Income n.a. n.a. - n.a. - n.a. - n.a. -

4. Gross Interest and Dividend Income 1,725.3 52,403.0 19.09 29,569.0 23.20 25,348.0 29.68 28,577.9 37.53

5. Interest Expense on Customer Deposits 353.4 10,735.0 3.91 2,354.0 1.85 1,662.0 1.95 523.7 0.69

6. Other Interest Expense 149.8 4,549.0 1.66 4,117.0 3.23 4,572.0 5.35 9,607.8 12.62

7. Total Interest Expense 503.2 15,284.0 5.57 6,471.0 5.08 6,234.0 7.30 10,131.5 13.31

8. Net Interest Income 1,222.1 37,119.0 13.53 23,098.0 18.12 19,114.0 22.38 18,446.4 24.22

9. Net Gains (Losses) on Trading and Derivatives (6.8) (206.0) (0.08) 327.0 0.26 180.0 0.21 2,227.2 2.92

10. Net Gains (Losses) on Other Securities (1.5) (46.0) (0.02) (137.0) (0.11) 280.0 0.33 822.0 1.08

11. Net Gains (Losses) on Assets at FV through Income Statement n.a. n.a. - n.a. - n.a. - n.a. -

12. Net Insurance Income n.a. n.a. - n.a. - n.a. - n.a. -

13. Net Fees and Commissions 770.6 23,406.0 8.53 9,591.0 7.52 7,330.0 8.58 6,484.3 8.52

14. Other Operating Income 4.4 135.0 0.05 (537.0) (0.42) (127.0) (0.15) (3,634.1) (4.77)

15. Total Non-Interest Operating Income 766.8 23,289.0 8.49 9,244.0 7.25 7,663.0 8.97 5,899.4 7.75

16. Personnel Expenses 300.5 9,128.0 3.33 5,575.0 4.37 4,398.0 5.15 3,803.2 4.99

17. Other Operating Expenses 348.2 10,576.0 3.85 6,972.0 5.47 4,883.0 5.72 5,108.3 6.71

18. Total Non-Interest Expenses 648.7 19,704.0 7.18 12,547.0 9.84 9,281.0 10.87 8,911.5 11.70

19. Equity-accounted Profit/ Loss - Operating n.a. n.a. - n.a. - n.a. - n.a. -

20. Pre-Impairment Operating Profit 1,340.2 40,704.0 14.83 19,795.0 15.53 17,496.0 20.49 15,434.3 20.27

21. Loan Impairment Charge 587.4 17,841.0 6.50 6,163.0 4.83 3,567.0 4.18 8,872.9 11.65

22. Securities and Other Credit Impairment Charges n.a. n.a. - n.a. - n.a. - n.a. -

23. Operating Profit 752.7 22,863.0 8.33 13,632.0 10.69 13,929.0 16.31 6,561.4 8.62

24. Equity-accounted Profit/ Loss - Non-operating n.a. n.a. - n.a. - n.a. - n.a. -

25. Non-recurring Income 38.5 1,168.0 0.43 n.a. - n.a. - n.a. -

26. Non-recurring Expense n.a. n.a. - n.a. - 2,071.0 2.43 n.a. -

27. Change in Fair Value of Own Debt n.a. n.a. - n.a. - n.a. - n.a. -

28. Other Non-operating Income and Expenses n.a. n.a. - n.a. - n.a. - n.a. -

29. Pre-tax Profit 791.2 24,031.0 8.76 13,632.0 10.69 11,858.0 13.88 6,561.4 8.62

30. Tax expense 163.8 4,975.0 1.81 2,878.0 2.26 2,447.0 2.87 1,382.3 1.82

31. Profit/Loss from Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. -

32. Net Income 627.4 19,056.0 6.94 10,754.0 8.44 9,411.0 11.02 5,179.1 6.80

33. Change in Value of AFS Investments 0.7 20.0 0.01 (26.0) (0.02) (67.0) (0.08) 54.6 0.07

34. Revaluation of Fixed Assets n.a. n.a. - n.a. - n.a. - n.a. -

35. Currency Translation Differences n.a. n.a. - n.a. - n.a. - n.a. -

36. Remaining OCI Gains/(losses) n.a. n.a. - n.a. - n.a. - n.a. -

37. Fitch Comprehensive Income 628.1 19,076.0 6.95 10,728.0 8.42 9,344.0 10.94 5,233.7 6.87

38. Memo: Profit Allocation to Non-controlling Interests n.a. n.a. - n.a. - n.a. - n.a. -

39. Memo: Net Income after Allocation to Non-controlling Interests 627.4 19,056.0 6.94 10,754.0 8.44 9,411.0 11.02 5,179.1 6.80

40. Memo: Common Dividends Relating to the Period 92.2 2,800.0 1.02 13,200.0 10.35 3,158.0 3.70 0.0 0.00

41. Memo: Preferred Dividends Related to the Period n.a. n.a. - n.a. - n.a. - n.a. -

Exchange rate USD1 = RUB30.37270 USD1 = RUB32.19610 USD1 = RUB30.47690 USD1 = RUB30.24420

Earning Assets

Earning

Assets

Earning

Assets

Earning

Assets

Banks

Home Credit & Finance Bank

April 2013 11

Home Credit & Finance Bank

Balance Sheet31 Dec 2012 31 Dec 2011 31 Dec 2010 31 Dec 2009

Year End Year End As % of Year End As % of Year End As % of Year End As % of

USDm RUBm Assets RUBm Assets RUBm Assets RUBm Assets

AssetsA. Loans

1. Residential Mortgage Loans 127.1 3,860.0 1.14 5,045.0 3.24 6,704.0 6.63 8,014.7 8.31

2. Other Mortgage Loans n.a. n.a. - n.a. - n.a. - n.a. -

3. Other Consumer/ Retail Loans 8,345.6 253,478.0 75.03 115,940.0 74.47 74,358.0 73.55 59,400.7 61.57

4. Corporate & Commercial Loans 0.8 24.0 0.01 35.0 0.02 170.0 0.17 386.2 0.40

5. Other Loans n.a. n.a. - n.a. - n.a. - n.a. -

6. Less: Reserves for Impaired Loans/ NPLs 660.0 20,046.0 5.93 8,187.0 5.26 5,957.0 5.89 8,872.6 9.20

7. Net Loans 7,813.5 237,316.0 70.25 112,833.0 72.47 75,275.0 74.46 58,929.0 61.08

8. Gross Loans 8,473.5 257,362.0 76.18 121,020.0 77.73 81,232.0 80.35 67,801.6 70.28

9. Memo: Impaired Loans included above 549.1 16,679.0 4.94 6,975.0 4.48 5,570.0 5.51 8,757.7 9.08

10. Memo: Loans at Fair Value included above n.a. n.a. - n.a. - n.a. - n.a. -

B. Other Earning Assets

1. Loans and Advances to Banks 56.4 1,712.0 0.51 2,092.0 1.34 4,126.0 4.08 1.4 0.00

2. Reverse Repos and Cash Collateral 222.4 6,754.0 2.00 0.0 0.00 83.0 0.08 1,492.1 1.55

3. Trading Securities and at FV through Income n.a. n.a. - n.a. - 14.0 0.01 181.9 0.19

4. Derivatives 8.8 267.0 0.08 608.0 0.39 0.0 0.00 0.0 0.00

5. Available for Sale Securities 931.5 28,291.0 8.37 11,861.0 7.62 5,841.0 5.78 15,516.3 16.08

6. Held to Maturity Securities n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

7. At-equity Investments in Associates 3.4 102.0 0.03 86.0 0.06 63.0 0.06 25.5 0.03

8. Other Securities n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

9. Total Securities 1,166.0 35,414.0 10.48 12,555.0 8.06 6,001.0 5.94 17,215.8 17.84

10. Memo: Government Securities included Above n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

11. Memo: Total Securities Pledged n.a. n.a. - 0.0 0.00 n.a. - n.a. -

12. Investments in Property n.a. n.a. - n.a. - n.a. - n.a. -

13. Insurance Assets n.a. n.a. - n.a. - n.a. - n.a. -

14. Other Earning Assets n.a. n.a. - n.a. - n.a. - n.a. -

15. Total Earning Assets 9,035.8 274,442.0 81.24 127,480.0 81.88 85,402.0 84.47 76,146.2 78.93

C. Non-Earning Assets

1. Cash and Due From Banks 1,565.5 47,548.0 14.08 16,745.0 10.76 7,521.0 7.44 11,945.8 12.38

2. Memo: Mandatory Reserves included above 75.9 2,304.0 0.68 773.0 0.50 188.0 0.19 107.6 0.11

3. Foreclosed Real Estate n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

4. Fixed Assets 301.8 9,167.0 2.71 6,972.0 4.48 5,994.0 5.93 6,373.9 6.61

5. Goodwill n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

6. Other Intangibles 51.9 1,576.0 0.47 833.0 0.54 659.0 0.65 618.6 0.64

7. Current Tax Assets n.a. n.a. - 401.0 0.26 205.0 0.20 226.2 0.23

8. Deferred Tax Assets 11.4 346.0 0.10 n.a. - 142.0 0.14 272.1 0.28

9. Discontinued Operations n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

10. Other Assets 156.0 4,737.0 1.40 3,258.0 2.09 1,176.0 1.16 893.1 0.93

11. Total Assets 11,122.4 337,816.0 100.00 155,689.0 100.00 101,099.0 100.00 96,475.9 100.00

Liabilities and Equity

D. Interest-Bearing Liabilities

1. Customer Deposits - Current 628.2 19,079.0 5.65 10,175.0 6.54 7,191.0 7.11 5,018.7 5.20

2. Customer Deposits - Savings n.a. n.a. - n.a. - n.a. - n.a. -

3. Customer Deposits - Term 5,110.2 155,210.0 45.95 60,123.0 38.62 16,594.0 16.41 8,559.2 8.87

4. Total Customer Deposits 5,738.3 174,289.0 51.59 70,298.0 45.15 23,785.0 23.53 13,577.9 14.07

5. Deposits from Banks 1,706.0 51,815.0 15.34 14,128.0 9.07 7,467.0 7.39 17,212.6 17.84

6. Repos and Cash Collateral n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

7. Other Deposits and Short-term Borrowings n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

8. Total Deposits, Money Market and Short-term Funding 7,444.3 226,104.0 66.93 84,426.0 54.23 31,252.0 30.91 30,790.5 31.92

9. Senior Debt Maturing after 1 Year 1,209.7 36,743.0 10.88 37,450.0 24.05 34,152.0 33.78 36,987.9 38.34

10. Subordinated Borrowing 508.5 15,444.0 4.57 n.a. - 0.0 0.00 0.0 0.00

11. Other Funding n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

12. Total Long Term Funding 1,718.2 52,187.0 15.45 37,450.0 24.05 34,152.0 33.78 36,987.9 38.34

13. Derivatives 14.5 439.0 0.13 80.0 0.05 95.0 0.09 142.1 0.15

14. Trading Liabilities n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00

15. Total Funding 9,177.0 278,730.0 82.51 121,956.0 78.33 65,499.0 64.79 67,920.5 70.40

E. Non-Interest Bearing Liabilities

1. Fair Value Portion of Debt n.a. n.a. - n.a. - n.a. - n.a. -

2. Credit impairment reserves n.a. n.a. - n.a. - n.a. - n.a. -

3. Reserves for Pensions and Other n.a. n.a. - n.a. - n.a. - 136.9 0.14

4. Current Tax Liabilities 21.7 660.0 0.20 n.a. - n.a. - n.a. -

5. Deferred Tax Liabilities 0.6 17.0 0.01 14.0 0.01 n.a. - n.a. -

6. Other Deferred Liabilities n.a. n.a. - n.a. - n.a. - n.a. -

7. Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. -

8. Insurance Liabilities n.a. n.a. - n.a. - n.a. - n.a. -

9. Other Liabilities 232.9 7,075.0 2.09 3,172.0 2.04 2,581.0 2.55 1,586.8 1.64

10. Total Liabilities 9,432.2 286,482.0 84.80 125,142.0 80.38 68,080.0 67.34 69,644.2 72.19

F. Hybrid Capital

1. Pref. Shares and Hybrid Capital accounted for as Debt n.a. n.a. - n.a. - n.a. - n.a. -

2. Pref. Shares and Hybrid Capital accounted for as Equity n.a. n.a. - n.a. - n.a. - n.a. -

G. Equity

1. Common Equity 1,542.2 46,841.0 13.87 30,585.0 19.64 33,031.0 32.67 26,777.1 27.76

2. Non-controlling Interest 148.5 4,511.0 1.34 n.a. - n.a. - n.a. -

3. Securities Revaluation Reserves 0.7 21.0 0.01 (38.0) (0.02) (12.0) (0.01) 54.6 0.06

4. Foreign Exchange Revaluation Reserves n.a. n.a. - n.a. - n.a. - n.a. -

5. Fixed Asset Revaluations and Other Accumulated OCI (1.3) (39.0) (0.01) n.a. - n.a. - n.a. -

6. Total Equity 1,690.1 51,334.0 15.20 30,547.0 19.62 33,019.0 32.66 26,831.7 27.81

7. Total Liabilities and Equity 11,122.4 337,816.0 100.00 155,689.0 100.00 101,099.0 100.00 96,475.9 100.00

8. Memo: Fitch Core Capital 1,627.4 49,429.0 14.63 29,714.0 19.09 32,218.0 31.87 25,941.0 26.89

9. Memo: Fitch Eligible Capital n.a. n.a. - n.a. - n.a. - n.a. -

Exchange rate USD1 = RUB30.37270 USD1 = RUB32.19610 USD1 = RUB30.47690 USD1 = RUB30.24420

Banks

Home Credit & Finance Bank

April 2013 12

Home Credit & Finance Bank

Summary Analytics31 Dec 2012 31 Dec 2011 31 Dec 2010 31 Dec 2009

Year End Year End Year End Year End

A. Interest Ratios

1. Interest Income on Loans/ Average Gross Loans 29.00 29.96 33.91 34.09

2. Interest Expense on Customer Deposits/ Average Customer Deposits 9.12 6.42 9.10 4.51

3. Interest Income/ Average Earning Assets 28.42 30.03 33.09 36.31

4. Interest Expense/ Average Interest-bearing Liabilities 8.59 7.36 9.83 12.72

5. Net Interest Income/ Average Earning Assets 20.13 23.46 24.95 23.44

6. Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets 10.46 17.20 20.30 12.16

7. Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets 20.13 23.46 24.95 23.44

B. Other Operating Profitability Ratios

1. Non-Interest Income/ Gross Revenues 38.55 28.58 28.62 24.23

2. Non-Interest Expense/ Gross Revenues 32.62 38.79 34.66 36.60

3. Non-Interest Expense/ Average Assets 8.93 10.56 9.75 8.49

4. Pre-impairment Op. Profit/ Average Equity 109.48 70.61 59.21 65.08

5. Pre-impairment Op. Profit/ Average Total Assets 18.45 16.66 18.38 14.70

6. Loans and securities impairment charges/ Pre-impairment Op. Profit 43.83 31.13 20.39 57.49

7. Operating Profit/ Average Equity 61.50 48.63 47.14 27.67

8. Operating Profit/ Average Total Assets 10.36 11.47 14.64 6.25

9. Taxes/ Pre-tax Profit 20.70 21.11 20.64 21.07

10. Pre-Impairment Operating Profit / Risk Weighted Assets 13.07 13.25 17.76 20.27

11. Operating Profit / Risk Weighted Assets 7.34 9.13 14.14 8.62

C. Other Profitability Ratios

1. Net Income/ Average Total Equity 51.26 38.36 31.85 21.84

2. Net Income/ Average Total Assets 8.64 9.05 9.89 4.93

3. Fitch Comprehensive Income/ Average Total Equity 51.31 38.27 31.62 22.07

4. Fitch Comprehensive Income/ Average Total Assets 8.65 9.03 9.82 4.99

5. Net Income/ Av. Total Assets plus Av. Managed Securitized Assets n.a. n.a. n.a. n.a.

6. Net Income/ Risk Weighted Assets 6.12 7.20 9.55 6.80

7. Fitch Comprehensive Income/ Risk Weighted Assets 6.12 7.18 9.48 6.87

D. Capitalization

1. Fitch Core Capital/Weighted Risks 15.87 19.89 32.70 34.07

2. Fitch Eligible Capital/ Weighted Risks n.a. n.a. n.a. n.a.

3. Tangible Common Equity/ Tangible Assets 14.71 19.19 32.12 27.14

4. Tier 1 Regulatory Capital Ratio 16.50 20.50 33.50 35.20

5. Total Regulatory Capital Ratio 21.40 20.50 33.50 36.40

6. Core Tier 1 Regulatory Capital Ratio n.a. n.a. n.a. n.a.

7. Equity/ Total Assets 15.20 19.62 32.66 27.81

8. Cash Dividends Paid & Declared/ Net Income 14.69 122.75 33.56 0.00

9. Cash Dividend Paid & Declared/ Fitch Comprehensive Income 14.68 123.04 33.80 0.00

10. Cash Dividends & Share Repurchase/Net Income n.a. n.a. n.a. n.a.

11. Net Income - Cash Dividends/ Total Equity 31.67 (8.01) 18.94 19.30

E. Loan Quality

1. Growth of Total Assets 116.98 54.00 4.79 (14.96)

2. Growth of Gross Loans 112.66 48.98 19.81 (17.95)

3. Impaired Loans(NPLs)/ Gross Loans 6.48 5.76 6.86 12.92

4. Reserves for Impaired Loans/ Gross loans 7.79 6.76 7.33 13.09

5. Reserves for Impaired Loans/ Impaired Loans 120.19 117.38 106.95 101.31

6. Impaired Loans less Reserves for Imp Loans/ Equity (6.56) (3.97) (1.17) (0.43)

7. Loan Impairment Charges/ Average Gross Loans 10.31 6.42 5.00 11.80

8. Net Charge-offs/ Average Gross Loans 3.93 4.10 9.10 11.72

9. Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets 6.48 5.76 6.86 12.92

F. Funding

1. Loans/ Customer Deposits 147.66 172.15 341.53 499.35

2. Interbank Assets/ Interbank Liabilities 3.30 14.81 55.26 0.01

3. Customer Deposits/ Total Funding excl Derivatives 62.63 57.68 36.37 20.03

Banks

Home Credit & Finance Bank

April 2013 13

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