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Alexandru Ioan Cuza University of Iasi 01.03.14 Business Description Recommendation Recommendation Main Features HOLD Current price RON 1.68 Target price RON 1.7 3rd bank by assets share 3rd Card issuer in Romania 1st Visa card Issuer Market Profile 1.8 Ticker: TLV Exchange: BSE 52-week price range 1.161 – 1.7550 1.4 Average daily volume 267,358,941 1.3 Shares outstanding 2,206,436,324 1.2 Market Capitalization 3,830,373,458.46 Book value per share 1.00 1.7 1.6 1.5 1.1 Closing price Business Description Feb-14 Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 1 Target price and current price Return on Equity (2014F) 13.37% P/BV 1.39 Business Lines Corporate Banking Well-diversified portfolio 49% of total loans Retail Banking 89% of customers Leader in innovation and technology SMEs Bank for entrepreneurial people New product packages HealthCare Division No competition 45% share of potential clients Business Description Business Description Shareholders Structure 20.2% 24.8% EBRD 14.61% Bank of Cyprus 9.98% The investment division of World Bank 3.53% 2.4% 52.6% Romanian individual investors Romanian institutional investors Foreign individual investors Foreign institutional investors Business Description Industry Overview & Competitive Positioning Industry Overview Macroeconomic background Unemployment rate (2013) Investment Saving CPI annualand change % Rates 30 7 6 25 5 20 4 3 15 2 10 1 05 20% 10% 0% Real GDP growth rate Annual inflation rate Upper bound Lower bound Investment rate Saving rate 8 6 4 2 0 -2 -4 -6 -8 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 % 10 Dec.11 Jan.12 Feb.12 Mar.12 Apr.12 May.12 Jun.12 Jul.12 Aug.12 Sep.12 Oct.12 Nov.12 Dec.12 Jan.13 Feb.13 Mar.13 Apr.13 May.13 Jun.13 Jul.13 Aug.13 Sep.13 Oct.13 Nov.13 Dec.13 %0 % 30% Source: National Bank of Romania Industry Overview & Competitive Positioning Industry Overview Banking sector overview Banks/100,000 citizens branches 0 5 10 15 20 Industry Overview & Competitive Positioning 25 May/2013 Dec/2012 Jul/2012 Feb/2012 Sep/2011 Apr/2011 Nov/2010 Jun/2010 Jan/2010 Aug/2009 Mar/2009 Oct/2008 May/2008 6,800 6,600 6,400 6,200 6,000 5,800 5,600 5,400 5,200 5,000 4,800 Dec/2007 Number of branches and employees in Romania Luxemburg Ireland Cyprus Austria Malta Finland Latvia Lithuania Denmark Estonia Germany Hungary Poland Sweden Netherlands Portugal Italy Slovenia France Belgium Croatia Spain United Kingdom Czech Republic Slovakia Bulgaria Greece Romania 74 72 70 68 66 64 62 60 58 56 54 52 thou. employees 1,000s employees in Banking sector Source: National Bank of Romania Industry Overview Banking sector overview % Financial Intermediation 400 350 300 250 200 150 100 50 0 Assets/GDP EU Median Industry Overview & Competitive Positioning Loans/GDP EU-27 (average) Deposits/GDP Romania Source: National Bank of Romania Competitive Positioning Porter Analysis Herfindahl–Hirschman Index 3,000 Threat of Entry 2,500 2,000 Competition in the industry Bargaining power of suppliers 1,500 1,000 500 Threat of Substitute Products Bargaining power of customers 0 Source: Team estimates, National Bank of Romania Industry Overview & Competitive Positioning Competitive Positioning Market Share in Total Banking Assets 25% 20% 15% 10% 5% 0% BCR BRD BT CEC bank Unicredit Tiric Raiffeisen bank Market Share by Assets Dec-12 Volksbank Alpha Bank ING Bank Bancpost Market Share by Assets Dec-13 Source: Company data Industry Overview & Competitive Positioning Competitive Positioning Loans and Deposits of peers 140% 120% 100% 80% 60% 40% 20% 0% BCR BRD Loan/Deposit ratio BT UniCredit Tiriac bank Deposits from customers/Total Liabilities ratio Source: Company data Industry Overview & Competitive Positioning Valuation Valuation Models Residual Income Model Sum of PV of Residual Income Justified P/BV Model Total equity (2018F) 178.7 6,367.1 Total equity (2014F) 3,524.3 P/BV ratio Value of equity 3,703.0 Justified P/BV 3,790.9 Number of shares (millions) 2,206.4 Number of shares (millions) TLV value / share RIM 1.68 2,206.44 1.68 TLV value / share Target Price 1.70 RON 1.013 1.72 Justified P/BV 1.72 Source: Team Estimates Valuation Sensitivity Analysis for Justified P/BV Model LT growth rate Cost of equity - perpetuity LT ROE 1.00% 2.00% 3.00% 4.00% 5.00% 12.36% 12.86% 13.36% 13.86% 14.36% 11.5% 1.44 1.42 1.39 1.36 1.32 1.54 1.46 1.39 1.33 1.27 12.5% 1.58 1.57 1.55 1.54 1.52 1.72 1.63 1.56 1.48 1.42 13.5% 1.71 1.72 1.72 1.72 1.72 1.90 1.81 1.72 1.64 1.57 14.5% 1.85 1.87 1.88 1.90 1.93 2.08 1.98 1.88 1.80 1.72 15.5% 1.99 2.01 2.05 2.08 2.13 2.26 2.15 2.05 1.95 1.87 Source: Team estimates Valuation Financial Analysis Financial Analysis Net Profit Income Breakdown 1,400 600 1,200 500 1,000 400 800 300 600 200 400 100 200 0 0 2009 2010 2011 2012 2013 2014e 2015e 2009 2010 Net interest income 2011 2012 2013 Net fee and comission income 2014e 2015e Net trading income Source: Company Data, Team Estimates Financial Analysis Financial Analysis Net Interest Income 1,400 1,200 1,000 800 600 400 200 0 2009 2010 2011 2012 2013 2014e 2015e RON million Source: Company Data, Team Estimates Financial Analysis Financial Analysis Gross Loans to Customers Loans and Deposits Interest Rates 25,000 16% 20,000 14% 12% 15,000 10% 8% 10,000 6% 4% 5,000 2% 0% 0 2009 RON million 2010 2011 2012 2013 2014e 2015e 2009 2010 RON million 2011 2012 Deposit interest rates 2013 2014E 2015E Loans interest rates Source: Company Data, Team Estimates Financial Analysis Financial Analysis Net Fee and Commission Income 500 450 400 350 300 250 200 150 100 50 0 RON million 2009 2010 2011 2012 2013 2014e 2015e Source: Company Data, Team Estimates Financial Analysis Financial Analysis Operations Growth for 2013 17% 20% 10% 5.38% 8.00% 13% 10% 0% Active clients Account operations Debit and credit cards Card transactions market share Financial Analysis Cards transaction volume Financial Analysis NPL Ratio Coverage Ratio 14% 12% 10% 8% 6% Solvency Ratio 125% 125% 120% 120% 115% 115% 110% 110% 105% 105% 100% 100% 4% 2% 0% 2011 2012 2013 2011 2012 2013 2011 2012 2013 Source: Company Data Financial Analysis Risk Analysis Risk Analysis Probability Impact Legend Risk Analysis Risk Analysis 2.44 2.4 2.36 2.32 2.28 2.24 2.2 Monte Carlo Simulation 2.16 2.12 2.08 2.04 2 1.96 1.92 1.88 1.84 1.8 1.76 1.72 1.68 1.64 1.6 1.56 1.52 1.48 1.44 1.4 1.36 1.32 1.28 1.24 1.2 Risk Analysis Mean: 1.69 Iterations: 10,000 SELL HOLD BUY 4.94% 84.5% 10.56% Conclusion Conclusion Increase in assets Increasing NPL and provision expenses Stable macroeconomic background HOLD Decreasing net interest income margin Increasing net fee income margin Current Price Target Price 1.70 1.70 Conclusion Conclusion THANK YOU! Special thanks to: • CFA Institute Research Challenge • CFA Society of Romania • Industry Mentor-Bogdan Bilaus, CFA • Faculty Advisor-Silviu Ursu, PhD • FRM, Alexandru Ioan Cuza University of Iasi • Banca Transilvania Appendix – part 1 Macroeconomic Indicators BT Framework Banking sector Real GDP Growth Rate of Romania BT Clients Structure Banking sector performance CPI annual change % Shareholders structure Assets, Loans and Deposits of Banking sector Real GDP growth rate of EU countries Number of branches Market share by assets GDP per capita of Romania Geographic coverage Bank distribution in terms of solvency ratio GDP per capita of EU countries Advantages of Flexcube core-banking system NPL ratio of credit institutions (%) Unemployment rate of EU countries Corporate Governance Distribution of credit institutions’ market share based on ROA Labor force demand Private sector loans in domestic and foreign currencies Investment and Savings Rates, Current account deficit of Romania Money aggregates Number of banks and population of EU countries Number of branches in EU countries Number of branches in Romania Herfindahl-Hirschmann index values for EU countries Credit institutions and branches with foreign capital in EU countries Liability structure of credit institutions operating in Romania Financial intermediation, international comparison Credit to households; lending for house purchase; RON Porter Analysis BT and BRD equity comparison Concentration of the Romanian banking system Appendix – part 2 Valuation Stock Exchange Market Financial Analysis Monte Carlo Simulation for Justified P/BV Banca Transilvania S.A. daily stock prices (RON) Income & Expense distribution in BT business lines Statement of financial position BT share price, traded volume and news flow since 2011 Loans as % of Deposits Income Statement (RON million) USD/RON and EUR/RON exchange rate dynamics Capital Adequacy indicators Operating model Romanian banking sector everyday transactions activity Cost to income ratio Residual income model BET, BET-C, CECEBNK, SX7E Index comparison with BT Loans and deposits relation Justified P/BV model BET, WIG, BUX and FTASE Index comparison Main items of gross operating revenues Cost of equity Regression Analysis Gross operating income and credit risk provision Justified P/BV sensitivity analysis IEA, NII and NFI Monte Carlo Simulation for Residual Income model based on long-term growth rate changes NIM and NFI annualized evolution Balance sheet growth BT loans and Advances to customers Objectives and results of BT (2013) Banca Transilvania S.A. daily stock prices (RON) Appendix 1.8 1.7 2.13% downside 1.6 1.5 1.4 1.3 Closing price Current price Target price 1.2 1.1 1 Source: BVB Back to the list of contents Appendix BT Clients Structure 1% 9% 1% 89% Retail Banking Corporate Banking Healthcare Division SME Source: Company data Back to the list of contents Income & Expense distribution in BT business lines Appendix 600 60% 52% 52% 500 50% 42% 40% 400 40% 300 30% 200 20% 100 10% Total Income Total Expense Operating Margin Source: Company data Healthcare Division Retail SME 0% Corporate Banking 0 Back to the list of contents Loans as % of Deposits Appendix 120% 110% 111% 107% 100% 80% 60% 40% 20% 0% 2010 2011 2012 BT Romanian Banking Sector Source: Company data and NBR Back to the list of contents Appendix Shareholders structure 20.2% 24.8% 2.40% 52.6% Romanian individual investors Romanian institutional investors Foreign individual investors Foreign institutional investors Source: Company data Back to the list of contents Real GDP Growth Rate of Romania Appendix % 10 8 6 4 2 0 -2 -4 -6 -8 Source: NIS Back to the list of contents CPI annual change % Appendix 7 6 5 4 3 2 1 0 Annual inflation rate Upper bound Lower bound Source: NIS Back to the list of contents Capital Adequacy indicators Appendix 24 20 16 12 8 4 Solvency ratio (%) Tier 1 capital ratio for credit risk (%) Minimum requirement for Solvency ratio (%) Source: NBR Back to the list of contents Banking sector performance Appendix 5.00 20.0% 4.00 15.0% 3.00 10.0% 2.00 1.00 5.0% 0.00 0.0% -1.00 -5.0% -2.00 Bln. RON -3.00 -10.0% Net Profit/Net Loss (RON bn.) ROE (%) Source: NBR Back to the list of contents Assets, Loans and Deposits of Banking sector Appendix 80% 70% 60% 50% 40% 30% 20% 10% 0% 2008 2009 2010 2011 2012 Jun/2013 Assets/GDP Loans/GDP Deposits/GDP Source: NBR Back to the list of contents Cost to income ratio Appendix 52.91% 52.22% 49.50% 48.10% 46.80% 45.40% 46.10% 45.02% 2013 2012 2013 2012 2013 BCR BRD UniCredit Tiriac Bank BT Source: Company data 2012 2013 2012 Back to the list of contents Loans and deposits relation Appendix 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% BCR BRD BT UniCredit Tiriac bank Loan/Deposit ratio Deposits from customers/Total Liabilities ratio Source: Company data Back to the list of contents Number of branches Appendix 889 602 550 189 BCR BRD TLV Unicredit Tiriac Source: Company data Back to the list of contents Market share by assets Appendix 25.00% 20.00% 15.00% 10.00% 5.00% 19.0% 12.7% 8.5% 6.7% 6.5% 7.1% 4.3% 4.6% 3.8% 3.3% 0.00% Market share by assets Dec-12 Market share by assets Q1-2013 Source: Company data Back to the list of contents Geographic coverage Appendix Source: Company data Back to the list of contents Justified P/BV sensitivity analysis Appendix LT growth rate Cost of equity - perpetuity LT ROE 1.00% 2.00% 3.00% 4.00% 5.00% 12.36% 12.86% 13.36% 13.86% 14.36% 11.5% 1.44 1.42 1.39 1.36 1.32 1.54 1.46 1.39 1.33 1.27 12.5% 1.58 1.57 1.55 1.54 1.52 1.72 1.63 1.56 1.48 1.42 13.5% 1.71 1.72 1.72 1.72 1.72 1.90 1.81 1.72 1.64 1.57 14.5% 1.85 1.87 1.88 1.90 1.93 2.08 1.98 1.88 1.80 1.72 15.5% 1.99 2.01 2.05 2.08 2.13 2.26 2.15 2.05 1.95 1.87 Source: Team calculations Back to the list of contents Appendix BT share price, traded volume and news flow since 2011 RON 2.0 RON 1.8 RON 1.6 Issue of 295,735,713 new shares RON 1.4 Buyback of 1,166,000 shares 16 new shares issued for every 100 held by stockholders 2013 gross profits increase by 30% over 2012 RON 1.2 RON 1.0 RON 0.8 RON 0.6 RON 0.4 RON 0.2 Robert Rekkers resigns as CEO BT borrows $45 mln from EBRD and IFC to finance SMEs Rumors of taking over Bank of Cyprus Omer Tetik officialy named as new CEO RON 0.0 10000000 8000000 6000000 4000000 2000000 0 Source: BVB Traded volume Back to the list of contents Main items of gross operating revenues Appendix 450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Net Interest income (RON m) Net fee and commission income (RON m) Gross operating income (RON m) Source: Company data 4Q13 Back to the list of contents Gross operating income and credit risk provision Appendix 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 -50.0 -100.0 -150.0 -200.0 Gross operating income (RON m) Net impairment losses on assets (RON m) Net profit (RON m) Source: Company data Back to the list of contents IEA, NII and NFI Appendix 32,000 40.0% 31,000 30.0% 30,000 20.0% 29,000 10.0% 28,000 0.0% 27,000 -10.0% 26,000 -20.0% 25,000 24,000 -30.0% 23,000 -40.0% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Interest earning assets (RON m) Net interest income (%, qoq) Net fee and commission income (%, qoq) Source: Company data Back to the list of contents NIM and NFI annualized evolution Appendix 6.00% 5.00% 5.01% 4.00% 3.96% 3.65% 3.00% 3.48% 3.29% 3.20% 1.50% 1.51% 3.43% 3.62% 2.00% 1.00% 1.49% 1.53% 1.07% 1.16% 1.22% 1.32% 1Q13 2Q13 3Q13 4Q13 0.00% 1Q12 2Q12 3Q12 4Q12 NII (annualized*)/Avg. IEA (%) NFI (annualized*)/Avg. Total Assets (%) *NII and NFI annualized based on quarterly figures Source: Company data Back to the list of contents Balance sheet growth Appendix 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2010 2011 2012 2013 2014E 2015E Loans growth Deposits growth 2010-2018E average loan growth 2010-2018E average deposit growth Source: Company data 2016E 2017E 2018E Back to the list of contents 2.03 2.01 1.99 1.97 1.95 1.93 1.91 1.89 1.87 1.85 1.83 1.81 1.79 1.77 1.75 1.73 1.71 1.69 1.67 1.65 1.63 1.61 1.59 1.57 1.55 1.53 1.51 1.49 1.47 1.45 1.43 Monte Carlo Simulation for Justified P/BV Appendix BT stock price Back to the list of contents Statement of financial position (million Ron) Appendix FY 09 A FY 10 A FY 11 A FY 12 A FY 13 A FY 14 F FY 15 F FY 16 F FY 17 F FY 18 F Cash and cash equivalents 3,183.3 3,696.8 4,546.5 5,576.3 4,102.3 4,138.6 4,469.7 4,144.9 4,074.8 4,319.2 Placements with banks 1,520.7 1,221.5 769.4 1,383.1 1,758.5 1,924.0 1,929.0 1,911.4 2,038.6 2,188.0 Investment securities 2,645.2 3,865.7 5,933.6 6,568.9 8,947.6 10,289.7 11,524.5 12,792.2 14,071.4 15,197.1 Assets Loans to customers Property and equipment 11,542.3 12,264.8 14,035.3 15,457.5 16,667.2 18,106.4 19,666.7 21,282.5 22,920.5 24,295.8 276.6 260.5 266.6 290.0 289.0 294.8 299.8 304.3 310.4 316.6 Intangible assets 10.2 47.4 69.1 80.1 82.9 85.4 88.0 91.0 94.2 97.5 Equity investments 95.8 105.5 70.0 74.1 74.0 74.0 74.0 74.0 74.0 74.0 Other assets 94.1 82.0 127.3 142.1 144.6 160.3 175.4 172.0 175.3 175.0 Total assets 19,368.3 21,544.2 25,817.8 29,572.0 32,066.0 35,073.2 38,227.0 40,772.3 43,759.2 46,663.2 Back to the list of contents Statement of financial position - continued Appendix Liabilities Deposits from banks 259.1 333.2 251.2 46.0 419.0 350.7 382.3 407.7 437.6 466.6 15,059.2 17,324.4 20,280.2 23,232.9 25,803.9 27,590.8 29,798.0 31,883.9 33,956.4 35,993.7 1,865.1 1,401.4 2,469.0 2,969.3 2,067.3 2,981.2 3,249.3 3,057.9 3,063.1 3,033.1 254.9 257.6 260.1 288.8 337.9 350.7 382.3 407.7 437.6 466.6 Other liabilities 99.9 155.7 237.5 340.1 355.5 275.5 370.0 320.8 393.9 336.0 Total liabilities 17,538.4 19,472.2 23,498.0 26,877.1 28,983.5 31,548.9 34,181.9 36,078.0 38,288.5 40,296.1 1,176.2 1,560.5 1,860.2 1,989.5 2,292.9 2,645.7 3,061.1 3,551.0 4,161.4 4,891.6 0.0 0.0 (1.9) (7.8) (0.8) (0.8) (0.8) (0.8) (0.8) (0.8) 97.7 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 369.8 300.4 235.0 376.1 430.1 496.9 576.0 704.3 831.6 951.6 21.2 26.9 34.1 38.1 29.0 29.0 29.0 29.0 29.0 29.0 165.0 184.3 191.7 298.9 331.3 353.5 379.8 410.8 449.4 495.6 1,829.9 2,072.0 2,319.8 2,694.9 3,082.6 3,524.3 4,045.1 4,694.3 5,470.7 6,367.1 19,368.3 21,544.2 25,817.8 29,572.0 32,066.0 35,073.2 38,227.0 40,772.3 43,759.2 46,663.2 Deposits from customers Loans from banks and other financial institutions Other subordinated liabilities Equity Share capital Own shares Share premium Retained earnings Revaluation reserve Other reserves Total equity Total liabilities and equity Source: Company data, Team estimates Back to the list of contents Income Statement (RON million) Interest income Interest expense FY 09 A FY 10 A FY 11 A FY 12 A FY 13 A FY 14 F FY 15 F FY 16 F FY 17 F FY 18 F 2,060.9 1,862.7 1,804.2 2,012.4 2,093.7 2,130.7 2,177.4 2,278.1 2,367.1 2,440.4 (1,341.5) (890.9) (932.4) (1,074.5) (899.7) (874.9) (852.7) (832.9) (808.3) (774.0) 719.3 971.8 871.9 937.9 1,194.0 1,255.8 1,324.7 1,445.2 1,558.8 1,666.4 396.6 (43.6) 401.2 (44.2) 441.0 (51.7) 487.7 (63.0) 435.1 (73.4) 487.3 (80.0) 545.8 (87.2) 605.9 (94.2) 666.4 (100.8) 726.4 (106.8) 353.1 357.0 389.3 424.7 361.7 407.3 458.6 511.7 565.7 619.6 Net interest income Fee and commission income Fee and commission expense Net fee and commission income Net trading income Other operating income Operating income Net impairment losses on assets Personnel expenses Depreciation and amortization Other operating expenses Operating expenses Profit before income tax Income tax expense Taxation rate Profit for the year Appendix 138.9 119.0 117.1 131.2 128.8 137.9 148.9 161.5 175.3 191.0 29.8 18.5 24.4 42.8 39.2 41.1 43.2 45.3 47.6 50.0 1,241.1 1,466.2 1,402.7 1,536.5 1,723.7 1,842.1 1,975.3 2,163.7 2,347.3 2,527.0 (415.8) (652.1) (380.8) (379.4) (407.4) (417.2) (427.0) (436.8) (446.6) (456.4) (326.1) (350.9) (368.9) (409.6) (441.3) (463.4) (481.9) (498.8) (513.7) (529.2) (61.2) (54.2) (49.3) (46.4) (56.8) (45.6) (42.7) (39.5) (36.4) (37.3) (266.6) (280.0) (325.4) (360.3) (375.1) (390.1) (403.8) (415.9) (426.3) (436.9) (1,069.6) (1,337.2) (1,124.4) (1,195.8) (1,280.6) (1,316.3) (1,355.3) (1,391.0) (1,423.0) (1,459.8) 171.5 129.0 278.2 340.8 443.1 525.9 620.0 772.8 924.3 1,067.2 (23.3) (20.2) (49.7) (20.3) (68.2) (84.1) (99.2) (123.6) (147.9) (170.8) 13.6% 15.7% 17.9% 6.0% 15.4% 16.0% 16.0% 16.0% 16.0% 16.0% 148.2 108.7 228.5 320.4 374.9 441.7 520.8 649.1 776.4 896.4 Source: Company data, Team estimates Back to the list of contents Operating model Appendix FY 09 A FY 10 A FY 11 A FY 12 A FY 13 A FY 14 F FY 15 F FY 16 F FY 17 F FY 18 F Investment Securities Investment Securities % growth 2,645.2 3,865.7 5,933.6 6,568.9 8,947.6 10,289.7 11,524.5 12,792.2 14,071.4 15,197.1 46.1% 53.5% 10.7% 36.2% 15.0% 12.0% 11.0% 10.0% 8.0% Placements with banks Placements with banks % of total assets 1,520.7 1,221.5 6.3% 769.4 3.6% 1,383.1 5.4% 1,758.5 5.9% 1,924.0 6.0% 1,929.0 5.5% 1,911.4 5.0% 2,038.6 5.0% 2,188.0 5.0% Loans Loans and advances to customers, gross % growth 12,234.0 13,542.7 15,694.6 17,568.5 19,160.3 20,693.1 22,348.5 23,912.9 25,467.3 26,995.3 10.7% 15.9% 11.9% 9.1% 8.0% 8.0% 7.0% 6.5% 6.0% 260.5 -5.8% 47.4 364.4% 82.0 0.4% 266.6 2.3% 69.1 46.0% 127.3 0.6% 290.0 8.8% 80.1 15.8% 142.1 0.6% 289.0 (0.3%) 82.9 3.5% 144.6 0.5% 294.8 2.0% 85.4 3.0% 160.33 0.5% 299.8 1.7% 88.0 3.0% 175.37 0.5% 304.3 1.5% 91.0 3.5% 172.02 0.5% 310.4 2.0% 94.2 3.5% 175.32 0.4% 316.6 2.0% 97.5 3.5% 175.04 0.4% Fixed assets Property and equipment % growth Intangible assets % growth Other assets % of total assets 276.6 10.2 94.1 Back to the list of contents Operating model - continued Deposits Loans and advances to customers, net Allowance for loan losses % of loans and advances to customers Loans to customers, gross Deposits from customers Ratio of loans / deposits Deposits from banks % of total assets Loans from banks and other financial institutions % of total assets Other subordinated liabilities % of total assets Cash, deposits from customers Cash and cash equivalents % of deposits from customers Interest income Loans and advances to customers % of loans and advances to customers Current accounts held with banks % of cash and cash equivalents Available for sale securities % of investment securities Placements with banks % of placements with banks Total interest income Appendix 11,542.3 (692) 6.0% 12,234.0 15,059.2 81.2% 259.1 1.3% 12,264.8 (1,278) 10.4% 13,542.7 17,324.4 78.2% 333.2 1.5% 14,035.3 (1,659) 11.8% 15,694.6 20,280.2 77.4% 251.2 1.0% 15,457.5 (2,111) 13.7% 17,568.5 23,232.9 75.6% 46.0 0.2% 16,667.2 (2,493) 15.0% 19,160.3 25,803.9 74.3% 419.0 1.3% 18,106.4 (2,587) 12.5% 20,693.1 27,590.8 75% 350.7 1.0% 19,666.7 (2,682) 12.0% 22,348.5 29,798.0 75% 382.3 1.0% 21,282.5 (2,630) 11.0% 23,912.9 31,883.9 75% 407.7 1.0% 22,920.5 (2,547) 10.0% 25,467.3 33,956.4 75% 437.6 1.0% 24,295.8 (2,700) 10.0% 26,995.3 35,993.7 75% 466.6 1.0% 1,865.1 1,401.4 2,469.0 2,969.3 2,067.3 2,981.2 3,249.3 3,057.9 3,063.1 3,033.1 9.6% 254.9 1.3% 6.5% 257.6 1.2% 9.6% 260.1 1.0% 10.0% 288.8 1.0% 6.4% 337.9 1.1% 8.5% 350.7 1.0% 8.5% 382.3 1.0% 7.5% 407.7 1.0% 7.0% 437.6 1.0% 6.5% 466.6 1.0% 3,183.3 21.1% 3,696.8 21.3% 4,546.5 22.4% 5,576.3 24.0% 4,102.3 15.9% 4,138.6 15.0% 4,469.7 15.0% 4,144.9 13.0% 4,074.8 12.0% 4,319.2 12.0% 1,638.0 14.2% 98.7 3.1% 274.9 10.4% 49.3 3.2% 2,060.9 1,537.2 12.5% 44.4 1.2% 254.4 6.6% 26.7 2.2% 1,862.7 1,436.3 10.2% 39.4 0.9% 294.0 5.0% 34.6 4.5% 1,804.2 1,425.7 9.2% 36.8 0.7% 520.1 7.9% 29.8 2.2% 2,012.4 1,498.5 9.0% 33.1 0.8% 534.5 6.0% 27.6 1.6% 2,093.7 1,502.8 8.3% 27.3 0.7% 565.9 5.5% 34.6 1.8% 2,130.7 1,514.3 7.7% 29.1 0.7% 599.3 5.2% 34.7 1.8% 2,177.4 1,553.6 7.3% 24.9 0.6% 665.2 5.2% 34.4 1.8% 2,278.1 1,604.4 7.0% 24.4 0.6% 703.6 5.0% 34.7 1.7% 2,367.1 1,652.1 6.8% 21.6 0.5% 729.5 4.8% 37.2 1.7% 2,440.4 Back to the list of contents Operating model - continued Interest expense Deposits from customers % of deposits from customer Loans from banks and other financial institutions % of loans from banks and other financial institutions Available for sale securities % of investment securities Deposits from banks % of deposits from banks Total interest expense Net fee and commission income Fee and commission income % growth Fee and commission expense % growth Net trading income % growth Other operating income % growth Operating expenses Net impairment losses on assets % of loans and advances to customers Personnel expenses % growth Depreciation and amortization % of fixed assets Other operating expenses % growth Source: Team estimates Appendix 1,119.1 7.4% 216.1 10.2% 0.0 0.0% 6.3 2.4% 1,341.5 816.4 4.7% 70.7 4.3% 0.0 0.0% 3.8 1.1% 890.9 834.7 4.1% 70.0 2.6% 22.4 0.4% 5.3 2.1% 932.4 916.7 3.9% 113.3 3.5% 33.6 0.5% 11.0 23.9% 1,074.5 812.5 3.1% 82.8 3.4% 0.0 0.0% 4.4 1.1% 899.739 786.3 2.9% 83.3 2.5% 0.0 0.0% 5.3 1.5% 874.9 774.7 2.6% 72.6 2.0% 0.0 0.0% 5.4 1.4% 852.7 765.2 2.4% 62.4 1.8% 0.0 0.0% 5.3 1.3% 832.9 747.0 2.2% 56.0 1.6% 0.0 0.0% 5.3 1.2% 808.3 719.9 2.0% 49.0 1.4% 0.0 0.0% 5.1 1.1% 774.0 396.6 401.2 441.0 487.7 435.1 487.3 545.8 605.9 666.4 726.4 1.1% 9.9% 10.6% (10.8%) 12.0% 12.0% 11.0% 10.0% 9.0% 44.2 51.7 63.0 73.4 80.0 87.2 94.2 100.8 106.8 1.5% 16.9% 21.9% 16.5% 9.0% 9.0% 8.0% 7.0% 6.0% 119.0 117.1 131.2 128.8 137.9 148.9 161.5 175.3 191.0 (14.3%) (1.6%) 12.0% (1.8%) 7.0% 8.0% 8.5% 8.5% 9.0% 18.5 24.4 42.8 39.2 41.1 43.2 45.3 47.6 50.0 (38.1%) 32.1% 75.3% (8.5%) 5.0% 5.0% 5.0% 5.0% 5.0% 415.8 652.1 380.8 379.4 407.4 417.2 427.0 436.8 446.6 456.4 3.6% 5.3% 2.7% 2.5% 2.4% 2.4% 2.4% 2.3% 2.3% 2.2% 326.1 350.9 7.6% 54.2 17.6% 280.0 5.0% 368.9 5.1% 49.3 14.7% 325.4 16.2% 409.6 11.0% 46.4 12.5% 360.3 10.7% 441.3 7.7% 56.8 15.3% 375.1 4.1% 463.4 5.0% 45.6 12.0% 390.1 4.0% 481.9 4.0% 42.7 11.0% 403.8 3.5% 43.6 138.9 29.8 61.2 21.3% 266.6 498.8 513.7 529.2 3.5% 3.0% 3.0% 39.5 36.4 37.3 10.0% 9.0% 9.0% 415.9 426.3 436.9 3.0% 2.5% 2.5% Back to the list of contents Residual income model Profit for the year Total equity Residual Income ROE Appendix FY 09 A 148.2 1,829.9 Valuation 31-12-2014 (RON million) FY 09 A Residual income Continuing value Discount factor Present value of RI and CV Sum of PV of Residual Income Total equity Value of equity Number of shares (millions) TLV value / share Source: Team estimates FY 10 A 108.7 2,072.0 (160.0) 5.57% FY 11 A 228.5 2,319.8 (73.9) 10.41% FY 12 A 320.4 2,694.9 (24.9) 12.78% FY 13 A 374.9 3,082.6 (23.0) 12.98% FY 14 F 441.7 3,524.3 (13.3) 13.37% FY 15 F 520.8 4,045.1 (0.5) 13.76% FY 16 F 649.1 4,694.3 39.8 14.86% FY 17 F 776.4 5,470.7 49.9 15.28% FY 18 F 896.4 6,367.1 17.8 15.15% FY 10 A FY 11 A FY 12 A FY 13 A FY 14 F FY 15 F (0.5) FY 16 F 39.8 FY 17 F 49.9 0.879 (0.4) 0.771 30.7 0.675 33.7 FY 18 F 17.8 177.4 0.588 114.7 178.7 3,524.3 3,703.0 2,206.44 1.68 Back to the list of contents Justified P/BV model Total equity Justified PB Number of shares (millions) TLV value / share Appendix FY 18 F 6,367.1 3,790.9 2,206.4 1.72 Cost of equity FY 15 F 13.77% FY 16 F 13.94% FY 17 F 14.29% Discount rate 0.879 0.771 0.675 CV assumptions ROE Long-term growth rate 13.5% 3.0% FY 18 F Perpetuity 14.84% 13.36% 0.588 Source: team estimates Back to the list of contents Cost of equity YTM Romanian government bond YTM 30yrs German government bonds Long-term inflation differential Risk-free rate Equity risk premium Adjusted β Cost of equity Appendix FY 15 F 3.67% FY 16 F 3.84% FY 17 F 4.19% FY 18 F 4.74% Perpetuit y 2.53% 0.73% 3.26% 9.13% 1.11 13.77% Total ERP Country risk premium Equity risk premium 9.13% 3.38% 5.75% Raw β Bloomberg adjusted β 1.16 1.11 9.13% 1.11 13.94% 9.13% 1.11 14.29% Differential inflation CPI Romania CPI Germany 9.13% 1.11 14.84% 9.13% 1.11 13.36% Long-term target 2.50% 1.77% Source: team estimates Back to the list of contents Appendix BT loans and Advances to customers In RON thousands Individuals Trading Manufacturing Construction Services Transport Real Estate Agriculture Free Lancers Chemical Industry Energy Industry Financial Institutions Telecommunication Mining Industry Fishing Industry Government Bodies Others Total loans and Advances to customers before impairment allowance Less allowances for impairment losses on loans Allowances for impairment losses on loans as a % of Total loans and Advances to customers before impairment allowance Total loans and advance to customers, net of impairment allowance Source: NBR 31-Dec-12 6,325,313 2,882,807 2,507,113 990,287 941,908 702,256 526,755 729,524 382,202 315,305 322,277 312,254 125,484 170,697 7,255 31,030 296,018 17,568,485 (2,111,004) 31-Dec-11 5,819,493 2,712,410 2,196,027 838,050 829,219 632,995 474,057 560,453 340,535 322,707 249,034 197,103 108,477 142,517 4,607 27,560 239,398 15,694,642 (1,659,352) 12.02% 10.57% 15,457,481 14,035,290 % increase 8.69% 6.28% 14.17% 18.17% 13.59% 10.94% 11.12% 30.17% 12.24% -2.29% 29.41% 58.42% 15.68% 19.77% 57.48% 12.59% 23.65% 11.94% 27.22% 10.13% Back to the list of contents Advantages of Flexcube core-banking system For the customer Appendix For the bank Client enrollment is just a matter of signing the form Process automation and optimization Customer electronic files (ID scan included) Account attachments are automatically posted Customer info update for all agencies/branches Centralization of IT infrastructure 24/7 available e-channels: a key ingredient for selfbanking Account statements available in all branches and Internet Banking Reconciliation and automatic transfer of bill payments End of day/month processes considerably faster Source: Company data Back to the list of contents -2 Estonia Romania Germany Bulgaria Sweden Austria Malta Slovakia Greece Portugal Slovenia Italy Cyprus Croatia Hungary Spain Netherlands Finland Czech Republic Denmark Luxembourg Belgium France Ireland United Kingdom -6 Poland Lithuania -4 Latvia Real GDP growth rate of EU countries Appendix 6 4 2 0 -8 Source: Eurostat Back to the list of contents Appendix GDP per capita of Romania 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Eurostat Back to the list of contents Appendix GDP per capita of EU countries Country Serbia Bulgaria Romania Hungary Poland Croatia Latvia Lithuania Estonia Slovakia Czech Republic Portugal Malta Greece Slovenia Cyprus Spain European Union (28 countries) European Union (27 countries) Italy Euro area (18 countries) Euro area (EA11-2000, EA12-2006, EA13-2007, EA15-2008, EA16-2010, EA17-2013, EA18) Euro area (17 countries) Euro area (12 countries) European Union (15 countries) United Kingdom France Germany (until 1990 former territory of the FRG) Iceland Belgium Finland Ireland Netherlands Austria Sweden Denmark Switzerland Norway Luxembourg Source: Eurostat 2004 2,500 2,600 2,800 8,100 5,300 7,400 4,900 5,400 7,200 6,300 9,000 14,200 11,600 16,700 13,600 17,300 19,700 21,600 21,700 24,000 24,300 24,900 24,400 24,900 26,000 29,900 26,500 26,600 36,500 28,000 29,100 36,900 30,200 28,700 32,400 36,500 40,400 45,600 59,900 2005 2,700 3,000 3,700 8,800 6,400 8,100 5,800 6,300 8,300 7,100 10,200 14,600 12,200 17,400 14,400 18,400 21,000 22,400 22,500 24,500 25,000 25,600 25,200 25,600 26,800 31,000 27,300 27,000 44,300 29,000 30,000 39,200 31,500 29,800 33,000 38,300 41,300 52,900 65,000 2006 3,100 3,400 4,500 8,900 7,100 8,900 7,200 7,400 10,000 8,300 11,500 15,200 12,800 18,700 15,500 19,500 22,400 23,600 23,700 25,300 26,200 26,800 26,300 26,800 28,100 32,700 28,400 28,100 43,800 30,200 31,500 41,600 33,100 31,300 35,000 40,200 42,700 58,100 71,700 2007 3,900 4,000 5,800 9,900 8,200 9,800 9,600 8,900 12,000 10,200 12,800 16,000 13,700 19,900 17,100 20,700 23,500 24,900 25,100 26,200 27,500 28,000 27,600 28,000 29,400 34,200 29,600 29,500 48,000 31,600 34,000 43,100 34,900 33,000 36,900 41,700 43,200 61,100 78,000 2008 4,400 4,600 6,500 10,500 9,500 10,700 10,500 10,100 12,100 11,900 14,800 16,200 14,600 20,800 18,400 21,800 23,900 25,000 25,100 26,300 28,000 28,400 28,100 28,500 29,100 29,900 30,100 30,100 32,200 32,400 34,900 40,100 36,200 34,000 36,100 42,800 46,400 65,300 76,400 2009 4,000 4,600 5,500 9,100 8,100 10,100 8,600 8,400 10,400 11,600 13,600 15,900 14,400 20,500 17,300 20,900 22,800 23,400 23,500 25,200 26,900 27,100 27,000 27,400 27,400 25,700 29,300 29,000 27,200 31,600 32,300 35,800 34,700 33,100 31,500 40,500 47,100 56,500 71,400 2010 3,800 4,800 5,800 9,600 9,200 10,100 8,600 8,900 10,700 12,100 14,300 16,300 15,400 19,600 17,300 21,000 22,700 24,400 24,500 25,700 27,500 27,700 27,700 28,100 28,500 27,800 29,900 30,500 29,800 32,700 33,300 34,700 35,300 34,100 37,300 42,600 53,300 65,000 77,400 2011 4,400 5,200 6,200 9,900 9,600 10,400 9,800 10,200 12,100 12,800 14,800 16,100 16,000 18,500 17,600 21,100 22,700 25,100 25,200 26,000 28,200 28,400 28,400 28,800 29,200 28,200 30,700 31,900 31,600 33,600 35,000 35,500 35,900 35,700 40,800 43,200 60,300 71,300 80,300 2012 4,100 5,400 6,200 9,800 9,900 10,300 10,900 11,000 13,000 13,200 14,600 15,600 16,300 17,200 17,200 20,700 22,300 25,500 25,600 25,700 28,400 28,500 28,500 28,900 29,700 30,300 31,100 32,600 32,900 34,000 35,500 35,700 35,800 36,400 42,800 43,900 61,900 77,500 80,700 Back to the list of contents Appendix Unemployment rate of EU countries Country Austria Luxembourg Netherlands Germany Malta Czech Republic Romania Denmark Belgium Finland United Kingdom Sweden Slovenia Poland Estonia France Italy Hungary Cyprus Bulgaria Lithuania Slovakia Ireland Latvia Croatia Portugal Greece Spain 2012 4.3 5.1 5.3 5.5 6.4 7 7 7.5 7.6 7.7 7.9 8 8.9 10.1 10.2 10.2 10.7 10.9 11.9 12.3 13.4 14 14.7 15 15.9 15.9 24.3 25 2013 : 5.9 6.7 5.3 6.5 7 7.2 7 8.4 8.2 : 8 10.2 10.4 : 10.8 : : 16 12.9 11.8 14.2 13.1 : 17.6 16.5 : 26.4 Labor force demand Period Vacancies Hiring thousand; monthly averages 2011Q1 39.2 30.8 2011Q2 42.4 31.2 2011Q3 38.3 30.4 2011Q4 36.7 26.5 2012Q1 36.9 26.4 2012Q2 37.9 26.3 2012Q3 37.8 26.6 2012Q4 38.6 26.8 2013Q1 39.0 26.5 2013Q2 39.6 26.4 2013Q3 41.5 27.0 2013 Oct.-Nov 43.0 26.5 Source: NIS, NBR : Missing data Source: Eurostat Back to the list of contents Jan.09 Mar.09 May.09 Jul.09 Sep.09 Nov.09 Jan.10 Mar.10 May.10 Jul.10 Sep.10 Nov.10 Jan.11 Mar.11 May.11 Jul.11 Sep.11 Nov.11 Jan.12 Mar.12 May.12 Jul.12 Sep.12 Nov.12 Jan.13 Mar.13 May.13 Jul.13 Sep.13 Nov.13 USD/RON and EUR/RON exchange rate dynamics Source: NBR USD/RON Appendix 4.7500 4.5000 4.2500 4.0000 3.7500 3.5000 3.2500 3.0000 2.7500 2.5000 EUR/RON Back to the list of contents Dec/2001 Apr/2002 Aug/2002 Dec/2002 Apr/2003 Aug/2003 Dec/2003 Apr/2004 Aug/2004 Dec/2004 Apr/2005 Aug/2005 Dec/2005 Apr/2006 Aug/2006 Dec/2006 Apr/2007 Aug/2007 Dec/2007 Apr/2008 Aug/2008 Dec/2008 Apr/2009 Aug/2009 Dec/2009 Apr/2010 Aug/2010 Dec/2010 Apr/2011 Aug/2011 Dec/2011 Apr/2012 Aug/2012 Dec/2012 Apr/2013 Aug/2013 Private sector loans in domestic and foreign currencies Source: NBR Appendix 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 loans to private sector in domestic currency percent loans to private sector in foreign currency Back to the list of contents Appendix Investment and Savings Rates, Current account deficit of Romania Period 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 Investment rate Saving rate 25.5 26.1 26.8 26.9 27.0 27.1 27.4 27.0 26.4 25.0 24.5 Quarters' average (%) 21.8 22.1 22.5 22.4 22.1 22.7 22.9 22.6 22.8 23.2 23.3 Current account deficit/GDP 3.7 4.0 4.3 4.5 4.8 4.4 4.5 4.4 3.6 1.8 1.2 Domestic investment rate is the ratio of gross capital formation to GDP. Domestic saving rate is the difference between national gross disposable income and final consumption as a share of GDP. Source: NBR, NIS Back to the list of contents Appendix Money aggregates M3 (Broad money) (RON thousand) M1 (Narrow money) 300,000,000.0 80,000,000.0 70,000,000.0 250,000,000.0 60,000,000.0 200,000,000.0 50,000,000.0 150,000,000.0 40,000,000.0 30,000,000.0 100,000,000.0 20,000,000.0 50,000,000.0 10,000,000.0 M1 (Narrow money) currency in circulation (RON thousand) Sep. 2013 May. 2013 Jan. 2013 Sep. 2012 May. 2012 Jan. 2012 Sep. 2011 May. 2011 Jan. 2011 Sep. 2010 May. 2010 Jan. 2010 Sep. 2009 May. 2009 Jan. 2009 Sep. 2008 May. 2008 Jan. 2008 Sep. 2007 May. 2007 0.0 Jan. 2007 Sep. 2013 Apr. 2013 Nov. 2012 Jun. 2012 Jan. 2012 Aug. 2011 Mar. 2011 Oct. 2010 May. 2010 Dec. 2009 Jul. 2009 Feb. 2009 Sep. 2008 Apr. 2008 Nov. 2007 Jun. 2007 Jan. 2007 0.0 M1 (Narrow money) overnight deposits (RON thousand) Source: NBR Back to the list of contents Appendix Number of banks and population of EU countries Country Population Nr of banks Romania Greece Bulgaria Slovakia Czech Republic United Kingdom Spain Croatia Belgium France Slovenia Italy Portugal Netherlands Sweden Poland Hungary Germany Estonia Denmark Lithuania Latvia Finland Malta Austria Cyprus Ireland Luxemburg 20,121,641 10,815,197 7,364,570 5,410,836 10,513,209 63,181,775 46,704,314 4,284,889 11,099,554 66,616,416 2,055,496 59,685,227 10,487,289 16,819,595 9,633,490 38,186,860 9,908,798 80,585,700 1,311,870 5,602,536 2,955,986 2,005,200 5,454,444 452,515 8,414,638 1,117,000 4,593,100 537,853 39 40 30 28 56 358 290 35 103 623 23 694 151 253 168 691 189 1842 31 161 91 63 303 27 731 101 458 147 Banks/100,000 citizens 0.193821 0.369850 0.407356 0.517480 0.532663 0.566619 0.620928 0.816824 0.927965 0.935205 1.118951 1.162767 1.439838 1.504198 1.743916 1.809523 1.907396 2.285765 2.363039 2.873699 3.078499 3.141831 5.555103 5.966653 8.687242 9.042077 9.971479 27.330888 Number of branches in EU countries Country Branches per 100,000 inhabitants Austria Bulgaria Czech Republic Estonia France Germany Greece Italy Latvia Lithuania The Netherlands Poland Portugal Slovakia Slovenia Spain Hungary EU-27 average Romania 2011 Romania 2012 53 52 20 13 59 44 32 53 20 23 15 39 59 20 34 83 33 43 30 28 Romania 2013 Q2 27 Source: European Banking Federation Back to the list of contents branches Jun/2013 Mar/2013 Dec/2012 Sep/2012 Jun/2012 Mar/2012 Dec/2011 Sep/2011 Jun/2011 Mar/2011 Dec/2010 Sep/2010 Jun/2010 Mar/2010 Dec/2009 Sep/2009 Jun/2009 Mar/2009 Dec/2008 Sep/2008 Jun/2008 Mar/2008 Dec/2007 Number of branches in Romania Appendix 6,800 74 6,600 72 6,400 70 6,200 68 6,000 66 5,800 64 62 5,600 60 5,400 58 5,200 56 5,000 54 4,800 52 thou. employees Source: NBR Back to the list of contents Concentration of the Romanian banking system Assets of top five banks as a share in total assets (%) Period 2008 2009 2010 2011 2012 Aug/2013 54.3 52.4 52.7 54.6 54.7 54.0 Appendix Loans of top five banks as a share in total loans (%) Deposits of top five banks as a share in total deposits (%) 53.3 53.4 51.5 52.3 54.4 55.9 54.0 52.0 55.4 58.0 54.9 53.5 60.0 58.0 56.0 54.0 52.0 50.0 48.0 2008 2009 2010 2011 2012 Assets of top five banks as a share in total assets percent Aug/2013 Loans of top five banks as a share in total loans Deposits of top five banks as a share in total deposits Source: NBR, ECB (Statistical Data Warehouse) Back to the list of contents Herfindahl-Hirschmann index values for EU countries Market share of top five banks (%) HH index (point) Austria 36 395 Bulgaria 50 738 Czech Republic 61 999 Estonia 90 2,493 France 45 545 Germany 33 307 Greece 79 1,487 Italy 40 410 Latvia 64 1,027 Lithuania 84 1,749 The Netherlands 82 2,026 Poland 44 568 Portugal 71 1,191 Slovakia 72 1,221 Slovenia 58 1,115 Spain 51 654 Hungary 54 806 EU-27 average 59 1,066 Romania* 54 834 Country Appendix 3,000 2,500 2,000 1,500 1,000 500 0 Source: ECB (Statistical Data Warehouse) Back to the list of contents Appendix Credit institutions and branches with foreign capital in EU countries Country Assets of foreign-owned credit institutions as a share in total assets. (%) Credit institutions (branches and subsidiaries) with foreign capital. (Number) 96.40 94.43 92.68 90.80 88.36 73.58 61.93 61.32 58.13 29.48 27.16 22.49 15.42 10.17 8.66 7.44 4.09 3.33 13 12 38 36 26 22 56 16 27 10 64 35 27 62 102 128 145 204 Estonia Lithuania Czech Rep. Romania Slovakia Bulgaria Poland Latvia Hungary Slovenia Austria Portugal Greece The Netherlands Italy Spain Germany France Aug. 2013 Source: ECB (Statistical Data Warehouse) Back to the list of contents Appendix Liability structure of credit institutions operating in Romania Dec. 2008 Dec. 2009 Dec. 2010 Dec. 2008 Dec. 2011 Jun. 2012 Aug. 2012 Dec. 2012 Mar. 2013 Aug. 2013 69.3* 73.6 73.2 73.5 75.2 76.1 76.8 77.8 78.0 78.6 -Interbank deposits 2.1 5.4 3.4 3.4 5.0 4.7 4.6 2.5 2.2 1.9 -Government sector deposits 3.1 2.1 1.7 1.4 1.5 1.4 1.3 1.3 1.3 1.4 -Corporate deposits 20.2 19.3 19.0 19.0 17.7 18.3 18.5 18.9 19.1 19.5 -Houshold deposits 24.4 26.7 27.0 28.7 29.2 29.5 30.2 31.7 31.6 31.8 -Capital and reserves 10.6 12.0 14.2 16.2 16.9 17.3 18.0 18.8 19.3 19.7 -Other liabilities 8.9 8.1 7.9 4.8 4.9 4.9 4.2 4.6 4.4 4.3 -Foreign liabilities 30.7 26.4 26.8 26.5 24.8 23.9 23.2 22.2 22.0 21.4 Liabilities Domestic Liabilities, of which *-percent of total liabilities Source: NBR Back to the list of contents Appendix Financial intermediation, international comparison Austria 315.50 Loans/GDP (%) 112.44 Bulgaria 114.45 70.84 69.07 Czech Republic 125.86 55.35 75.04 Estonia 115.89 78.83 58.83 France 397.38 105.99 95.35 Germany 311.12 98.09 118.86 Greece 228.23 118.30 86.66 Italy 269.52 112.19 95.70 Latvia 128.49 65.59 37.74 Lithuania 74.25 48.99 38.95 The Netherlands 415.79 177.98 149.38 Poland 93.05 53.72 52.83 Portugal 337.13 152.32 127.45 Slovakia 83.54 49.54 56.81 Slovenia 143.23 84.59 58.93 Spain 341.21 156.76 145.02 Hungary 114.26 53.85 48.63 EU-27 351.72 120.03 113.43 Romania 68.93 38.44 33.58 Country Assets/GDP (%) Deposits/GDP (%) 104.66 The Netherlands Assets/GDP Loans/GDP Deposits/GDP Max Max Max 415.79 The Netherlands Min Romania EU-27 68.93 177.98 The Netherlands Min Romania 38.44 149.38 Min Romania 33.58 Median Median Median 143.23 84.59 75.04 351.72 120.03 113.43 Source: NBR, ECB (Statistical Data Warehouse) Back to the list of contents Appendix Credit to households; lending for house purchase; RON 140,000,000.0 4,000,000.0 3,500,000.0 120,000,000.0 3,000,000.0 100,000,000.0 2,500,000.0 80,000,000.0 2,000,000.0 1,500,000.0 60,000,000.0 1,000,000.0 40,000,000.0 500,000.0 Credit to households (RON thousand) Sep. 2013 May. 2013 Jan. 2013 Sep. 2012 May. 2012 Jan. 2012 Sep. 2011 May. 2011 Jan. 2011 Sep. 2010 May. 2010 Jan. 2010 Sep. 2009 May. 2009 Jan. 2009 Sep. 2008 May. 2008 Jan. 2008 Sep. 2007 Ron Thousands May. 2007 Sep. 2013 Apr. 2013 Nov. 2012 Jun. 2012 Jan. 2012 Aug. 2011 Mar. 2011 Oct. 2010 May. 2010 Dec. 2009 Jul. 2009 Feb. 2009 Sep. 2008 Apr. 2008 Nov. 2007 Jun. 2007 Jan. 2007 Ron Thousands Jan. 2007 20,000,000.0 0.0 Deposit from households Back to the list of contents Bank distribution in terms of solvency ratio 8 - 10% 10 - 12% Appendix 12 - 16% 16 - 20% 20 - 24% 24 - 30% above 30% Period Number of banks Dec/2008 2 6 9 4 2 3 6 Dec/2009 0 2 14 7 2 2 4 Dec/2010 0 2 16 7 0 3 4 Dec/2011 2 3 8 9 5 1 4 Jun/2012 1 4 10 7 6 0 4 Dec/2012 1 2 15 4 4 2 3 Mar/2013 1 4 15 6 0 1 4 Jun/2013 1 5 14 5 0 1 5 Source: NBR Back to the list of contents May/2013 Mar/2013 Jan/2013 Nov/2012 Sep/2012 Jul/2012 May/2012 Mar/2012 Jan/2012 Nov/2011 Sep/2011 Jul/2011 May/2011 Mar/2011 Jan/2011 Nov/2010 Sep/2010 Jul/2010 May/2010 Mar/2010 Jan/2010 Nov/2009 Sep/2009 Jul/2009 May/2009 Mar/2009 Jan/2009 Nov/2008 Sep/2008 Jul/2008 May/2008 Mar/2008 NPL ratio of credit institutions (%) Appendix 25.00 20.00 15.00 10.00 5.00 0.00 Source: NBR Back to the list of contents Appendix Distribution of credit institutions’ market share based on ROA ROA<0 0≤ROA<1 1≤ROA<2 2≤<=ROA<3 ROA≥3 2008 9.9 22.8 32.2 6.7 28.3 2009 21.0 47.7 30.1 0.1 1.0 2010 21.9 53.6 21.7 2.8 0.0 2011 44.7 28.8 24.8 1.6 0.0 2012 59.8 18.2 19.8 2.2 0.0 Period Source: NBR Back to the list of contents 130,000 14,000,000 120,000 100,000 90,000 12,500,000 80,000 12,000,000 70,000 60,000 Jul. 2013 14,500,000 Mar. 2013 140,000 Nov. 2012 POS terminals (units) Jul. 2012 6,000 Mar. 2012 6,000,000 Nov. 2011 7,000 Jul. 2011 7,000,000 Mar. 2011 8,000 Nov. 2010 8,000,000 Jul. 2010 9,000 Sep. 2013 Jun. 2013 Mar. 2013 Dec. 2012 Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Sep. 2011 Jun. 2011 Mar. 2011 Dec. 2010 Sep. 2010 Jun. 2010 Mar. 2010 Dec. 2009 Sep. 2009 Jun. 2009 Mar. 2009 Dec. 2008 Sep. 2008 Jun. 2008 Mar. 2008 Jul. 2013 Mar. 2013 Nov. 2012 Jul. 2012 Mar. 2012 Nov. 2011 Jul. 2011 Mar. 2011 Nov. 2010 Jul. 2010 Mar. 2010 Nov. 2009 Jul. 2009 Mar. 2009 Nov. 2008 Jul. 2008 Active cards (units) Mar. 2010 9,000,000 Nov. 2009 10,000 Jul. 2009 10,000,000 Mar. 2009 11,000 Nov. 2008 11,000,000 Jul. 2008 12,000 Mar. 2008 12,000,000 Mar. 2008 Jul. 2013 Mar. 2013 Nov. 2012 Jul. 2012 Mar. 2012 Nov. 2011 Jul. 2011 Mar. 2011 Nov. 2010 Jul. 2010 Mar. 2010 Nov. 2009 Jul. 2009 Mar. 2009 Nov. 2008 Jul. 2008 Mar. 2008 Romanian banking sector everyday transactions activity Appendix ATMs (units) Cards in circulation (units) 110,000 13,500,000 13,000,000 11,500,000 Back to the list of contents Source: NBR Appendix Porter Analysis Threat of Entry Forces 1. 2. Threat of Entry 3 0 No interaction Bargaining power of suppliers 3 1 Insignificant Bargaining power of customers 2 2 Low Threat of Substitute Products 2 3 Average Competition in the industry 4 4 High 5 Very high Capital Requirements Product differentiation for overcoming customer loyalty 3. NBR supervision 4. Existence of economies of scale Bargaining power of suppliers 1. Specialized labor force required 2. Limited number of input sources 3. Strong position of labor unions Final rating 2.8 Bargaining power of customers 1. Undifferentiated product 2. Price sensitivity of customers 3. Large volume customers Threat of Substitute Products 1. No perfect substitute for loans 2. Substandard product 3. Government programs existence Competition in the industry 1. Relatively large competitors 2. Law product differentiation. 3. Fixed costs are high 4. The rivals are diverse in strategies 5. High exit barriers Scale of interaction Points Threat of Entry Competition in the industry Threat of Substitute Products Bargaining power of suppliers Bargaining power of customers Back to the list of contents Appendix BT and BRD equity comparison 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 1/4/13 2/4/13 3/4/13 4/4/13 5/4/13 6/4/13 TLV RO equity 7/4/13 8/4/13 9/4/13 10/4/13 11/4/13 12/4/13 1/4/14 2/4/14 BRD (Reference date 01.03.2013 ) Source: Bloomberg Back to the list of contents Appendix BET, BET-C, CECEBNK, SX7E Index comparison with BT 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 BET-C Index (Reference date 01.03.2013 ) TLV RO equity SX7E Index (Reference date 01.03.2013) CECEBNK Index (Reference date 01.03.2013) Jan-14 Feb-14 BET Index ( Referrence date 01.03.2013) Source: Bloomberg Back to the list of contents BET (RO) WIG (PL) BUX (HU) Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 BET, WIG, BUX and FTASE Index comparison Appendix 1.4 1.2 1 0.8 0.6 0.4 0.2 0 FTASE (GR) Source: Bloomberg Back to the list of contents Appendix Regression Analysis We have conducted simple regression analysis between BT returns and BET index returns in order to identify the value Beta. Dependent Variable: TLV_CLOSE_PRICE_RETURN Method: Least Squares Sample: 1 271 Included observations: 271 Variable BET_INDEXRETURN Coefficient 1.166806 STd. Error 0.091560 t-Statistics 12.74367 Prob. 0.0000 R-squared 0.372131 Mean dependent var. 0.104347 Adjusted R-squared 0.372131 S.D dependent var. 1.406576 S.E of regression 1.114546 Akaike info criterion 3.058454 Sum squared residuals 335.3974 Schwarz criterion 3.071746 Log likelihood -413.4206 Hannan-Quinn criterion 3.063791 Durbin-Watson statistics 1.918392 Back to the list of contents Appendix Objectives and results of BT (2013) Objectives of BT for 2013 Results (based on Dec 2013) Total assets: 8% increase + 8.4% Total credits: 8% increase + 7.83% Total resources from clients: 10% increase + 11.07 % Credits / Deposits: 74.63% 74.25% Cost / Income: maximum 52% 48.7% Source: Company data Back to the list of contents Appendix Corporate Governance OECD Criteria BT’s score for each criteria BT’s score after applying weights Ensuring the Basis for an Effective Corporate Governance Framework 10 1 The Rights of Shareholders and Key Ownership Functions 9 1.8 The Equitable Treatment of Shareholders 8 1.6 The Role of Stakeholders in Corporate Governance 10 1 Disclosure and Transparency 9 1.8 10% 20% 20% 20% 20% 10% The Responsibilities of the Board 9 1.8 SUM 9 Source: Team estimates Back to the list of contents 1.694-1.695 1.693-1.694 1.691-1.692 1.689-1.69 1.688-1.689 1.687-1.688 1.686-1.687 1.685-1.686 1.684-1.685 1.683-1.684 1.682-1.683 1.681-1.682 1.68-1.681 1.679-1.68 1.678-1.679 1.677-1.678 1.676-1.677 1.675-1.676 1.674-1.675 1.673-1.674 1.672-1.673 1.671-1.672 1.67-1.671 1.669-1.67 1.668-1.669 1.667-1.668 1.666-1.667 1.665-1.666 1.664-1.665 1.663-1.664 1.662-1.663 1.661-1.662 1.66-1.661 1.659-1.66 1.658-1.659 1.657-1.658 1.656-1.657 1.655-1.656 1.654-1.655 Monte Carlo Simulation for Residual Income model based on long-term growth rate changes Appendix 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Source: Team estimates Back to the list of contents