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AMERIABANK CJSC 2008 ANNUAL REPORT Investor Presentation March 2009 TABLE OF CONTENTS HIGHLIGHTS BANK BUSINESS OVERVIEW ENVIRONMENT TARGET MARKETS ANALYSIS OF THE MARKET QUANTITATIVE RESULTS 2 Highlights of 2008 3 HIGHLIGHTS (1 of 9) Development Goals Number 1 in Investment Banking Leadership in Corporate Banking Among Top 5 by assets Full range of investment and corporate bank services Becoming the most desirable Employer Toughening the liquidity and credit risk management practices to battle the global economic crisis Continuing attempts to increase the capital /attracting IFIs/ Increasing cost management efficiency 4 HIGHLIGHTS (2 of 9) GOALS OF THE YEAR 2008 Development of new product range & business processes Professional staff recruitment Bank structure optimization Establishment of two branches, exploitation of 20 ATMs Relocation to a new building 5 HIGHLIGHTS (3 of 9) GOALS FOR THE YEAR 2008(ctd.) Switching to AS-bank 4.0 Introduction of Terrasoft - CRM Promotion of a new brand of the Bank Determination & attraction of target clients Working on obtaining of ISO certificate Participation in Visa systems & MasterCard 6 HIGHLIGHTS (4 of 9) MAJOR ACHIEVEMENTS OF THE YEAR 2008 1st by Share Capital (AMD 18,2 bln, or USD 59,3 mln) 4th by Total Capital (AMD 20,3 bln, or USD 66,1 mln) 8th by Total Assets (AMD 49.1 bln, or USD 160,3 mln) AmEx agent, VISA & MasterCard principal member 1st branch launching in Stepanakert 7 HIGHLIGHTS (5 of 9) MAJOR ACHIEVEMENTS OF THE YEAR 2008 (ctd) 1st Bank-backed M&A transaction in Armenia 1st Bank to launch financial lease & 1st by volume and number of leasing operations 1st Bank to pursue CRM in the Banking Industry of RA 3rd by public awareness indicator 70 internal business processes endorsed 92 procedures, policies, regulations & instructions adopted 8 HIGHLIGHTS (6 of 9) , P&L and Profitability Ratios 2008* 2007* thous. USD thous. USD Growth, Y-O-Y, (times) Net Interest Income 6,637 1,276 5 Net Non-Interest Income 2,210 866 3 Total Operating Income (Revenue) 8,846 2,142 4 Recurring Operating Costs 4,376 1,374 3 Net Income 2,511 529 5 1.50% ROAA, Annualized 2.6% ROAE, Annualized 6.9% 4.70% *USD/AMD currency rate is calculated as of the last day of each period ** Growth numbers are rounded 9 HIGHLIGHTS (7 of 9) , Balance Sheet Growth, Y-O-Y, (times)** 2008 (as of 31.12.2008) 2007 (as of 31.12.2007) thous. USD thous. USD Net Loans 101,541 8,941 11 Total Assets 160,386 44,233 4 75,964 28,977 2.6 93,999 33,015 3 66,387 11,218 6 Total Deposits Total Liabilities Total Capital *USD/AMD currency rate is calculated as of the last day of each period ** Growth numbers are rounded 10 HIGHLIGHTS (8 of 9) Ameriabank-Efficiency Ratios 2008 2007 Operating Cost To Average Total Assets 15.8% 13.7% Operating Cost To Total Cost 4.6% 4% Cost/Income 88% 94% 7.6% 7.6% Total Employee Compensation Expense To Cost 8.6% 9.1% Total Employee Compensation Expense To Average Total Assets 2.5% 2.4% Total Assets Per One Employee (thous. USD) 917 766 Revenue per one employee (thous. USD) 180 185 ROAA 2.6% 1.50% ROAE 6.9% 4.70% Total Employee Compensation Expense To Revenue 11 * USD/AMD currency rate is calculated as of the last day of each period HIGHLIGHTS (9 of 9) Ameriabank - Liquidity Ratios 2008 (as of 31.12.2008) 2007 (as of 31.12.2007) Net Loans To Total Assets 63% 20% Average Interest Earning Assets To Average Total Assets 95% 89% 20% 51% Total Equity To Net Loans 65% 125% Total Deposits to Total Liabilities 81% 90% 1.41 2.93 Liquid Assets To Total Assets Leverage (times) 12 * USD/AMD currency rate is calculated as of the last day of each period Ameriabank Business Overview 13 STRUCTURE OF THE FUNCTIONAL UNITS (1 of 3) 14 STRUCTURE OF CORPORATE GOVERNANCE (2 of 3) Shareholders Annual General Meeting Board Of Directors • Ruben Vardanian - Chairman of the Board • Gor Nahapetyan - Board Member • Aram Grigorian - Board Member • Anushavan Arzumanian – Board Member • Andrew Mkrtchyan – Board Member • Artak Hanesyan – Chairman of the Management Board (MB) Management Board • Vazrik Sekoyan- MB Member (Retail Banking) • Tigran Jrbashyan- MB Member (Development) • Andrei Shinkevich- MB Member (IB) • Sergey Shevchenko- MB Member (Trading) • Gohar Khachatryan - Chief Accountant 15 OWNERSHIP STRUCTURE (3 of 3) TDA HOLDINGS LIMITED 99.7% of the Bank’s share capital + = 100% of Ameriabank CJSC Share Capital Ministry of Finance and other Minority Shareholders 0.3% 16 Economic & Financial Environment in Armenia 17 ENVIRONMENT (1 of 4) , 1. Macroeconomic environment 2004 2005 2006 2007 2008* GDP (bn USD )1,2 Real GDP Growth (%) 3.6 10.5 4.9 14.0 6.4 13.3 9.2 13.8 11.9 6.8* Unemployment rate (cumulative,%) Average monthly salary (USD)1,2 n/a n/a n/a n/a 7,6 177 7,1 255 6,3 300 Consumer Price Inflation (avg %) 7.0 0.6 2.9 4.4 9.0** CPI index (cumulative) n/a n/a 102,9 104,4 109,0 738.3 1,004.9 1,025.5 1,196.6 1,123.8 1,196.3 1,592.8 1,921.3 2,796.9 3,782.2 Current Account Balance (mln) 1 -19.6 -51.7 -117.1 -589.6 -1,564.6 Exchange rate AMD/USD (avg.) 533.5 457.7 416.0 342.1 306.0** Export (FOB, mln) 1, 2 Import (CIF,mln) 1, 2 2006 (%) 2007 (%) 2008 (%) Net Foreign Assets *** 70,7 35,1 (24,4) Net Internal Assets *** (33,8) 58,1 3,9 Money Base (M2X) *** 41,1 50,9 2,9 Interest rate on CB loans (for the end of the period) 17,2 16,5 16,5 5 5,7 8,5 6,5 7,5 9,6 Interbank loans’ interest rate (for the end of the period) Profitability of Governmental bonds 1 Cumulative growth Exchange rate calculated as an average AMD/USD rate for the period *actual ** The Economist Intelligence Unit (EIU) estimates *** Percentage change against the previous period (end of the period) Source: Central Bank of Armenia: www.cba.am, Economist Intelligence Unit: www.eiu.com 2 18 ENVIRONMENT (2 of 4) 2. 2008 Global Indexes (Armenia) Doing Business 2009 & 2008 reports for the Economy of Armenia by the World Bank Ease of Doing Business Rank Starting a Business Employing Workers (April 2007 to June 2008) 44 66 54 5 28 88 150 143 61 47 2008 41 49 52 2 25 84 147 131 63 47 Year Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business 2009 2009 Index of Economic Freedom World Rankings by The Heritage Foundation World Rank Country Economic Freedom Score Change from Previous #31 Armenia 69.9 0 World Economic Forum 2008 Global Competitiveness Index (GCI) rankings and 2007-2008 comparisons Country/Economy Armenia GCI 2008-2009 rank GCI 2008-2009 score 97 3.73 Moody’s Country Rating 19 The fundamental credit outlook for 2008 for Armenian financial institutions by Moody’s is negative. Moody’ s rates the government of Armenia Ba2 for local and foreign currency debt obligations. ENVIRONMENT (3 of 4) 3. Monetary policy and estimates for 2009 2008 indicators (actual) Slowing of inflation (av. 9,0%) and weakening of economic growth (6,8%) Cutting refinancing rate by a cumulative 75 basis points in December 2008 and January 2009, to 7% National currency to USD rate fluctuated within 300-309 drams 2009 estimates Protracted economic crisis: volatile market environment & corporate defaults Refinancing rate in 2009 within 6.5% - 8% Inflation rate within 8-10% according to RA government AMD/USD rate within 360-380 drams as per announcements of CBA GDP is expected to grow by 9.2% according to RA Government by 7-8% according to CBA by 1.1-1.5% according to EIU, IMF and World Bank predictions 20 ENVIRONMENT (4 of 4) 4. Macroeconomic trends and forecasts by EIU 2007* 2008** 2009*** 2010*** USD USD USD USD 13.8 6.8* 1.1 3.0 10.2** 1.3 2.0 3.0 Consumer Price inflation (avg %) 4.4 9.0* 3.6 4.6 Short-term interbank rate 17.5 17.1* 16.5 16.7 Export (FOB, mln) Import (CIF,mln) 1,196.6 2,796.9 1,123.8 3,782.2 976.6 3,172.7 1,045.1 3,345.1 Current Account Balance (mln) (589.6) (1,564.6) (1,672.2) (1,653.7) Exchange rate Dram:USD (avg.) 342.1 306.0* 322.9 347.8 Exchange rate Dram:Rb (avg.) 13.4 12.3* 9.4 9.9 Real GDP Growth (%) **** Gross agricultural production growth Consumer price inflation (av, %) Gross Domestic product (% change, Y-oY) 16 14 12 10 Armenia 8 CIS 6 4 2 0 -2 2004 2005 2006 2007 2008 * Actual **Economist Intelligence Unite (EIU) estimates *** The Economist Intelligence Unit forecasts **** RA Government forecasts 9,2% GDP growth. CBA forecasts 7-8% growth for 2009 Source: Economist Intelligence Unit: www.eiu.com 2009 2010 18 16 14 12 10 8 6 4 2 0 Armenia CIS 2004 2005 2006 2007 2008 2009 2010 21 Target Markets 22 TARGET MARKETS (1 of 4) 1. Priority sectors 1.1 Industry* GDP by Industry Real % change** 2007 Real % change** 2008 Contribution to growth*** 2007 Contribution to growth*** 2008 3.1 2.4 0.5 0.4 Quick growth branches in 2008: energy, mining, food industry, construction materials Loan portfolio concentration during 2008 in this sector was almost 32% (avg.) * Source: National Statistical Service of RA ** Year on year *** Percentage points 23 TARGET MARKETS(2 of 4) 1. Priority sectors 1.2 Construction* GDP by Construction Real % change** 2007 Real % change** 2008 Contribution to growth*** 2007 Contribution to growth*** 2008 18.6 7.2 4.4 1.8 Quick growth branches: constructions in hospitality/catering and in the processing industry Slowdown trend in the real estate price growth Extremely tightened mortgage terms or absence of mortgage issuance Loan portfolio concentration during 2008 in this sector was almost 18.4% (avg.****) * Source: National Statistical Service of RA ** Year on year *** Percentage points **** The concentration percentage includes mortgage loans as well. 24 TARGET MARKETS (3 of 4) 1. Priority sectors 1.3 Services* GDP by Services Real % change** 2007 Real % change** 2008 Contribution to growth*** 2007 Contribution to growth*** 2008 26.9 16.7 1.6 1.0 Quick growth branches: transport, tourism & hospitality, telecommunications, finance Alignment towards domestic demand Dependency оn solvency of general population (remittances) Banks have tightened consumer lending terms Loan portfolio concentration during 2008 in this sector was 12% (avg.) * Source: National Statistical Service of RA ** Year on year *** Percentage points 25 TARGET MARKETS (4 of 4) 3. Sector concentration of the annual total loans issued by the Bank Concentration of loans by RA economic sectors 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Public nutrition and other services Trade Transport Construction Agriculture Industry 26 Analysis of the Banking Market 27 ANALYSIS OF THE MARKET (1 of 6) Bank’s positioning / ranking against benchmarks Top 10 Banks by CAPITAL in 2008* Thous. USD 2008 (as of 31.12.2008) 2007 (as of 31.12.2007) Growth Y-O-Y ACBA 84,980 69,307 22.6% Ardshininvestbank 84,447 60,463 39.7% VTB Bank Armenia 77,757 67,506 15.2% Ameriabank (4th by total capital) 66,387 27,644 1.08 times HSBC 50,564 34,641 46.0% Converse bank 42,820 35,721 19.9% Areximbank 32,363 11,513 2.8 times Unibank 30,844 22,853 35.0% Prometey Bank 29,351 26,609 10.3% Armeconombank 28,451 27,644 2.9% * Table contains data published by Banks per CBA requirement 28 ANALYSIS OF THE MARKET (2 of 6) Bank’s positioning / ranking Top 10 Banks By ASSETS in 2008* Thous. USD 2008 (as of 31.12.2008) 2007 (as of 31.12.2007) Growth Y-O-Y ACBA 403,612 261,815 54.2% HSBC 397,153 340,564 16.6% Ardshininvestbank 371,120 305,891 21.3% VTB Bank Armenia 323,544 228,527 41.6% Converse Bank 234,286 191,532 22.3% Unibank 224,169 148,671 50.8% Armeconombank 164,020 164,408 -0.2% (8th by assets) 160,386 44,233 3.6 times Inecobank 143,680 116,677 23.1% ABB 140,695 108,119 30.1% Ameriabank * Table contains data published by Banks per CBA requirement 29 ANALYSIS OF THE MARKET (3 of 6) Bank’s positioning / ranking Top 10 Banks By LIABILITIES in 2008* Thous. AMD 2008 (as of 31.12.2008) 2007 (as of 31.12.2007) Growth Y-O-Y HSBC 346,590 305,923 13.3% ACBA 318,632 192,508 65.5% Ardshininvestbank 286,672 245,428 16.8% VTB Bank Armenia 245,787 161,021 52.6% Unibank 193,325 125,818 53.7% Converse Bank 191,466 155,810 22.9% Armeconombank 135,569 136,764 -0.9% ABB 118,081 88,256 33.8% Inecobank 117,174 94,549 23.9% Anelik Bank 99,613 87,057 14.4% Ameriabank (11 th by liabilities) 93,999 33,015 2.8 times * Table contains data published by Banks per CBA requirement 30 ANALYSIS OF THE MARKET (4 of 6) Bank’s positioning / ranking Top 10 Banks By DEPOSITS* Q4 2008 Q4 2007 Thous. USD Growth Y-O-Y HSBC 270,131 252,536 7.0% Ardshininvestbank 228,187 191,329 19.3% Unibank 155,541 116,066 34.0% Converse Bank 142,119 127,614 11.4% VTB Bank Armenia 88,949 88,182 0.9% ACBA 88,086 70,338 25.2% Artsakhbank 76,304 32,388 2.3 times ABB 74,608 56,011 33.2% Armeconombank 65,198 67,823 -3.9% 75,964 28,977 2.6 times Ameriabank (10th by deposits) * Table contains data published by Banks per CBA requirement 31 ANALYSIS OF THE MARKET (5 of 6) Bank’s positioning / ranking against benchmarks* Thous. USD 2008 Market Share of Top 5 banks by capital Market Share of Ameriabank Net loans 2,045,938 52.3% 5.0% Total assets 3,381,349 49.0% 4.7% 47.3% 4.8% 2,601,172 49.7% 3.6% Share capital 469,363 40.4% 12.6% Total capital 777,207 46.9% 8.5% Net income 90,714 64.3% 2.8% Total deposits Total liabilities 1,587,545 32 * Table contains data published by Banks per CBA requirement ANALYSIS OF THE MARKET (6 of 6) Bank’s positioning / ranking against benchmarks Corporate & Retail Banking* Thous. USD Ameriabank ASHIB HSBC Converse Armeconom (position in the market) ACBA thous. USD Net loans 236,958 234,043 139,726 88,472 101,541 (7) 270,211 Investments 15,754 31,100 22,200 14,903 9,526 (9) 7,876 Total assets 371,120 397,153 234,286 164,020 160,386 (8) 403,612 Total deposits 228,187 270,131 142,119 65,198 75,964 (10) 88,086 Total liabilities 286,672 346,590 191,466 135,569 93,999 (11) 318,632 Share capital 44,999 7,947 4,020 7,607 59,336 (1) 32,602 Total capital 84,447 50,564 42,820 28,451 66,387 (4) 84,980 Net income 19,113 12,760 6,697 1,670 2,511 (10) 14,502 ROA 5.15% 3.21% 2.86% 1.02% 1.57% 3.59% ROE 22.63% 25.24% 15.64% 5.87% 3.78% 17.06% Leverage 3 times 7 times 4 times 5 times 1 times 4 times 765 1654 833 659 1096 (6) 331307 Average salary (USD) * Table contains data published by Banks per CBA requirement Quantitative Results (2008) 34 QUANTITATIVE RESULTS (1 of 8) Revenue Analysis of the Bank (2008) Tous.USD Composition of Revenue Net foreign currency related income 1,437 thous. USD 16% Other income 105 thous. USD 1% (+18% y-o-y) (+199% y-o-y) Net fee and commission income 659 thous. USD 8% (+118% y-o-y) Net interest income 6,637 thous. USD 75% (+424% y-o-y) 35 QUANTITATIVE RESULTS (2 of 8) Analysis of the Bank’s Revenue thous. USD thous. USD Revenue Growth Net Fee and Commission Income 800 312% 310% 10,000 8,000 8,846 Net noninterest income Net interest income 2,209 6,000 4,000 2,000 0 6,637 2,142 30 667 600 500 400 308 300 200 860 1,282 100 - 31.12.2007 thous. USD +117 % 700 31.12.2008 31.12.2007 Net Securiries Related Income 25 thous. USD +260 % Net Foreign Currency Related Income +112% 1,200 20 1,000 15 800 26 600 10 31.12.2008 1,102 518 400 5 0 200 - 0 31.12.2007 31.12.2008 * USD/AMD currency rate is calculated as of the last day of each period 31.12.2007 31.12.2008 36 QUANTITATIVE RESULTS(3 of 8) Operational costs of the Bank (2008) Tous.USD Operating cost structure Licensing and technologies 75 thous. USD 2% +100% y-oy Other expenses 498 thous. USD 11% +105% y-oy Administration expenses 178 thous. USD +123 %4% y-oy Audit and consulting 375 thous. USD 9% Personnel costs 2,330 thous. USD 53% +188% y-oy +841 % y-oy Advertisement costs 559 thous. USD 13% +2,127 % y-oy Depreciation, amortizatio n 369 thous. USD 8% 37 QUANTITATIVE RESULTS (4 of 8) Analysis of operational expenses of the Bank Staff Number Dynamics Cost to Income Ratio 200 100% 202% 94% 150 88% 100 175 50 58 80% 2007 0 2008 2007 (31.12.2007) Ameriabank 2008 (31.12.2008) Ameriabank 38 6. QUANTITATIVE RESULTS (5 of 19) Profitability* Tous.USD Net Income Dynamics 3800 3300 2800 2300 1800 1300 2,511 800 300 -200 525 2007 2008 Ameriabank 39 * USD/AMD currency rate is calculated as of the last day of the period QUANTITATIVE RESULTS (6 of 8) Profitability of the Bank 40 QUANTITATIVE RESULTS (8 of 8) Ameriabank – Main Economic Normatives Item Minimum statutory fund of the bank Minimum total capital of the bank N1 Total capital/ Risk weighted assets Actual (Thous. AMD) CBA requirement (Thous. AMD) No violation 18,200,000 50,000 20,296,982 2,400,000 65.33% 12% N2.1 High liquid assets/ Total assets Maximum risk on large-scale borrowers Maximum risk on bank- related person Maximum risk on all bank- related persons No violation No violation No violation 20.08% 15% 107.83% 60% N2.2 High liquid assets/ Demand liabilities Maximum risk on a single borrower Number of violations during quarter No violation No violation 15.69% 20% No violation 85.04% 500% 0.26% 5% No violation No violation 2.32% 20% 41 For further information, please contact: Head of Investor Relations Department Ms. Lusine Vardanyan E-mail: [email protected] Tel: + 37410 561111 42