Presentation of Komercijalna Banka AD Skopje as at December 31, 2012

Presentation of Komercijalna Banka AD Skopje as at December 31, 2012 Contents • • • • Komercijalna Banka Overview The Republic of Macedonia The Mac...
Author: Reynard Harris
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Presentation of Komercijalna Banka AD Skopje as at December 31, 2012

Contents • • • •

Komercijalna Banka Overview The Republic of Macedonia The Macedonian Banking Sector Komercijalna Banka Financial Overview

3 9 11 19

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

2

Komercijalna Banka Overview

Overview (I): A cornerstone of Macedonia’s financial sector... Leading Market Position •

Expected to keep market position as one of the leading banks in Macedonia with assets (EUR 1,345.9 m) and deposits from customers (EUR 1,111.0 m) and in terms of net loans to customers (EUR 743.0 m) as of December 31, 2012.

Customer Base • Leading corporate customer base (42,211 customers) • Second largest retail customer base (848,078 customers) One of Macedonia’s Most Prominent Financial Institutions • Long-standing history • Well-established customer relationships Strong Brand Recognition • Associated with quality, innovation and trustworthiness Modern Corporate Governance Structure • Privatisation completed with 98.19% private ownership (50.96% foreign, as at December 2012) and about 2% held by the Public sector • Diversified ownership structure with one single shareholder owning 10% (East Capital Explorer Investments AB, Stockholm, Sweden) • EBRD active shareholder with Board representation (more than 5% participation) • Comprehensive, ‘best-practise’ corporate governance • Rigorous risk management and money laundering practices

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Overview (II):...with a track record of significant achievements... Experienced Team of Executives • Providing leading position in number of areas combined with maintaining stable market position • History of product innovation and investments in new technologies Well Invested Distribution channels • Very well presented branch network - over 70% of the current network newly opened or refurbished in the past five years • Rapidly developing multi channel distribution network comprising POS Terminals, ATM’s, Infokiosks, E-Banking (both retail & corporate, as well as f/x and in denars), Telephone banking Fully Integrated IT platform • State-of-the-art system • Fully protected and readily upgradeable Driver of Sector Innovation • First to issue credit cards (1996) • First to operate ATMs and POS terminals (1996) • First to establish a dedicated brokerage house (1997) • Founded one of the country’s two second pillar pension funds (2005) • Founded the investment fund KB Publikum Invest AD (2009) Profitable Operation with Sound Asset Quality • History of profitable operations • Adequately provisioned loan portfolio

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Overview (III):...a long-standing successful history... 1990

1973

1966

1963

1955 Established as Komunalna Banka under municipal ownership

Leading role in rebuilding the economy and housing after disastrous earthquake in Skopje

Name change to Komercijalno Investiciona banka Skopje and merger with 3 banks

Operating as Stopanska Banka, Skopje Branch as part of an integrated banking system

Incorporated as an open joint stock company Start of a significant expansion phase based on organic and acquisitive growth establishing nationwide coverage

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Overview (IV): ...the largest distribution network in the country... 67 branches including headquarters as at December, 2012

Branch Network

- Coverage of all major cities and economically significant regions - 56 city branches (36 in Skopje + HQ1 & HQ2) - 11 regional branches

Second largest ATM network in the country - 149 installed ATMs as at December 2012 (142 as at Dec 2011)

Fast expanding merchant network – Over 6,500 POS terminals installed as at December 2012(>6,200 as at Dec 2011)

State-of-the-art IT infrastructure – Fully integrated – Real time

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Overview (V): ...and an enviable market position Banking Awards

Market share as at December 31, 2012 Total assets Capital and reserves

23.5% 22.9%

Total deposits from non-financial sector

27.6%

Total net-loans to non-financial sector

23.8%

Total number of debit cards issued

16.7%

Total number of credit cards issued Total number of merchants in the country acquiring bank cards issued by KB

19.0%

Total number of POS and ATM acquiring cards Total value of realized domestic payment operations Total number of accounts opened to legal entities Total trading realized at the MSE Total number of transactions realized at the MSE

41.6% 23.6% 21.5% 21.5% 17.9% 17.0%

- Bank of the Year for 2001, 2002, 2004 , 2005, 2010, 2011 and 2012 - The Best Bank for 2002, 2003 & 2004 - The Best Bank by Assets Strength for 2005, 2006 & 2007 - The Best Bank by Capital Strength for 2005 - The Best Bank by Gross Profit for 2005 & 2007 - The Best Bank by ROE for 2007 -The Best Bank in Macedonia for 2004, 2005, 2006, 2007, 2008 2009 , 2010, 2011 and 2012 - Best Developing Trade Financier for 2003, 2004, 2008 -Most active issuing bank In Macedonia in 2009

The most transparent company for 2008, 2009 & 2010

2007 Participant in the best financial deal

STP Excellence Award for 2007,2009,2010 and 2011 - Super brand in Macedonia for 2009 Non government organization – Transparency zero corruption - Prize for best corporate governance - National prize for the social responsibility practice of companies in RM for 2008 2009 & 2011 Red Cross of the Republic of Macedonia

- Gold Supporter Award 2012

price for Corporate Social Responsibility Integrated Approach for 2009, 2010 and 2011

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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The Republic of Macedonia

The Republic of Macedonia - Macroeconomic Environment: Key economic indicators (1)

2008

2009

2010

2011

2012

Population (000's)

2,048

2,053

2,057

/

/

GDP per capita (in EUR)

3,283

3,269

3,434

3,645

/

5.0

-0.9

2.9

2.8(2)

0.0

Real GDP growth (%) Central Government Budget surplus/deficit (% of GDP) Inflation (CPI%) av. Current Account Bal.(EUR'm)

-0.9

-2.7

-2.4

-2.5

-3.5

8.3

-0.8

1.6

3.9

3.3

-143.6 -224.3

-291.4

-862.2 -457.1

Gross External Debt (EUR'm)

3,304

3,780

4,106

4,847 5,070(3)

FX Reserves (EUR'm)

1,495

1,598

1,714

2,069

2,193

Foreign direct invest.(EUR'm) Unemployment Rate (%)

399.9

145.0

160.0

336.8

104.8

33.8

32.2

32.0

31.4

/

61.3

61.3

61.5

61.5

61.5

MKD/EUR year end.

(1) Source: Ministry of Finance, State Statistical office, NBRM (2) Preliminary data (3) As at 30.09.2012

The Fitch agency affirmed Macedonia’s foreign currency rating at “BB+”, In May 2012, the credit rating agency Standard & Poor’s has affirmed the credit rating of Macedonia for foreign and local currency as “stable BB/B with good outlook for future”. The rating affirmation is due to the favourable fiscal policy, low indebtedness, as well as to the expectations for the possible accession to EU.

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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The Macedonian Banking Sector

Macedonian Banking Sector (I): The structure and the characteristics Structure • 16 active banks (4 large, 8 medium and 4 small) • 7 saving houses Characteristics • High concentration with four large banks • Low level of financial intermediation Significant growth prospects • Continuous growth of the level of privatization • Continuous growth of the participation of the foreign capital • Improvement of the ownership structure • Increased network • Increased total assets • Growth in loans and deposits • Increased banking capital • Constant increase in profitability and efficiency

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Macedonian Banking Sector (II)

...assets...

Total assets (EUR'm) 7,000 6,000 5,000

3,654

4,000 3,000

2,296

4,082

4,390

2008

2009

4,964

5,385

5,738

2,846

2,000 1,000 0

2005

2006

2007

2010

2011

2012

Total assets

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Macedonian Banking Sector (III)

...and placements to non-financial entities... Placements to non-financial entities (net) (EUR'm) 3,500 3,000 2,500

1,000

2,569

2008

2009

2,737

3,104

2011

2012

1,861

2,000 1,500

2,512

2,943

1,302 963

500 0 2005

2006

2007

2010

Placements to non-financial entities (net)

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Macedonian Banking Sector (IV)

...and deposits from non-financial entities... Deposits from non-financial entities (EUR'm) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

2,621 1,601

2005

2,946

3,071

2008

2009

3,468

3,807

3,990

2011

2012

2,013

2006

2007

2010

Deposits from non-financial entities

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Macedonian Banking Sector (V) ...and capital & reserves... Capital & reserves (EUR'm) 700 600 500 400 300 200 100 0

354

364

2005

2006

416

2007

471

500

524

2008

2009

2010

595

2011

641

2012

Capital & reserves

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Macedonian Banking Sector (VI)

...and financial results influenced by

the crisis... Net profit (EUR'm) 70

60

60

56

46

50

38

40 30

27

26

24 19

20 10 0

2005

2006

2007

2008

2009

2010

2011

2012

Net profit

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Macedonian Banking Sector (VII)

...and drop of profitability from 2009... Profitability indicators (EUR'm and %) 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0

16.0%

15.2% 12.5%

14.0%

184.9

12.3%

12.0%

169.1 175.0

169.0

10.0% 7.5%

8.0%

7.3% 148.0

124.0 75.9

1.2%

102.0

5.6%

1.8%

2006

2007

2008

NII

2009

ROAA

2.0%

0.8%

0.6%

2010

6.0% 4.0%

1.4%

1.8%

2005

3.4%

3.8%

0.4%

2011

0.0% 2012

0.4%

ROAE

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

18

Komercijalna Banka Financial Overview

Financial Performance (I): Highlights Key Performance Indicators Key Performance Indicators Net Interest margin Net Interest margin Net fees and Commission / Income Net fees and Commission / Income Cost/Income Cost / Income NPLs / Total Loans NPLs / Total Exposure NPL Coverage

2007 3.9% 24.5% 45.8% 10%

2008 2005 4.1% 5.3% 20.3% 23.0% 45.8% 54.5% 7% 9.1%

2009

2010

2011

2012

2006 2007 2008 3.5% 3.4% 3.4% 3.45% 3.8% 3.9% 4.1% 3.5% 20.4% 21.9% 22.7% 20.0% 24.5% 20.3% 24.8% 53.0% 52.0% 47.8% 44.3% 45.8% 45.8% 53.0% 56.6% 8% 8.1% 9.6% 13.1% 5.2% 5.4% 6.2% 6.9 %

78.8%

83.8% 89.8% 83.9% 92.6% 79.0% 87.3%89.9%79.2% 72.6% 72.6% 81.2 %

NetNet Loans / Deposits (Customers) Loans / Deposits (Customers)

54.3%

54.3% 78.1% 66.9% 42.4% % 76.6% 47.478.1% 70.4% 76.6% 65.1%

(1) ROE ROE (1)

19.2%

19.2% 15.5% 5.86% 8.9% % 22.0% 16.615.5% 17.9% 22.0% 11.4%

1.9%

1.0% 1.7 % 2.5% 1.8%

10.5%

14.8% 11.8 %(2) 9.9% 10.6%

ROA (1) Capital adequacy (1) After taxation

1.9% 2.5% 1.8% 2.0% 1.4% 0.68 % 10.5% 11.1%

9.9% 10.6% 13.5% 13.2%

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Financial Performance (II): Financial indicators Financial indicators

2007

2008

2009

2010

2011

2012

Earnings per share (EPS)

8.3

11.2

8.8

11.6

7.8

4.0

Book value (BV)

42.7

50.6

56.5

64.6

68.0

68.4

112.7

44.8

45.8

52.8

42.9

39.0

Dividend Yield

2.73%

6.88%

6.06%

5.22%

7.58%

8.33%

Price/Earnings (P/E) (2)

13.58

3.99

5.21

4.57

5.45

9.73

2.64

0.88

0.81

0.82

0.63

0.57

0.262

0.100

0.093

0.092

0.075

0.066

227.1

90.2

92.2

106.4

97.8

88.9

(1)

Market price per share

Price/Book value (P/B)

(2)

Price/Total assets (P/A)

(2)

Market capitalization(in mill. EUR)

Presentation of Komercijalna Banka AD Skopje 1) Last traded price 2) Calculation according data in MKD

Skopje, April 2013

21

Financial Performance (III):Income statement (IFRS) in million EUR 2007

2008

2009

2010

2011

2012

Index 08/07

Index 09/08

Index 10/09

Index 11/10

Index 12/11

Net interest income

34.6

41.9

39.1

40.4

43.5

46.9

121.1

93.3

103.3

107.7

107.8

Net fee & commission income Other income Total income

13.5 7.0 55.1

12.4 6.6 60.9

11.2 4.7 55.0

12.6 4.9 57.9

13.9 3.9 61.3

14.6 11.6 73.1

91.9 94.3 110.5

90.3 71.2 90.3

112.5 104.3 105.3

110.3 79.6 105.9

105.0 297.4 119.2

-25.3 -12.5 17.3

-28.0 -7.9 25.0

-29.3 -8.4 17.3

-30.3 -29.4 -4.5 -14.4 23.1 17.5

-32.5 -31.8 8.8

110.7 63.2 144.5

104.6 106.3 69.2

103.4 53.6 133.5

97.0 320.0 75.8

110.5 220.8 50.3

Share of loss from associate Profit before tax/loss

0.1 17.4

0.2 25.2

0.3 17.6

0.3 23.4

0.3 17.8

0.4 9.2

200.0 144.8

150.0 69.8

100.0 133.0

100.0 76.1

133.3 51.7

Taxation Profit after tax/loss

-0.9 16.5

-2.8 22.4

0.0 17.6

-0.1 23.3

-0.1 17.7

-0.1 9.1

311.1 135.8

78.6

132.4

100.0 76.0

100.0 51.4

Operating expenses Impairment losses Operating profit

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013 22

Financial Performance (IV): Balance sheet (IFRS) in million EUR 2007

2008

2009

2010

2011

2012

Index

Index

Index

Index

Index

08/07

09/08

10/09

11/10

12/11

Assets Cash and cash equivalents Customer loans

172.5 401.8

180.1 570.7

144.0 635.1

383.1 663.9

479.2 698.7

488.7 743.0

104.4 142.0

80.0 111.3

266.0 104.5

125.1 105.2

102.0 106.3

Bank placements and loans

226.0

90.4

149.0

17.1

22.1

15.6

40.0

164.8

11.5

129.2

70.6

Total loans and placements Other assets Total assets

800.3 63.5 863.8

841.2 56.0 897.2

928.1 64.4 992.5

1,064.1 87.6 1,151.7

1,200.0 103.3 1,303.3

1,247.3 98.6 1,345.9

105.1 88.2 103.9

110.3 115.0 110.6

114.7 136.0 116.0

112.8 117.9 113.2

103.9 95.5 103.3

Liabilities Total deposits

752.7

770.9

843.5

971.9

1,091.8

1,128.6

102.4

109.4

115.2

112.3

103.4

Borrowings & other liabilities Total liabilities

25.1 777.8

24.4 795.3

35.3 878.8

49.6 1,021.5

56.6 1,148.4

61.4 1,190.0

97.2 102.2

144.7 110.5

140.5 116.2

114.1 112.4

108.5 103.6

Shareholders funds Share capital Share premium Reserves

32.9 1.8 32.6

32.9 1.8 45.0

32.9 1.8 61.5

32.8 1.8 72.4

37.1 12.5 87.6

37.1 12.5 97.2

100.0 100.0 138.0

100.0 100.0 136.7

99.7* 100.0 117.7

113.1 694.4 121.0

100.0 100.0 111.0

Retained earnings

18.7

22.2

17.5

23.2

17.7

9.1

118.7

78.8

132.6

76.3

51.4

Shareholders funds Total liabilities and shareholders funds

86.0

101.9

113.7

130.2

154.9

155.9

118.5

111.6

114.5

119.0

100.6

863.8

897.2

992.5

1,151.7

1,303.3

1,345.9

103.9

110.6

116.0

113.2

103.3

* The decrease is a result of changing the course of the denar against the euro

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013 23

Financial Performance (V): Total Assets Total assets (1) (in million EUR)

1,600

8%

1,152 1,200 1,000

1,346

1,303

1,400 993 864

897

36%

8% 33%

36% 54%

58%

2%

6%

7%

6%

15%

20%

20%

64%

600

47%

64%

15%

26%

10%

400

800

8% 55% 1%

1%

200 0 2007 Placements to banks

2008

2009

Loans to customers

2010

2011

Cash and equivalents

2012 Other assets

(1) Total balance sheet assets (based on net loans after provisions) (2) In 2006 and 2011 the Bank’s Independent Auditor is changed

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Financial Performance (VI): Gross Loans to Customers Total Loans - Corporate vs Retail (EUR'm) 860.2 707.9

634.8 122.1

457.8 94.7

19%

130.3

787.0

738.6 18%

132.8

18%

129.2

16%

136.9

16% 84%

84% 82%

82% 81%

21%

605.8

657.8

723.3

512.7

577.6

2008

2009

2010

2011

2012

79%

363.1

2007

Corporate loans

Retail loans

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Financial Performance (VII): Liabilities

Total Liabilities (EUR'm) 1,190

1,148 1,022 879

795

778 3% 97%

2007

2008 Total deposits

95%

95%

4% 3% 97%

5% 95%

5%

5%

96%

2009

2010

2011

2012

Borrowed funds & other liabilities

(1) Total deposits include deposits from banks which represent less than 2% within total liabilities

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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Financial Performance (VIII): Deposits – Customer Breakdown Deposits by customer category (EUR'm)

1,128.6

1,091.8 971.9 752.7 263.4

770.9 231.1 35%

269.1 30%

241.6

29%

65% 489.3

539.8

601.9

2007

2008

2009

Retail deposits

28% 72%

71%

70%

271.4

287.3

843.5

702.8

2010

26%

24%

74%

76%

804.5

857.2

2011

2012

Corporate deposits

Presentation of Komercijalna Banka AD Skopje (1) Corporate deposits include deposits from banks which represent 1.9% within total deposits

Skopje, April 2013

27

Financial Performance (IX):Shareholders Equity and Capital Adequacy 68%

Shareholders Equity and Capital Adequacy (EUR'm) 130.2

10.5%

113.7

101.9 86.0

10.6% 9.9%

40%

34%

11%

15% 57%

22% 38%

154.9*

54%

31%

14%

13.5% 6%

12% 13.2%

10%

18%

22% 44%

11.1%

155.9

62%

8% 6%

55%

4%

27%

32%

2%

32%

0%

2007

2008

Share capital incl.share premium

2009 Reserves

2010

2011

Retained earnings

2012 Capital adequacy

*VI-th issue of shares in the amount of 15 million EUR

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

28

Financial Performance (X): Income Breakdown Income (EUR'm) 73.1 60.9

55.1

55.0

41.9

13.5

12.4

7.0

2007 Total income

11.2 6.6

2008

12.6

4.7

2009

Net interest income

13.9

14.6

11.6

3.9

4.5

2010

46.9

43.5

40.4

39.1

34.6

61.3

57.5

2011

Fee and commission income

2012 Other income

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

29

Financial Performance (XI): Expenses Breakdown Operating expenses (EUR'm) 25.3

10% 15% 11% 15%

12% 13% 11% 16% 48%

16% 13% 11% 18% 42%

15% 12% 11% 16% 46%

30.3

29.3

28.0

32.5

16%

29.4 18%

8% 18% 10% 16% 48%

49%

9% 15%

42% 2007

2008

2009

Wages, salaries and other employees' costs Depreciation and amortization Other expenses

2010

2011

2012

Materials and services Insurance

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

30

Financial Performance (XII): Efficiency Total income and efficiency (million EUR and %) 53.0%

80

54.0%

52.0%

70

52.0%

60 45.8%

50 40

50.0%

47.8% 55.1

30

73.1

46.0%

45.8%

57.9

60.9

20

48.0%

44.3%44.0%

61.3

42.0%

55.0

10

40.0%

0

38.0%

2007

2008

2009 Total income

2010

2011

2012

Cost/Income

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

31

Financial Performance (XIII): Non-Performing Loans Total loans (1) vs Non-Performing Loans (EUR'm) 1,000.0 860.2

900.0 800.0

738.6

707.9 (2)

700.0

787.0

634.8

600.0 457.8

500.0 400.0 300.0 200.0 100.0 0.0

46.5 36.7 10% 14% 84%

78.80 %

2007 Total loans

NPL

46.0 38.5 7% 83.80 10%78.8%

55.9 50.2 89.8%

8% 83.8% 89.8% 7%

59.9 55.5 92.6% 8.1% 89.8% 8%

75.6 66.0 9.6% 87.3% 8.1%

92.6

113.1

89.6

10.7%79.2% 87.3% 13.1% 9.6%

%

2008

2009

NPL provisions

(1) Gross corporate and retail loans excluding bank placements (2) New methodology applied as of 01.01.2009

2010

% NPLs/Total loans

2011

2012

% NPL provisions/NPLs

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

32

Financial Performance (XIV): Asset Quality Asset Risk Categories (%) 3.3% 1.6% 3.2% 9.9% 82.0%

3.6% 1.5% 3.2% 5.9% 85.8%

4.8% 0.6% 2.0% 4.6% 88.0%

5.3%

5.0% 0.5% 2.0% 4.5% 88.0%

4.4% 1.6% 2.1% 3.2% 88.7%

2.3% 2.8% 6.1% 83.5%

2007

2008

2009 A

B

2010 C

2011 D

2012

E

Presentation of Komercijalna Banka AD Skopje Skopje, April 2013

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