SME asset-backed financing in Eastern Europe An underexploited market?

Views of an Originator Bratislava, May 15, 2008

Agenda Fundamental business motivations for issuers The different market stages in CEE & CIS Challenges and opportunities with respect to SME transactions in CEE/CIS Case Studies RI

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RI: Well Diversified CEE Pure Play Total Assets by Region

Top 3 Pan-CEE Bank with more than 13.7mn Customers

CIS 27% CE 41%

Commonwealth of Independent States (“CIS”)

13.7mn Customers 3,015 Branches(1)

6.5mn Customers 1,499 Branches

SEE 32%

Total assets: €72.7bn Profit before Tax by Region Central Europe (“CE”) CE 34%

CIS 30%

2.0mn Customers 497 Branches South Eastern Europe (“SEE”)

SEE 36%

5.2mn Customers 959 Branches

Profit before Tax: €1,238mn Note: Figures as of/for FY 2007 (1) Including leasing and other branches.

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From Micros to Large Corporates Seamless & Efficient Customer Service Tailor-made solutions Focus on structured products

Corporates

Large Corporates

Mid-market Customers

Leverage crossborder business Lean product portfolio & competent advisory service Process optimization

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Capitalize on leading position in 9 markets

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Capture ongoing strong market growth opportunities

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Focus on acquisition of highly profitable mid-market clients

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Increase share of wallet with international clients

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Increase and optimize cross-selling to related business segments

Retail Small Enterprises

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Fundamental Business Drivers Securitization offers various benefits Risk Transfer/ Equity Relief • Risk is shared with external investors • Freed-up equity can be reinvested and generates additional income. This process generally makes commercial sense in cases of 9 Growing and 9 Profitable portfolios

Funding • Funding with matching maturities (in some countries, the only matching funding source for very long-term assets). • In certain cases, securitization provides cheaper funding (currently rather the exception). • In the long run, access to disintermediated funding sources will become crucial.

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The Market Stages in CEE/CIS The various countries are developed differently Old NewEU EUMember Member OldEU EUMember Member New States States States States

Russia Russia Kazakhstan, Kazakhstan, Ukraine Ukraine

Other Other CIS/SEE CIS/SEE

Sov. Sov.ceiling ceilingnot not an anissue issue

Sov. Sov.ceiling ceiling partly partlyan anissue issue

Sov. Sov.ceiling ceiling challenging challenging

Sov. Sov.ceiling ceiling critical critical

Long Longdeal dealtrack track record record

Limited Limiteddeal deal history history

Quite Quiteactive active markets markets

Untested Untested markets markets

Seasoned Seasoned portfolios portfolios

Partly Partlyseasoned seasoned portfolios portfolios

Younger Younger portfolios portfolios

Legal Legalsituation situation difficult difficultbut butnot not hopeless hopeless

Future Futureflow flow deals deals

Poss. Poss.future futureflow flow deals deals 6

The CEE/CIS Challenges Higher hurdle than for matured markets Country ceiling – Top-rated tranches can be rated only slightly above the sovereign rating. • Adds to the cost of securitization transactions quite considerably. • In particular for issues for CIS but also for the new EU member countries. • Less of an issue for synthetic deals in EU member countries „ Young and rather small portfolios – The best suitable portfolio categories (retail, SME) are being offered in the region only since quite recently. • Significant stresses applied during the rating process • High transaction cost compared to transaction amount „ Limited rating precedents • Rating agencies apply again conservative stresses „

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Specific Portfolio Aspects CEE/CIS Portfolios have their specific aspects „

Many portfolios are based on foreign currency loans • Not unusual due to high local currency interest rates and generally beneficial local currency development • Foreign currency loan portfolios usually show better default rates than local currency portfolios

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Legal situation not so bad as you might expect • Still, legal track record needs to be built up

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Lending policies of CEE/CIS banks generally do not reach out for as aggressive segments as some of the Western European and US banks do • Generally conservative collateral policies and/or underwriting criteria • Still, rating agencies apply tight rating criteria

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The RI – SME Experience We applied securitization first to SME/Micro Portfolios! For the first securitization for Raiffeisen Leasing Polska (RLPL), the key target was a diversification of funding sources. The portfolio had a medium size. • We decided to go for a true sale securitization with only certain tranches to be structured as term notes and placed to specialized investors • As a leasing company, RLPL primarily services micro and SME clients. „ Because of the success and the good portfolio development, we could increase the transaction in January 2008. „

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The ROOF Poland Parameters The First CEE/CIS Leasing Securitization

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Originator Raiffeisen Leasing Polska S.A. (RLPL) Type of transaction True sale securitization Closing January 2006 and increased in January 2008 Volume PLN 1 bln (approx. EUR 280 mln) Ref. Obligations: PLN denominated vehicle leasing agreements new cars and trucks & trailers) to Polish SME and micro companies Replenishment 3 years from initial closing Average tenor 5.5 years from initial closing

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The ROOF Poland Structure Taylor-made Structure involving key regional players

Purchase Price PLN 1 bln

Leasing Leasing Payments Payments

RLPL RLPL

EIB-Senior EIB-Senior Tranche Tranche29.4% 29.4%

ROOF Poland sp.z.o.o.

EIF Guarantee

Mezzanine MezzanineTr. Tr.4.1% 4.1%

(Polish SPV) Senior Tr. 64.3% Senior Tr. 64.3%

Leasing LeasingPortfolio Portfolio (20,000 Leases (20,000 Leases PLN PLN11bln) bln)

Non-recourse Non-recoursesale sale ofofportfolio portfolio

Junior Tranche 1.3% Junior Tranche 1.3%

POLAND

OFFSHORE

Privately Privately placed placedto to ABCP ABCP Conduit Conduit

Equity Investor 11

The RI – SME Experience (ctd) For the next SME Deal, we combined 2 countries „ For the first securitization for Raiffeisen Leasing Polska (RLPL), the key target was a diversification of funding sources. The portfolio had a medium size. • We decided to go for a true sale securitization with only certain tranches to be structured as term notes and placed to specialized investors • As a leasing company, RLPL primarily services micro and SME clients. „ Because of the success and the good portfolio development, we could increase the transaction in January 2008. „ In our second transaction for the Raiffeisen Banks in Poland and the Czech Republic, funding was not an issue but rather risk transfer. The combination of two banks brought economies of scale. • A synthetic securitization was actually the only way to combine the portfolios of the two originators for this asset class. 12

The ROOF CEE Parameters The first synthetic CEE transaction – a multi-originator deal

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Originator

Raiffeisenbanks Czech Republic and Poland (RBCZ and RBPL) Type of transaction Synthetic Securitization (unfunded balance sheet CLO) Closing March 2006 Volume EUR 450 mln Assets EUR, CZK and PLN denominated corporate loans to Czech and Polish SME/corporate borrowers Replenishment 5 years Average Tenor 7 years

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The ROOF CEE Structure A fully synthetic structure ideally meeting the goals of all parties Risk Seller RBCZ

KfW-Platform Portfolio CDS EUR 183 mln

Combined Reference Pool RBPL

Portfolio CDS EUR 267 mln

EUR 450 mln

Risk Taker

Super Senior 83.9%

Aaa 6% Aa2 1.7% A2 2.8% Ba2 2.8% Junior 2.8%

RI 14

What will the future bring us? The RI Securitization Strategy in light of the Financial Crisis „

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We continue to apply securitization on a selective basis and if we can agree with investors on mutually acceptable terms • Our (modest) targets for using securitizations reflect the current market environment and our wish for a diversified funding structure Establishment of the ROOF-securitization platform • Western-level underwriting standards are a key success factor! • Servicing and documentation standards to ensure investor confidence • Full transparency and information availability to investors and rating agencies Diversification of securitization placement strategies • Nowadays rather privately than publicly placed deals • Alternative exit strategies such as structured covered bonds/ Pfandbriefe and Repos with ABS paper become more important

Fundamentals and the used straight-forward structures very much support the success of CEE/CIS securitizations in the long run 15

Contact

Georg Feldscher Head of Strategic Portfolio Management Raiffeisen International Bank-Holding AG

Tel. +43-1-71707 1026 Fax +43-1-71707 76 1026 e-mail [email protected]

Contact

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