Securitisation in CIS: Trends, Challenges, and Opportunities

1. CORPORATE FINANCE Securitisation in CISAny Questions?Alexander Yerofeyev, Partner, KPMG Russia & CIS 13 October, 2006 ADVISORY

2. Disclaimer • The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

3. Agenda • Introduction • Securitisation Mini-Survey • Outlook • Developments in CIS - on shore securitisation • KPMG Corporate Finance

4. Introduction • Russian securitisation market develops like no securitisation market has in the past • Current securitisation issuance in Russia & CIS concentrates on: • ABS (car loans and consumer loans) • MBS (mortgages) • DPR • Leases (Red Arrow) • What’s next? What drives originators?

5. Securitisation Mini-Survey

6. Securitisation Mini-Survey Targeted Banks • 10 banks were approached • Total balance sheet size – USD 22 bln. • Focus on middle-size banks • Between top 15 and 160 (based on assets) • Among approached banks, 1 bank decided to stop preparations for securitisation because of lack of knowledge and doubt in economics of the transaction • 8 banks are in either the feasibility or execution stage and planning to close a transaction in the course of the year

7. Securitisation Mini-Survey • Securitisation is a logical tool to decrease cost of capital * 1) On average, a bank has ratings from 2 agencies 2) No banks approached have BB/Ba2 rating 3) 3 banks currently have no credit rating

8. Securitisation Mini-Survey • Most respondent banks already have sufficient assets to securitise • Types of such assets are diverse • Given potential for growth, banks start preparation for securitisation even where assets are not sufficient

9. Securitisation Mini-Survey Goals • Majority of respondents consider decreasing funding costs as the main purpose of securitisation • For some banks new funding is crucialfor further loan origination • One bank stated that the primary (and basically only) objective is capital relief * Number of banks that selected the goal is shown. Each bank could have selected several goals

10. Securitisation Mini-Survey Challenges • Need to understand true costs/benefits • Doubts in own preparedness (HR/IT/assets) • Lack of understanding of technicalities • Selling of the “best” assets was mentioned as disadvantage for management (cherry picking) At the same time… • Legal issues are no longer considered unsurmountable • Importance of interest rate risks seems underestimated

11. Securitisation Mini-Survey Involvement in Securitisation Transactions of Other Banks • Only one (large) respondent was prepared to play all third-party roles • Originators will need to approach higher rated parties for most roles Also… • Two banks demonstrated interest in investing in securitisation notes, issued by other banks. Among necessary requirements: competitive price and liquidity in secondary market • Four banks are not ready to invest in securitisation notes

12. Outlook • Future transactions in the short term will still be characterised by relatively small transaction sizes • First times issues • Learning curve • Availability of collateral pools • We expect that larger transaction sizes and improved knowledge and comfort of securitisation techniques will lead to other developments: • Structures (funded vs. synthetic) • Asset classes (SME loans and corporate loans, CDO) • Professionalization of organisation and processes • Domestic securitisation depends on (testing of) legislation • Russia • Kazakhstan

13. Developments in CIS – on shore securitisation Characteristics of current Kazakh project • In accordance with new Kazakh Securitisation Law (#126-III DD 20 February 2006) and Tax code • Domestic SPV • Secured by assets denominated in local currency • Non-/limited recourse • KzААА rating prospects without external credit enhancement • Risk transfer and capital relief (based on Basel regulatory standards) • Domestic investors targeted with notes in local currency

14. Developments in CIS – on shore securitisation Main benefits for the Kazakh originator • Risk transfer and capital relief • Diversification of funding sources and raising of long-term funding • Possible ROE improvement • Mortgage rates could be more competitive because of lower all-in funding costs • Estimated lower transaction costs compared to offshore transaction, legal risks minimized • Spin off: Enhanced primary underwriting standards • Positive influence on business and strategy

15. Developments in CIS – on shore securitisation Team • KPMG (combined Russian, Dutch and Kazakh team) • Halyk Finance JSC • LeBoeuf, Lamb, Greene & MacRae LLP (LLGM)

16. KPMG Corporate Finance • Beside Audit and Tax services, KPMG also provides Corporate Finance Advisory services in securitisation transactions • KPMG Corporate Finance offers securitisation services in a number of different roles in all stages of the securitisation process • Through our experience in advising on securitisation we can add value on all aspects of a transaction ranging from: • Pre securitisation preparations, including product development • Transaction structuring and execution • Post closing reporting including management and financial accounting • Generally KPMG Corporate Finance offers services as: • Financial advisor advising the originator alongside investment banks and legal counsel; or • Structurer and arranger, including a feasibility study and the execution of the transaction

17. KPMG – contact details Alexander Yerofeyev Partner, Head of Financing Group, KPMG in Russia and CIS +7 (495) 9374479 AlexanderYerofeyev@kpmg.ru www.kpmg.ru