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    Home Credit & Finance Bank 2005 IFRS results: Credit portfolio exceeds USD 1 billion supported by growth in revolving credit
    04/06/2006

    Home Credit & Finance Bank (“HCFB”) [Moody´s Ba3/NP/D-, S&P B-/C], one of the leading providers of consumer credit in Russia, announces its financial results for the year ended 31st December 2005 in accordance with International Financial and Reporting Standards (IFRS).

    “The 68% increase in the volume of consumer loans granted over the year demonstrates that HCFB is making good progress in maintaining its position as a leading provider of consumer finance in the Russian market. In addition to the increase in our point of sales volumes, HCFB made significant in-roads in the development of its revolving credit activities where the Bank now ranks third by market share in the provision of revolving credit.

    “We remain confident that the Bank’s strategy of focusing on consolidating its position in the Russian consumer finance market by widening its product range and geographical presence, and by continued improvements in its business processes, technology and risk-management systems, will provide a strong platform for profitable and continued disciplined growth.“


    Andrey Lykov, the Chairman of HCFB Management Board

    Highlights

    Continued discplined growth during 2005

    • 68% increase in the volume of consumer loans granted to RUR 47,911 million (RUR 28,496 million in 2004), reflecting the continued development of the consumer finance market in Russia
    • 50% increase in the gross loan book portfolio to RUR 29.2 billion (RUR 19.5 billion in 2004)
    • Maintained strong market share of over 26% in POS loan market in Russia
    • HCFB is the third largest provider of revolving credit in Russia with a 4% market share. Revolving credits increased significantly to 10% of the Bank’s loan portfolio
    • Net profit for the year of RUR 309 million (2004: RUR 407 million)
    • HCFB focusing on consolidating its strong position in the Russian consumer finance market by widening its product range and geographical presence, and by continued improvements in its business processes, technology and risk-management systems

    Stable credit quality and sound financial performance

    • Strong operating performance with the cost-to-income ratio standing at 41.7% as at the year-end
    • Double increase in the operating income to RUR 6.9 billion (RUR 3.5 billion in 2004)
    • Stabilisation in the level of Non Performing Loans experienced in Q4 resulting from improved collection and origination procedures introduced in the second half of the year
    • Prevailing strong capitalisation with risk weighted CAR of 32.2% (21.2% in 2004)
    • HCFB continues to receive the full support of its parent, PPF Group: 209% increase in shareholders‘ equity to RUR 8.6 billion (RUR 2.8 billion in 2004)
    • Confirmation of HCFB credit ratings by Moody’s in December 2005 (& national scale ratings of Aa3.ru assigned by Moody’s Interfax Rating Agency)

    Strategic focus on controlled expansion and business development

    • Expansion of activities across the Russian Federation over the year including:
      • Increase in the distribution network: number of POS at 20,178 at the year-end (9,509 in 2004)
      • HCFB opened 31 new representative offices in the year (57 regional offices in total)
      • Presence in over 1,100 cities and 68 regions across Russia
      • 87% increase in staff numbers in the year to 5,400

    Funding

    • 2005 funding strategy to further diversify funding sources successfully implemented. HCFB entered the Eurobond, international syndicated loan and asset backed securitization (“ABS”) markets
    • HCFB’s ABS transaction represented the first ever public securitization of a rouble denominated consumer loan portfolio. Initial issue amount of EUR 126.5 million, followed by a delayed issue of up to EUR 164.5 million to be placed in 2006
    • Industry recognition of HCFB’s ABS transaction; voted “Deal of Year” by Euromoney magazine and also accredited with a Structured Finance International Award 2006 as ‘Best Securitization of Emerging Market Assets’
    • The total amount of funding raised by HCFB in 2005 is approximately USD 900 million

    HCFB posted a net profit for the year of RUR 309 million and continues to maintain its position as one of the leading providers of consumer finance in the Russian market.

    The volume in consumer loans granted in the period increased by 68% to RUR 47,911 million (2004: 28,496 million), reflecting the continuing expansion of the consumer finance market in Russia. HCFB‘s growth in point of sales activities were supported by the opening of a further 31 representative offices across the country; a doubling to 20,178 in the number of distribution network partner shops and a further strengthening of commercial relationships with key business partners. HCFB is ranked second in the point of sales market in Russia servicing a customer database in excess of 7.5 million.

    HCFB’s revolving credit activities (credit cards) increased significantly in the year with over 2 million new cards issued. HCFB is now the third largest provider of credit cards in Russia representing 4% of the market. Whilst the credit card market in Russia remains a key strategic area of growth for the Bank, HCFB is also considering accessing other segments of the consumer finance market.

    HCFB maintained a strong capitalization position throughout the year with a capital adequacy ratio of 32.2% as at the year-end and is ranked among the strongest Russian banks as measured by cost to income ratio (2005: 41.7%).

    In addition, the Bank continued to attract the support of the international investment community for its funding requirements. HCFB entered into a number of successful domestic funding transactions in 2005 including two rouble demoninated bond issues to raise RUR 6 billion, and two further Eurobond issues in the first half of the year to raise USD 150 million and USD 275 million respectively. Confirmation of HCFB credit ratings assigned by Moody’s was received in December 2005 together with national scale ratings of Aa3.ru assigned by Moody’s Interfax Rating Agency.

    Financial Summary

     
    As at 31 December 2005 TRUR As at 31 December 2004 TRUR % change
    Gross Loans Granted 47 911 161 28 496 412 68.1 %
    Operating Income 6 871 433 3 460 080 98.6 %
    Net Profit 308 619 407 098 -24.2 %
    Total Assets 39 354 070 25 828 653 52.4 %
    Total Equity 8 556 721 2 768 203 209.1 %
                

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