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Banks
www.fitchratings.com 11 April 2013
Russia
Home Credit & Finance Bank Full Rating Report
Key Rating Drivers
Strong Financials, Some Vulnerabilities: Home Credit & Finance Bank’s (HCFB) ratings are
underpinned by its strong profitability, management expertise in consumer lending, its
considerable loss absorption capacity, the solid cash generation of its retail book, and relatively
diversified funding. On the negative side, the ratings are pressured by high credit risks,
although these are well managed on a risk-return basis, the cyclicality of consumer lending in
Russia, gradually increasing competition and greater reliance of profitability on lending volumes.
Excellent Profitability; Sustainability Concerns: HCFB continued to report exceptionally
strong results in 2012 (ROAA of 8.6%), well ahead of most peers. However, in Fitch Ratings’
view, the bank has become increasingly reliant on new lending volumes, as 46% of pre-
impairment profit in 2012 was earned on insurance commissions, which are recognised upfront.
Borrower Leverage Increasing: In Fitch’s view, HCFB probably relaxed underwriting
standards in 2012, at least moderately, given the almost threefold increase in the cash loan
portfolio during the year and higher loss rates. Average loan tickets also increased.
Losses Increased But Manageable: Relaxed underwriting has resulted in higher loss rates.
Non-performing loans (NPLs, overdue more than 90 days) origination increased to 10.4% of
average performing loans in 2012 from 7.8% in 2011. Loss rates could increase further as the
portfolio starts to season after very rapid growth, but wide margins mean HCFB would be able
to sustain much higher loss rates and still remain profitable.
Group Risks Decreased: Contingent risks stemming from leverage of the broader PPF Group
have decreased as a result of the latter’s asset sales. The sale of a 26.5% stake in NOMOS-
Bank generated more than USD700m in Q312, and in Q113 an agreement was reached to exit
insurance holding Generali-PPF, allowing PPF to repay EUR2.5bn of debt in 2013-2014.
Decent Deposit Collection Capacity: Retail deposits accounted for 61% of liabilities at end-
2012. Given that deposits have been acquired recently and rates paid by HCFB are above the
market average (as at most retail banks in Russia), these might become flighty during a
downturn. However, HCFB’s capacity to pay higher rates to retain customers mitigates this risk.
Moderate Refinancing Risk: At end-2012, the bank had to refinance about RUB8bn of
domestic bonds. This does not appear onerous in the context of a RUB54bn liquidity cushion
and a cash-generative loan book (monthly principal/interest payments of about RUB20bn, or
7% of liabilities, in 2012).
Solid Capital Position: HCFB’s Fitch core capital (FCC) ratio declined to 15.9% at end-2012
from almost 20% at end-2011, driven by rapid growth. However, HCFB’s capitalisation is still
sound in the context of the strong risk-return profile of its business.
Rating Sensitivities
Stable Outlook: The Outlook reflects Fitch’s view that HCFB’s strong financial metrics
sufficiently offset risks from rapid growth, higher loss rates and potentially tighter regulation.
Growth and Performance: HCFB’s ratings could come under downward pressure if there was
a marked downturn in the Russian economy or further sustained very rapid loan growth, either
at HCFB or across the sector. Conversely, an extended track record of more balanced growth
and sound performance could result in moderate rating upside over the medium term.
Ratings
Foreign Currency
Long-Term IDR BB Short-Term IDR B
Local Currency Long-Term IDR BB Viability Rating bb Support Rating 5 Support Rating Floor NF
Outlooks
Long-Term Foreign-Currency IDR Stable Long-Term Local-Currency IDR Stable National Long-Term Rating Stable
Financial Data
Home Credit & Finance Bank
31 Dec
12 31 Dec
11
Total assets (USDm) 11,122.4 4,835.6 Total equity (USDm) 1,690.1 948.8 Operating profit (USDm) 752.7 423.4 Published net income (USDm)
627.4 334.0
ROAA (%) 8.64 9.05 ROAE (%) 51.26 38.36 Fitch core capital/ weighted risks (%)
15.87 19.89
Capital adequacy (%) 21.40 20.50 Loan growth (%) 112.66 48.98
Related Research
2013 Outlook: CIS and Georgian Banks (December 2012)
Russian Banks Datawatch: Full-Year 2012 (January 2013)
Russian Banks Datawatch 2M13 (March 2013)
Analysts
Dmitri Vasiliev +7 495 956 5576 [email protected] Alexander Danilov +7 495 956 9901 [email protected]
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Home Credit & Finance Bank
April 2013 2
Overview
POS Lending: Leading Position, Limited Growth Potential
From the start of its operations in 2002, HCFB focused on point-of-sale (POS) lending, which
remained its headline product until 2010. The bank has built strong expertise in consumer
lending, a modern operational platform and nationwide coverage with a 25% market share in
POS lending. The bank’s high-yield business model focuses primarily on customers from
outside large cities in the low to middle mass-market segment.
In the long run, the POS market is likely to become increasingly competitive, due to limited
growth potential and the expected entry of state-owned players with significant cost advantages.
In addition, large federal retailers are eager to charge high commissions to banks for the
origination of loans. HCFB’s concentration by retailer is moderate (the three largest retail
chains contribute 34% of HCFB’s monthly POS loan production).
Shift to Larger-Ticket Consumer Lending Increases Risks
HCFB’s shift to larger cash loans (which tripled in total volume in 2012 and reached 64% of the
gross retail portfolio) is a moderate credit negative, as borrower leverage has increased. In
addition, clients are likely to be more conscious of the pricing of cash loans than more granular
POS loans, take-up of which is driven mostly by credit availability and marketing. As a result,
the bank may face tougher competition in the segment from mainstream lenders (eg, larger
state-owned banks and universal private banks), which have funding cost advantages.
Figure 1 Loan Book Composition
End-2012 End-2011 End-2010
(RUBm) (%) (RUBm) (%) (RUBm) (%)
Cash loans 156,303 55,367 18,424 POS, of which 58,827 44,575 43,150
Home improvement 18,589 8 14,398 12 12,255 15 Electronics 14,001 6 8,737 7 11,564 14 Personal computers 13,707 6 8,781 7 9,795 12 Mobile phones 5,647 2 3,655 3 6,300 8 Other 6,883 3 9,004 7 3,236 4
Credit cards 23,731 15,429 11,569 Mortgages 3,860 5,045 6,704 Total 242,721 120,416 79,847
Source: HCFB, Fitch
Significant Geographical Coverage
HCFB has constantly invested in its geographical coverage, and has significantly expanded its
branch network over the last couple of years. This should not put much pressure on its financial
standing, as new offices are mostly low-cost. HCFB’s branch network is now the third-largest in
Russia after state-owned Sberbank of Russia (BBB/Stable/bbb) and Russian Agricultural Bank
(BBB/Rating Watch Negative/b). At end-2012, the bank had 6,356 offices and outlets, and was
also present in more than 69,000 points-of-sale.
Risks and Rewards of Being a Part of PPF Group
HCFB is owned by PPF Group, which is 94.25% controlled by Czech businessman Petr Kellner.
PPF’s assets are quite diversified by sector (see Annex 2), but HCFB is by far the largest
contributor to group profitability. PPF’s exposure to Russia is high, with assets in several
sectors.
PPF Group Asset Sales Reduce Contingent Risks for HCFB
Potential risks for HCFB as a result of PPF Group’s other investments and leverage have
reduced markedly as a result of recent asset sales. Most importantly, in January 2013, PPF
Group reached agreement on the terms of the sale to Assicurazioni Generali SpA
(BBB+/Negative) for EUR2.52bn of its remaining 49% stake in Generali PPF Holding B.V., a
joint venture owning insurance businesses across Central and Eastern Europe, plus a dividend
Related Criteria
Global Financial Institutions Rating Criteria (August 2012)
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April 2013 3
payment of EUR172m in the first quarter of 2013 before the closing of the transaction. The first
part of the sale (25% stake; EUR1.3bn) was completed in March 2013, with a further 24%
stake to be sold for EUR1.2bn by the end of 2014. This will enable PPF Group to repay
EUR2.5bn of financing taken on as part of the initial creation of the joint venture.
In September 2012, PPF also sold its 26.5% stake in Russia’s NOMOS-Bank for USD700m.
Following these asset sales, Fitch views PPF Group’s current leverage as low. However, in the
agency’s view, the group’s leverage is potentially quite volatile and dependent on investment
opportunities and strategy. In addition, PPF's performance outside of HCFB appears to be not
that strong, with some of the business segments reporting only marginal profits at best (see
Annex 2). HCFB accounted for approximately half of the group’s net profit in H112 (adjusted for
the non-recurring impairment of the NOMOS investment).
No Major Effect From Home Credit Kazakhstan Acquisition
In December 2012 and January 2013, HCFB consolidated 100% of Home Credit Bank in
Kazakhstan (HCK), following the approval of the Kazakh regulator. The acquisition will not have
a significant impact on HCFB’s credit profile, as the subsidiary accounted for only about 5% of
consolidated assets at end-2012. HCK is strongly capitalised, with a Basel total capital
adequacy ratio above 30% at end-2012, and profitable, with an ROAE of 55.4% in 2012.
Management Strategy and Operating Environment
Strong Management Team
HCFB has an experienced management team, headed by CEO Ivan Svitek, who had extensive
international experience in consumer finance before joining the bank in 2008. In Fitch’s view,
the bank has been generally well managed to date and management has delivered strong
results. Balance sheet integrity and the transparency of the business model are markedly
superior to those of most Russian corporate banks with ratings at similar or slightly lower levels.
Higher Household Leverage; Increasing Penetration Among Formerly Underbanked Customers
Retail lending grew by 39% in Russia in 2012, with unsecured consumer finance expanding still
more rapidly, driven mostly by specialised players, including HCFB. Despite relatively low
overall credit penetration, there are signs that some borrowers’ leverage has increased
significantly. High interest rates and short loan tenors mean that debt servicing burdens are
more onerous than overall indebtedness levels might suggest.
According to leading Russia credit bureau NBKI, the number of borrowers in its database
increased by a rapid 28% to 60m people at end-2012 (80% of the labour force or 86% of the
employed population) from 47m at end-2011. At the same time, borrowers having at least five
loans at a time in different banks increased to an all-time high of 8.5% at end-2012 from 4.6%
at end-2011, and the share could be disproportionately higher for lower-income groups.
Regulatory Initiatives Negative for Growth Prospects, but Credit Positive
The Central Bank of Russia has taken a number of measures to contain consumer lending growth.
From July 2013, the regulator plans to increase risk weights for high-yield consumer lending, and
has already introduced higher provisioning rates on such exposures. HCFB raised USD500m of
subordinated debt in October 2012, in part to offset potential pressure on regulatory capital from
these initiatives. Further regulatory tightening cannot be ruled out if measures so far
introduced/proposed do not achieve the goal of curbing high-yield retail loan growth.
Performance
Strong Performance, but Supported by Revenue/Cost Recognition
HCFB’s performance remained strong in 2012, with an ROAA of 8.6% and an ROAE of 51%,
well above levels at most of the bank’s peers. Profitability is supported by wide margins, good
efficiency and still manageable credit costs.
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April 2013 4
In 2012, 46% of pre-impairment profit came from RUB19.4bn agent commissions on borrowers’
life and health insurance, which were charged and recognised upfront as at the date of loan
origination. At the same time, HCFB nets certain transaction costs (costs that could be directly
attributed to loan origination and form part of the effective interest rate) against interest income
and defers them during the loan life. In addition, HCFB booked a RUB1.2bn gain (equal to 5%
of pre-tax profit; classified as non-recurring in the attached Income Statement) from the sale of
a performing consumer finance portfolio to a related special-purpose vehicle, reportedly on a
non-recourse basis.
Profitability More Sensitive to Lending Volumes
Although still strong, HCFB’s profitability has become more sensitive to origination volumes, as
insurance commissions are tied to new lending. Greater market saturation, increasing
competition and tougher regulation mean that new loan issuance is likely to decrease in 2013
(HCFB targets above-market growth during the year, while Fitch believes there is some
downside risk to this forecast), with the same factors also putting moderate downward pressure
on margins. Loss rates are also likely to tick up as the loan book seasons following very rapid
growth in H212.
Figure 2 HCFB’s Products, end-2012 Credit cards Cash loans POS
Share of gross retail loans (%) 9.8 64.3 24.2 Average loan life (months) n.a. 34 18 Average loan size (RUB000) 74.1 119.2 29.6 a For credit cards, based on assumption of 70% limit utilisation and payment equal to 5% of outstanding debt
Source: HCFB, Fitch
Notwithstanding these trends, Fitch expects HCFB to perform well in 2013, barring a major
economic shock or unexpectedly aggressive loan underwriting.
Risk Management
Credit risk is the main risk that HCFB faces. Loss rates have been significant to date, but still
comfortably within levels that the bank can sustain while remaining profitable. As for other
mass-market retail lenders, loss rates are potentially very sensitive to the macroeconomic
environment given the bank’s focus on low mass-market borrowers with limited financial
flexibility. Liquidity and refinancing risks are mitigated by strong cash generation of the loan
book, the long track record of attracting wholesale borrowing, and an ability to tolerate
significantly higher funding rates.
Long Track Record of Managing Credit Risk
HCFB’s clients are mostly low to mid mass-market clients, mostly from Russian regions.
Historical loss rates through the cycle are broadly in line with those at other retail lenders. The
bank’s major acquisition channel is granular POS lending (see Figure 2), which can be used to
test the creditworthiness of the borrower before cross-selling a larger loan.
Scoring models were developed internally and have been tested on a large customer base, and
the database now includes more than 20m records, one of the largest among Russian mass-
market lenders. The bank carries out the same checks and verifications on customers who
have not borrowed from it for a significant period as for street customers.
So far, risks have been well managed on a risk-return basis, providing HCFB with a significant
cushion against a potential spike in NPLs.
Shift to Larger-Ticket Loans Increases Risks
HCFB has started to issue bigger-ticket cash loans (the average loan amount increased by
42% in 2012), although real incomes did not grow significantly in 2011-2012, implying higher
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April 2013 5
borrower leverage. Risks are mitigated by the fact that most recipients of cash loans have a
credit history with the bank, and by various checks and verifications carried out prior to loan
issuance. However, borrowers may still increase their leverage, and the risks for HCFB, by
subsequently taking a further loan from another bank.
Moderate Increase in Loss Rates in 2012; Potentially Significant Downside
The general build-up in household leverage and larger loan tickets at HCFB, combined with the
economic slowdown in Russia, have already translated into higher loss rates, with the NPL
generation ratio rising to 10.4% in 2012 from 7.8% in 2011 (see Annex 3). Given the
unseasoned loan book, a further increase in loss rates is likely in 2013, although strong pre-
impairment profit (equal to 24% of average loans in 2012) provides considerable capacity to
absorb these through the income statement.
Moderate Market Risks
HCFB’s market risks are moderate relative to other risks faced. The bank does not actively
trade securities, and the portfolio held is for liquidity purposes. Bonds held by HCFB are mostly
of Russian banks and corporates; credit risk is reasonable (see Figure 3) and most of the
bonds could be used to obtain repo funding with the Central Bank of Russia. Interest risk could
be significant in the longer term given HCFB’s dependence on high-margin lending and the
potential for greater competition and increasing borrower sophistication to gradually reduce
loan yields. Foreign-currency risk stems from the partial funding of RUB loans with USD
eurobonds (total foreign-currency funding accounted for 11% of liabilities at end-2012), but the
on-balance-sheet position is reasonably hedged with highly rated, mainly foreign-owned banks.
Manageable Operational Risks
Operational risks stem from HCFB’s broad regional coverage. It appears that the bank has
adequately managed these risks so far by investing in modern IT infrastructure, a sophisticated
fraud prevention system based on biometric identity checks and a regularly updated database
containing information about loan issuance behaviour of branches. In addition, credit decisions
are centralised. To date, the bank has avoided large fraud-related losses.
Funding and Liquidity
Strong Capacity to Collect Deposits and to Raise Rates if Needed
HCFB started to collect retail deposits in Q408, before which it was primarily funded by
wholesale borrowings and the parent. Since then, strong deposit collection, supported by the
broad branch network and highly competitive rates offered, has resulted in retail deposits rising
to 61% of liabilities at end-2012 (see Figure 4). In Fitch’s view, HCFB’s depositors (like those of
other consumer finance banks) are relatively mobile and price-sensitive, and could become
flighty during a crisis.
These risks – and the fact that deposits have not been stressed to date – are offset by the
bank’s ability to raise interest rates, which is among the highest of all Russian retail banks.
HCFB’s deposits are quite granular and are mostly covered by deposit insurance, which also
mitigates the early withdrawal risk.
Moderate Near-Term Refinancing Risk
Near-term refinancing needs are not onerous, limited to 13% of total liabilities at end-2012 (see
Figure 5). In addition to short-term interbank funding, which mainly relates to arbitrage
placements used for liquidity management purposes and not included in wholesale refinancing
needs by Fitch, the bank has to redeemRUB4bn of domestic bonds in April 2013, with another
RUB4bn bond containing a put option exercisable in October 2013.
Figure 3 HCFB’s Securities Portfolio, end-2012
Rating Of total
securities (%) Of FCC
(%)
BBB 33.0 18.9 BB 33.4 19.1 B 31.3 17.9 Unrated 2.2 1.3 Total 100 57
Source: HCFB, Fitch
Figure 4
11%
17% 56%
3%13%
18%
62%
7%
5% 3%
5%
Retail
deposits Interbank
Domestic debt
Eurobonds
Subordinated
debtOther
Funding Profile Inner circle - end-2011
Outer circle - end-2012
Source: HCFB, IFRS
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Strong Liquidity Profile
HCFB’s liquidity buffer equalled 32% of end-2012 customer accounts. The liquidity cushion is
reasonable and the bank generally accumulates additional liquidity prior to lumpy wholesale
repayments. In addition, HCFB’s liquidity benefits from its exceptionally cash-generative loan
book, which provided payments of RUB20bn (equal to 12% of customer accounts) per month in
2012.
HCFB benefits from potential liquidity support from PPF Group. Currently, there are no
committed lines from group entities, although Fitch believes that the shareholder would have a
very strong incentive to provide liquidity support to its best-performing asset.
Figure 5 Estimated Funding Maturity Schedule (RUBm) 2013 2014 2015 2016 2017+ Total
Bilateral bank loans 28,298 - 802 - - 29,100 Senior Eurobonds - 15,186 - - - 15,186 Local bonds 8,000 8,000 5,000 - - 21,000 Subordinated Eurobonds - - - - 15,186 15,186 Total 36,298 23,186 5,802 - 15,186 80,472 % of total liabilities 12.7 8.1 2.0 - 5.3
Excluding REPO Source: HCFB, Fitch estimates
Capital
Reasonable Capital Position
HCFB’s FCC ratio declined to 15.9% at end-2012 from almost 20% at end-2011, driven by
extremely rapid growth of consumer finance receivables. HCFB’s capitalisation is still
reasonable in the context of the strong risk-return profile of its business but is not quite the
outright rating strength it was before. The significant reliance of performance on loan origination
volumes may also negatively affect the bank’s deleveraging capacity, while downside risks for
asset quality have become more significant following recent rapid growth.
At the same time, HCFB’s income statement (in particular, its high margins) offers a
considerable first line of defence to absorb any potential losses. Tighter capital regulation by
the Central Bank also somewhat restricts the extent to which HCFB can leverage up its
balance sheet.
Figure 6 Loss Absorption Capacity End-2012 End-2011
IFRS RAS IFRS RAS
Tier 1 capital (RUBm) 51,334 24,059 30,547 26,031 Tier 2 capital (RUBm) 15,290 24,059 - Total capital (RUBm) 66,624 48,119 30,547 26,031 Tier 1 ratio (%) 16.5 7.4 20.5 15.0 Total CAR (%) 21.4 14.7 20.5 15.0 Risk-weighted assets (RUBm) 311,535 326,584 149,358 173,193 Gross loans (RUBm) 257,362 246,839 121,020 126,398 Current LIR (RUBm) 20,046 24,380 8,187 21,738 Additional LIR capacity (RUBm)
a 30,028 8,137 12,794 4,041
Maximum LIR capacity (RUBm)a 50,074 32,517 20,981 25,779
Current LIR/gross loans (%) 8 10 7 17 Additional LIR cap./gross loans (%)
a 12 3 11 3
Maximum LIR/gross loans (%)a 19 13 17 20
Targeted or covenanted total CAR (%) 13 10 13 10
Note: In analysing capital, Fitch's primary focus is on loss-absorbing capital, as expressed by Fitch core capital. However, the Basel total capital ratio is used here in order to provide comparison with regulatory capital. a LIR which the bank could create without total capital ratio falling below targeted/covenanted total CAR
Source: Fitch, HCFB
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Annex 1
Figure 7
Liquidity Position at 31 Jan 2013
(RUBm)
Cash sourcesa
Cash on hand 9,677 Correspondent accounts with central banks
b 6,270
Correspondent accounts with other banks 19,572 Overnight placements with other banks 10,581 Cash and cash equivalents 46,100 Due from other banks (short-term) Additional liquidity sources, incl: Unpledged securities eligible for repo with the central bank 7,790 Total additional liquidity sources 7,790 Total available liquidity 53,890 Average monthly proceeds from loan repayments
c 20,000
Cash uses
a
Loans from banks 10,789 Local bonds 8,000 Wholesale/money markets debt repayments in next 12m 18,789 Potential repayments to government related entities, incl Due to CBR (excluding repo) 9,184 Deposits of ministry of finance, state and regional budgets 4,812 Total potential repayments to government related entities 13,996 Total repayments & other potential cash uses 32,785 Total available liquidity net of wholesale/money markets debt repayments in next 12m 35,101 Total available liquidity net of total potential cash uses 21,105 Total available liquidity/сustomer accounts (%) 32.0 Total available liquidity net of total potential cash uses/сustomer accounts
d (%) 12.9
Monthly proceeds from loan repayments/сustomer accounts (%) 11.9 a Excluding loan issuance/repayments and other items
b Excluding restricted cash
с Bank estimate; Fitch conservatively excludes loan proceeds from calculation of liquid assets
d Customer accounts are net of Ministry of Finance/regional budgets/other non-core government deposits
Source: IFRS statements, bank, Fitch estimates
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Annex 2: PPF’s Other Assets
Figure 8 PPF Breakdown by Segments, End-H112
HCFB Russia
Other home credit Real estate Retail Insurance Other banking Agriculture Other
Key assets/PPF shareholding
100% owned
100% owned
Russian business accounted for 62% of
the portfolio
Mostly Russia-based Eldorado (100%
owned)
Generali-PPF JV (will be
sold) NOMOS (Sold in Aug
2012), PPF Banka (93%)
Russia based RAV-Agro Pro
(100%)
Polymetal (Russia based precious metals producer;20.86% owned), EP-holding (leading
energy company in Czech Republic; 40% owned)
Net profit (EURm) 161 20 -4 -45 76 -7b -8 86
Total assets (EURm) 4,769 1,022 728 1,312 2,651a 4,497 63 3,563
Total equity (EURm) 822 305 304 82 2,651a 827 -4 -72
ROAE (%) 41.5 13.7 -2.6 -80.7 5.8 -1.7 n. m. n. m. ROAA (%) 7.6 4.1 -1.1 -7.6 5.8 -0.4 -25.2 5.3 a Generali-PPF is not consolidated in PPF accounts (49% stake held at end-H112)
b Other banking losses were due to EUR76m impairment of NOMOS investment
Source: PPF IFRS accounts, Fitch
Figure 9
PPF Banking Assets, End-H112
No.
Company information BS data at end-2012 Ratios
Name Industry Country of registration
Stake held (%)
Equity (EURm)
Total assets (EURm)
Net income (EURm)
Return on assets (%)
Return on equity (%) Equity/assets (%)
1 Home Credit a.s. Consumer lending Czech Republic 100 78 186 32 18.0 36.9 42.2 2 Home Credit Slovakia, a.s. Consumer lending Slovakia 100 44 172 20 10.8 45.8 25.8 3 Home Credit Bank OJSC Banking Belarus 100 22 121 -4 -4.1 -17.5 18.1 4 Home Credit branded operations in
China (various companies)a
Consumer lending China 100 170 300 5 3.8 6.4 56.7
5 PPF Vietnam Finance Company LLCa Consumer lending Vietnam 100 35 108 5 7.7 28.3 32.8
6 PPF banka, a.s. Banking Czech Republic 93 237 3,065 37 1.3 17.8 - 15.5 Total 561 3,941 a Data is at end-H112 and is based on segment reporting by PPF group
Source: companies IFRS financials, public disclosure, HCFB
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Annex 3: Loan Quality, NPL Origination
Figure 10 At End-2012
Gross loans
(RUBm) Performing loans
(RUBm) Loan impairment
provision (RUBm) Net loans
(RUBm) NPLs 90+
(RUBm) Gross written-off
loans (RUBm) NPLs 90+ (%) Loan impairment
provision (%) NPL coverage (%)
NPLs originated in period / average
performing loans (%)
Mortgages 3,860 3,671 211 3,649 189 277 4.9 5.5 111.6 -0.5 Car loans 279 248 34 245 31 53 11.1 12.2 109.7 -1.1 Cash loans 164,140 153,566 13,588 150,552 10,574 3,499 6.4 8.3 128.5 11.4 POS loans 65,321 61,160 4,618 60,703 4,161 3,639 6.4 7.1 111.0 9.1 Credit cards 23,738 22,014 1,595 22,143 1,724 1,231 7.3 6.7 92.5 10.9 Total retail loans 257,338 240,659 20,046 237,292 16,679 8,699 6.5 7.8 120.2 10.4
Source: IFRS statements, HCFB
Figure 11 At End-2011
Gross loans
(RUBm) Performing loans (RUBm) Loan impairment
provision (RUBm) Net loans
(RUBm) NPLs 90+
(RUBm) Gross written-off
loans (RUBm) NPLs 90+ (%) Loan impairment
provision (%) NPL coverage (%)
NPLs originated in period / average
performing loans (%)
Mortgages 5,045 4,559 392 4,653 486 315 9.6 7.8 80.7 3.5 Car loans 569 481 90 479 88 139 15.5 15.8 102.3 0.4 Cash loans 55,367 53,069 3,488 51,879 2,298 1,062 4.2 6.3 151.8 7.2 POS loans 44,575 41,458 3,313 41,262 3,117 2,995 7.0 7.4 106.3 8.9 Credit cards 15,429 14,454 893 14,536 975 1,328 6.3 5.8 91.6 8.3 Total retail loans 120,985 114,021 8,176 112,809 6,964 5,839 5.8 6.8 117.4 7.8
Source: IFRS statements, HCFB
Figure 12 At End-2010
Gross loans (RUBm) Performing loans (RUBm) Loan impairment
provision (RUBm) Net loans (RUBm) NPLs 90+ (RUBm) Gross written-off loans (RUBm) NPLs 90+ (%) Loan impairment
provision (%)
Mortgages 6,704 6,088 542 6,162 616 401 9.2 8.1 Car loans 1,215 991 222 993 224 65 18.4 18.3 Cash loans 18,424 17,594 1,131 17,293 830 2,052 4.5 6.1 POS loans 43,150 40,689 2,795 40,355 2,461 2,727 5.7 6.5 Credit cards 11,569 10,295 1,102 10,467 1,274 2,891 11.0 9.5 Total retail loans 81,062 75,657 5,792 75,270 5,405 8,136 6.7 7.1
Source: IFRS statements, HCFB
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Home Credit & Finance Bank
Income Statement31 Dec 2012 31 Dec 2011 31 Dec 2010 31 Dec 2009
Year End Year End As % of Year End As % of Year End As % of Year End As % of
USDm RUBm RUBm RUBm RUBm
Audited/Report not seenAudited/Report not seen Unqualified Unqualified Unqualified
1. Interest Income on Loans 1,652.3 50,185.0 18.29 28,778.0 22.57 24,168.0 28.30 25,638.9 33.67
2. Other Interest Income 73.0 2,218.0 0.81 791.0 0.62 1,180.0 1.38 2,939.0 3.86
3. Dividend Income n.a. n.a. - n.a. - n.a. - n.a. -
4. Gross Interest and Dividend Income 1,725.3 52,403.0 19.09 29,569.0 23.20 25,348.0 29.68 28,577.9 37.53
5. Interest Expense on Customer Deposits 353.4 10,735.0 3.91 2,354.0 1.85 1,662.0 1.95 523.7 0.69
6. Other Interest Expense 149.8 4,549.0 1.66 4,117.0 3.23 4,572.0 5.35 9,607.8 12.62
7. Total Interest Expense 503.2 15,284.0 5.57 6,471.0 5.08 6,234.0 7.30 10,131.5 13.31
8. Net Interest Income 1,222.1 37,119.0 13.53 23,098.0 18.12 19,114.0 22.38 18,446.4 24.22
9. Net Gains (Losses) on Trading and Derivatives (6.8) (206.0) (0.08) 327.0 0.26 180.0 0.21 2,227.2 2.92
10. Net Gains (Losses) on Other Securities (1.5) (46.0) (0.02) (137.0) (0.11) 280.0 0.33 822.0 1.08
11. Net Gains (Losses) on Assets at FV through Income Statement n.a. n.a. - n.a. - n.a. - n.a. -
12. Net Insurance Income n.a. n.a. - n.a. - n.a. - n.a. -
13. Net Fees and Commissions 770.6 23,406.0 8.53 9,591.0 7.52 7,330.0 8.58 6,484.3 8.52
14. Other Operating Income 4.4 135.0 0.05 (537.0) (0.42) (127.0) (0.15) (3,634.1) (4.77)
15. Total Non-Interest Operating Income 766.8 23,289.0 8.49 9,244.0 7.25 7,663.0 8.97 5,899.4 7.75
16. Personnel Expenses 300.5 9,128.0 3.33 5,575.0 4.37 4,398.0 5.15 3,803.2 4.99
17. Other Operating Expenses 348.2 10,576.0 3.85 6,972.0 5.47 4,883.0 5.72 5,108.3 6.71
18. Total Non-Interest Expenses 648.7 19,704.0 7.18 12,547.0 9.84 9,281.0 10.87 8,911.5 11.70
19. Equity-accounted Profit/ Loss - Operating n.a. n.a. - n.a. - n.a. - n.a. -
20. Pre-Impairment Operating Profit 1,340.2 40,704.0 14.83 19,795.0 15.53 17,496.0 20.49 15,434.3 20.27
21. Loan Impairment Charge 587.4 17,841.0 6.50 6,163.0 4.83 3,567.0 4.18 8,872.9 11.65
22. Securities and Other Credit Impairment Charges n.a. n.a. - n.a. - n.a. - n.a. -
23. Operating Profit 752.7 22,863.0 8.33 13,632.0 10.69 13,929.0 16.31 6,561.4 8.62
24. Equity-accounted Profit/ Loss - Non-operating n.a. n.a. - n.a. - n.a. - n.a. -
25. Non-recurring Income 38.5 1,168.0 0.43 n.a. - n.a. - n.a. -
26. Non-recurring Expense n.a. n.a. - n.a. - 2,071.0 2.43 n.a. -
27. Change in Fair Value of Own Debt n.a. n.a. - n.a. - n.a. - n.a. -
28. Other Non-operating Income and Expenses n.a. n.a. - n.a. - n.a. - n.a. -
29. Pre-tax Profit 791.2 24,031.0 8.76 13,632.0 10.69 11,858.0 13.88 6,561.4 8.62
30. Tax expense 163.8 4,975.0 1.81 2,878.0 2.26 2,447.0 2.87 1,382.3 1.82
31. Profit/Loss from Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. -
32. Net Income 627.4 19,056.0 6.94 10,754.0 8.44 9,411.0 11.02 5,179.1 6.80
33. Change in Value of AFS Investments 0.7 20.0 0.01 (26.0) (0.02) (67.0) (0.08) 54.6 0.07
34. Revaluation of Fixed Assets n.a. n.a. - n.a. - n.a. - n.a. -
35. Currency Translation Differences n.a. n.a. - n.a. - n.a. - n.a. -
36. Remaining OCI Gains/(losses) n.a. n.a. - n.a. - n.a. - n.a. -
37. Fitch Comprehensive Income 628.1 19,076.0 6.95 10,728.0 8.42 9,344.0 10.94 5,233.7 6.87
38. Memo: Profit Allocation to Non-controlling Interests n.a. n.a. - n.a. - n.a. - n.a. -
39. Memo: Net Income after Allocation to Non-controlling Interests 627.4 19,056.0 6.94 10,754.0 8.44 9,411.0 11.02 5,179.1 6.80
40. Memo: Common Dividends Relating to the Period 92.2 2,800.0 1.02 13,200.0 10.35 3,158.0 3.70 0.0 0.00
41. Memo: Preferred Dividends Related to the Period n.a. n.a. - n.a. - n.a. - n.a. -
Exchange rate USD1 = RUB30.37270 USD1 = RUB32.19610 USD1 = RUB30.47690 USD1 = RUB30.24420
Earning Assets
Earning
Assets
Earning
Assets
Earning
Assets
Banks
Home Credit & Finance Bank
April 2013 11
Home Credit & Finance Bank
Balance Sheet31 Dec 2012 31 Dec 2011 31 Dec 2010 31 Dec 2009
Year End Year End As % of Year End As % of Year End As % of Year End As % of
USDm RUBm Assets RUBm Assets RUBm Assets RUBm Assets
AssetsA. Loans
1. Residential Mortgage Loans 127.1 3,860.0 1.14 5,045.0 3.24 6,704.0 6.63 8,014.7 8.31
2. Other Mortgage Loans n.a. n.a. - n.a. - n.a. - n.a. -
3. Other Consumer/ Retail Loans 8,345.6 253,478.0 75.03 115,940.0 74.47 74,358.0 73.55 59,400.7 61.57
4. Corporate & Commercial Loans 0.8 24.0 0.01 35.0 0.02 170.0 0.17 386.2 0.40
5. Other Loans n.a. n.a. - n.a. - n.a. - n.a. -
6. Less: Reserves for Impaired Loans/ NPLs 660.0 20,046.0 5.93 8,187.0 5.26 5,957.0 5.89 8,872.6 9.20
7. Net Loans 7,813.5 237,316.0 70.25 112,833.0 72.47 75,275.0 74.46 58,929.0 61.08
8. Gross Loans 8,473.5 257,362.0 76.18 121,020.0 77.73 81,232.0 80.35 67,801.6 70.28
9. Memo: Impaired Loans included above 549.1 16,679.0 4.94 6,975.0 4.48 5,570.0 5.51 8,757.7 9.08
10. Memo: Loans at Fair Value included above n.a. n.a. - n.a. - n.a. - n.a. -
B. Other Earning Assets
1. Loans and Advances to Banks 56.4 1,712.0 0.51 2,092.0 1.34 4,126.0 4.08 1.4 0.00
2. Reverse Repos and Cash Collateral 222.4 6,754.0 2.00 0.0 0.00 83.0 0.08 1,492.1 1.55
3. Trading Securities and at FV through Income n.a. n.a. - n.a. - 14.0 0.01 181.9 0.19
4. Derivatives 8.8 267.0 0.08 608.0 0.39 0.0 0.00 0.0 0.00
5. Available for Sale Securities 931.5 28,291.0 8.37 11,861.0 7.62 5,841.0 5.78 15,516.3 16.08
6. Held to Maturity Securities n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
7. At-equity Investments in Associates 3.4 102.0 0.03 86.0 0.06 63.0 0.06 25.5 0.03
8. Other Securities n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
9. Total Securities 1,166.0 35,414.0 10.48 12,555.0 8.06 6,001.0 5.94 17,215.8 17.84
10. Memo: Government Securities included Above n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
11. Memo: Total Securities Pledged n.a. n.a. - 0.0 0.00 n.a. - n.a. -
12. Investments in Property n.a. n.a. - n.a. - n.a. - n.a. -
13. Insurance Assets n.a. n.a. - n.a. - n.a. - n.a. -
14. Other Earning Assets n.a. n.a. - n.a. - n.a. - n.a. -
15. Total Earning Assets 9,035.8 274,442.0 81.24 127,480.0 81.88 85,402.0 84.47 76,146.2 78.93
C. Non-Earning Assets
1. Cash and Due From Banks 1,565.5 47,548.0 14.08 16,745.0 10.76 7,521.0 7.44 11,945.8 12.38
2. Memo: Mandatory Reserves included above 75.9 2,304.0 0.68 773.0 0.50 188.0 0.19 107.6 0.11
3. Foreclosed Real Estate n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
4. Fixed Assets 301.8 9,167.0 2.71 6,972.0 4.48 5,994.0 5.93 6,373.9 6.61
5. Goodwill n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
6. Other Intangibles 51.9 1,576.0 0.47 833.0 0.54 659.0 0.65 618.6 0.64
7. Current Tax Assets n.a. n.a. - 401.0 0.26 205.0 0.20 226.2 0.23
8. Deferred Tax Assets 11.4 346.0 0.10 n.a. - 142.0 0.14 272.1 0.28
9. Discontinued Operations n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
10. Other Assets 156.0 4,737.0 1.40 3,258.0 2.09 1,176.0 1.16 893.1 0.93
11. Total Assets 11,122.4 337,816.0 100.00 155,689.0 100.00 101,099.0 100.00 96,475.9 100.00
Liabilities and Equity
D. Interest-Bearing Liabilities
1. Customer Deposits - Current 628.2 19,079.0 5.65 10,175.0 6.54 7,191.0 7.11 5,018.7 5.20
2. Customer Deposits - Savings n.a. n.a. - n.a. - n.a. - n.a. -
3. Customer Deposits - Term 5,110.2 155,210.0 45.95 60,123.0 38.62 16,594.0 16.41 8,559.2 8.87
4. Total Customer Deposits 5,738.3 174,289.0 51.59 70,298.0 45.15 23,785.0 23.53 13,577.9 14.07
5. Deposits from Banks 1,706.0 51,815.0 15.34 14,128.0 9.07 7,467.0 7.39 17,212.6 17.84
6. Repos and Cash Collateral n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
7. Other Deposits and Short-term Borrowings n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
8. Total Deposits, Money Market and Short-term Funding 7,444.3 226,104.0 66.93 84,426.0 54.23 31,252.0 30.91 30,790.5 31.92
9. Senior Debt Maturing after 1 Year 1,209.7 36,743.0 10.88 37,450.0 24.05 34,152.0 33.78 36,987.9 38.34
10. Subordinated Borrowing 508.5 15,444.0 4.57 n.a. - 0.0 0.00 0.0 0.00
11. Other Funding n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
12. Total Long Term Funding 1,718.2 52,187.0 15.45 37,450.0 24.05 34,152.0 33.78 36,987.9 38.34
13. Derivatives 14.5 439.0 0.13 80.0 0.05 95.0 0.09 142.1 0.15
14. Trading Liabilities n.a. n.a. - n.a. - 0.0 0.00 0.0 0.00
15. Total Funding 9,177.0 278,730.0 82.51 121,956.0 78.33 65,499.0 64.79 67,920.5 70.40
E. Non-Interest Bearing Liabilities
1. Fair Value Portion of Debt n.a. n.a. - n.a. - n.a. - n.a. -
2. Credit impairment reserves n.a. n.a. - n.a. - n.a. - n.a. -
3. Reserves for Pensions and Other n.a. n.a. - n.a. - n.a. - 136.9 0.14
4. Current Tax Liabilities 21.7 660.0 0.20 n.a. - n.a. - n.a. -
5. Deferred Tax Liabilities 0.6 17.0 0.01 14.0 0.01 n.a. - n.a. -
6. Other Deferred Liabilities n.a. n.a. - n.a. - n.a. - n.a. -
7. Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. -
8. Insurance Liabilities n.a. n.a. - n.a. - n.a. - n.a. -
9. Other Liabilities 232.9 7,075.0 2.09 3,172.0 2.04 2,581.0 2.55 1,586.8 1.64
10. Total Liabilities 9,432.2 286,482.0 84.80 125,142.0 80.38 68,080.0 67.34 69,644.2 72.19
F. Hybrid Capital
1. Pref. Shares and Hybrid Capital accounted for as Debt n.a. n.a. - n.a. - n.a. - n.a. -
2. Pref. Shares and Hybrid Capital accounted for as Equity n.a. n.a. - n.a. - n.a. - n.a. -
G. Equity
1. Common Equity 1,542.2 46,841.0 13.87 30,585.0 19.64 33,031.0 32.67 26,777.1 27.76
2. Non-controlling Interest 148.5 4,511.0 1.34 n.a. - n.a. - n.a. -
3. Securities Revaluation Reserves 0.7 21.0 0.01 (38.0) (0.02) (12.0) (0.01) 54.6 0.06
4. Foreign Exchange Revaluation Reserves n.a. n.a. - n.a. - n.a. - n.a. -
5. Fixed Asset Revaluations and Other Accumulated OCI (1.3) (39.0) (0.01) n.a. - n.a. - n.a. -
6. Total Equity 1,690.1 51,334.0 15.20 30,547.0 19.62 33,019.0 32.66 26,831.7 27.81
7. Total Liabilities and Equity 11,122.4 337,816.0 100.00 155,689.0 100.00 101,099.0 100.00 96,475.9 100.00
8. Memo: Fitch Core Capital 1,627.4 49,429.0 14.63 29,714.0 19.09 32,218.0 31.87 25,941.0 26.89
9. Memo: Fitch Eligible Capital n.a. n.a. - n.a. - n.a. - n.a. -
Exchange rate USD1 = RUB30.37270 USD1 = RUB32.19610 USD1 = RUB30.47690 USD1 = RUB30.24420
Banks
Home Credit & Finance Bank
April 2013 12
Home Credit & Finance Bank
Summary Analytics31 Dec 2012 31 Dec 2011 31 Dec 2010 31 Dec 2009
Year End Year End Year End Year End
A. Interest Ratios
1. Interest Income on Loans/ Average Gross Loans 29.00 29.96 33.91 34.09
2. Interest Expense on Customer Deposits/ Average Customer Deposits 9.12 6.42 9.10 4.51
3. Interest Income/ Average Earning Assets 28.42 30.03 33.09 36.31
4. Interest Expense/ Average Interest-bearing Liabilities 8.59 7.36 9.83 12.72
5. Net Interest Income/ Average Earning Assets 20.13 23.46 24.95 23.44
6. Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets 10.46 17.20 20.30 12.16
7. Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets 20.13 23.46 24.95 23.44
B. Other Operating Profitability Ratios
1. Non-Interest Income/ Gross Revenues 38.55 28.58 28.62 24.23
2. Non-Interest Expense/ Gross Revenues 32.62 38.79 34.66 36.60
3. Non-Interest Expense/ Average Assets 8.93 10.56 9.75 8.49
4. Pre-impairment Op. Profit/ Average Equity 109.48 70.61 59.21 65.08
5. Pre-impairment Op. Profit/ Average Total Assets 18.45 16.66 18.38 14.70
6. Loans and securities impairment charges/ Pre-impairment Op. Profit 43.83 31.13 20.39 57.49
7. Operating Profit/ Average Equity 61.50 48.63 47.14 27.67
8. Operating Profit/ Average Total Assets 10.36 11.47 14.64 6.25
9. Taxes/ Pre-tax Profit 20.70 21.11 20.64 21.07
10. Pre-Impairment Operating Profit / Risk Weighted Assets 13.07 13.25 17.76 20.27
11. Operating Profit / Risk Weighted Assets 7.34 9.13 14.14 8.62
C. Other Profitability Ratios
1. Net Income/ Average Total Equity 51.26 38.36 31.85 21.84
2. Net Income/ Average Total Assets 8.64 9.05 9.89 4.93
3. Fitch Comprehensive Income/ Average Total Equity 51.31 38.27 31.62 22.07
4. Fitch Comprehensive Income/ Average Total Assets 8.65 9.03 9.82 4.99
5. Net Income/ Av. Total Assets plus Av. Managed Securitized Assets n.a. n.a. n.a. n.a.
6. Net Income/ Risk Weighted Assets 6.12 7.20 9.55 6.80
7. Fitch Comprehensive Income/ Risk Weighted Assets 6.12 7.18 9.48 6.87
D. Capitalization
1. Fitch Core Capital/Weighted Risks 15.87 19.89 32.70 34.07
2. Fitch Eligible Capital/ Weighted Risks n.a. n.a. n.a. n.a.
3. Tangible Common Equity/ Tangible Assets 14.71 19.19 32.12 27.14
4. Tier 1 Regulatory Capital Ratio 16.50 20.50 33.50 35.20
5. Total Regulatory Capital Ratio 21.40 20.50 33.50 36.40
6. Core Tier 1 Regulatory Capital Ratio n.a. n.a. n.a. n.a.
7. Equity/ Total Assets 15.20 19.62 32.66 27.81
8. Cash Dividends Paid & Declared/ Net Income 14.69 122.75 33.56 0.00
9. Cash Dividend Paid & Declared/ Fitch Comprehensive Income 14.68 123.04 33.80 0.00
10. Cash Dividends & Share Repurchase/Net Income n.a. n.a. n.a. n.a.
11. Net Income - Cash Dividends/ Total Equity 31.67 (8.01) 18.94 19.30
E. Loan Quality
1. Growth of Total Assets 116.98 54.00 4.79 (14.96)
2. Growth of Gross Loans 112.66 48.98 19.81 (17.95)
3. Impaired Loans(NPLs)/ Gross Loans 6.48 5.76 6.86 12.92
4. Reserves for Impaired Loans/ Gross loans 7.79 6.76 7.33 13.09
5. Reserves for Impaired Loans/ Impaired Loans 120.19 117.38 106.95 101.31
6. Impaired Loans less Reserves for Imp Loans/ Equity (6.56) (3.97) (1.17) (0.43)
7. Loan Impairment Charges/ Average Gross Loans 10.31 6.42 5.00 11.80
8. Net Charge-offs/ Average Gross Loans 3.93 4.10 9.10 11.72
9. Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets 6.48 5.76 6.86 12.92
F. Funding
1. Loans/ Customer Deposits 147.66 172.15 341.53 499.35
2. Interbank Assets/ Interbank Liabilities 3.30 14.81 55.26 0.01
3. Customer Deposits/ Total Funding excl Derivatives 62.63 57.68 36.37 20.03
Banks
Home Credit & Finance Bank
April 2013 13
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