Management PresentationSeptember 2009
Page 2
WHILE JSC BTA BANK (“BTA BANK” OR THE “BANK”) HAS TA KEN ALL REASONABLE MEASURES TO ENSURE THAT THE INFORMATION CONTAINED HEREIN IS CORRECT, ACCURATE A ND COMPLETE AT THE DATE OF PUBLICATION, NO REPRESENTATION OR WARRANTY IS MADE (EXPRESS OR IMPL IED) AS TO THE RELIABILITY, ACCURACY OR COMPLETENESS OF SUCH INFORMATION AND NO RELIANCE SH OULD BE PLACED ON SUCH INFORMATION.
THIS DOCUMENT DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY SECURITIES OF THE BANK.
THIS PRESENTATION INCLUDES FORWARD-LOOKING STATEMEN TS. YOU ARE CAUTIONED NOT TO PLACE RELIANCE ON FORWARD-LOOKING STATEMENTS. ALL STATEMENTS OTHER TH AN STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS PRESENTATION, INCLUDING, WITHOUT LIMITATION, T HOSE REGARDING THE BANK’S FINANCIAL POSITION, PROSPECTS, BUSINESS STRATEGY, MANAGEMENT PLANS AND OBJECTIVES FOR FUTURE OPERATIONS ARE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENT S INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, WHICH MAY CAUSE TH E BANK’S ACTUAL RESULTS, PERFORMANCE, ACHIEVEMENTS OR INDUSTRY RESULTS TO BE MATERIALLY D IFFERENT FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOO KING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE BANK’S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE BANK EXPECTS TO OPERATE IN THE FUTURE
Disclaimer
Page 3
a. Kazakhstan Economy
b. Key Banking Sector Trends
c. Banking Sector Penetration Ratios
d. Competitive Landscape
Executive Summary
I. Market Overview
II. Update On Recent Developments – 2009
a. BTA Bank snapshot pre-restructuring
b. Recent Developments
c. Recent Financial Performance
d. Current Portfolio Structure
e. Overview of Asset Deterioration
f. Corporate, SME & Retail Loans
g. Investment in Affiliates & Key Subsidiaries
h. Securities
i. Funding and Deposit Outflow
Table of Contents
Page 4
III. New BTA Strategy
a. Strategy Overview
b. Focus on Current Liquidity
c. Branch Network & Subsidiaries
d. Current Structure & Governance
e. Specific Focus on Risk Management
f. Treasury
g. Human Resources & IT
a. Presentation of the Total Gross Loan Portfolio
b. Focus on Corporate Clients
c. Focus on the “Troubled Assets Portfolio”
d. Restructuring and Recovery Strategy
e. Focus on the “Performing Loans Division”
f. Corporate Business Strengths & Development Strat egy
g. Specific Focus on the Trade Finance
h. Deposits & Lending Dynamics
IV. Corporate Business Strategy
Table of Contents (cont’d)
Page 5
V. SME Business Strategy
a. Macroeconomic Considerations
b. SME Business Overview
c. Presentation of the Total Gross Loan Portfolio
d. Impaired Assets Criteria
e. Restructuring and Recovery Strategy
f. SME Business Strengths & Development Strategy
g. Lending Dynamics
VI. Retail Business Strategy
VII. Q&A
a. Macro-Economic Considerations
b. Evolution of Retail Clients
c. Presentation of the Total Gross Loan Portfolio
d. Impaired Assets Portfolio
e. Restructuring and Recovery Strategy
f. Retail Business Strengths & Development Strategy
g. Deposits & Lending Dynamics
Table of Contents (cont’d)
Page 6
Executive Summary
Page 7
Executive Summary
� Kazakhstan economy, which has been rapidly growing over the past decade, was heavily impacted by the global credit crunch and economic crisis, in particular the sharp decline in commodity prices
� The banking sector, which used to rely on access to cheap international funding, is currently facing major liquidity issues resulting from shortage of external funding combined with a dramatic decline in asset quality
� Recovery of the Kazakh banking system is largely dependent on macroeconomic prospects of Kazakhstan
� BTA has been Kazakhstan’s leading bank with #1 or #2 position in major areas. The Bank focused in particular on Corporate Banking and Trade Finance
� Its financial position was heavily affected by its loan portfolio that included a large number of dubious loans to non-transparent companies outside of Kazakhstan (including borrowersincorporated in a number of off-shore jurisdictions such as Panama, Cayman Islands and British Virgin Islands). Continuous investigations into suspected corporate governance abuses as many loans appear to be linked to former management
� Almost the entire corporate loan portfolio of the Bank had to be fully provisioned. The Bank’s trade finance portfolio is also largely composed of non-performing and dubious assets
� The impaired nature of BTA’s loan portfolio was revealed in late 2008 through FMSA investigations, which had led to BTA being acquired by JSC SWF “Samruk-Kazyna” (Samruk-Kazyna) and the creation of additional provisions reducing BTA’s net loans and impacting its capital structure
� Further to BTA’s acquisition by Samruk-Kazyna and replacement of BTA’s top management, further asset impairments were revealed at BTA, which had led to more provisions being created throughout 1H 2009
� Since its acquisition of BTA, Samruk-Kazyna has invested c.US$7bn to support BTA’s liquidity and does not intend to make any additional investments
Kazakhstan Economy
Background on BTA
Page 8
Executive Summary (cont’d)
� The new strategy of BTA is focused on:
- Recovery of troubled assets
- Reliance on customer funds and State as key sources of funding
- Refocusing of BTA’s business strategy with higher emphasis on Kazakhstan customers, retail and SME Business
- Scaling back on corporate and international business
- Rigorous risk management, KYC and lending policies
� BTA’s banking franchise (in particular, retail and SME) is fundamentally a healthy business that will perform efficiently now that the management and key shareholders of the Bank have changed and deficient legacy lending practices have been abandoned. Retail and SME blocs have retained the core infrastructure and personnel despite the recent financial turmoil
� A successful debt restructuring would boost the Bank’s profile in Kazakhstan and provide BTA with a certain competitive advantage over its local peers as it would be one of the first Kazakhstan banks to re-emerge after the peak of the financial crisis.
� The completion of debt restructuring is expected to stop deposit outflows and trigger a significant increase of loan recoveries and expansion of retail and SME business due to improved customer confidence
� Further development of SME and Retail businesses will ensure strong synergies and cross-selling opportunities
� Close ties with its key shareholder, Samruk-Kazyna combined with BTA’s strong infrastructure provide the Bank with a unique opportunity to benefit from servicing various state-sponsored programmes, as well as to act as the preferred bank for Samruk-Kazyna’s group companies
� BTA’s management and Samruk-Kazyna are fully committed to BTA’s successful recovery and development going forward
� BTA would become an attractive partner for strategic investors post-restructuring
New Strategy
Page 9
I Market Overview
Page 10
I Market Overview
a. Kazakhstan Economy
b. Key Banking Sector Trends
c. Banking Sector Penetration Ratios
d. Competitive Landscape
Page 11
Kazakhstan Economy
Source: NBRK, SARK
� Major international oil&gas player:� 3% of total world oil reserves� 1.7% of total world gas
reserves
� Key national industry:� c. 1/6 of GDP� 59% of exports
� Improved production capacities with infrastructure investments
� Price drop over 50% since peak (oil)
� 6th largest exporter of grain globally
� Regulatory framework for grain production developed in co-operation with EBRD
� Favorable climate (similar to Canada)
� Proximity to largest consumers (Russia and CIS, Middle East)
� Price drop over 50% since peak
� The last year’s sharp drop in commodities prices ha s negatively affected Kazakhstan growth projects since mid-2008 (e.g. exports in Q1 2009 down by c.6 0% vs. Q2 2008 or Q3 2008)
Kazakhstan Economy is Largely Dependent on Natural Resources
Oil & Gas: 16.0% of GDP Metals & Mining: 18.7% of GDP Agriculture: 5.3% of GDP
� Kazakhstan is world’s:� # 2 in uranium reserves� # 3 in zinc reserves � # 11 in copper reserves
� Cost improvement
� Mostly privatized and owned by large local players or leading internationals
� Price drop since peak: � Copper – 30%� Uranium – 50%� Zinc – 40%
Page 12
8.4%
5.9%
6.4% 6.9%7.6%
8.6%
10.8%
17.0%
6.0% 6.0% 6.0%6.0%
9.5%
8.7%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Actual Forecast
8.9%
10.7%9.6% 9.7%
13.5%
9.8%9.3%
1.5%
-2.0%
8.0%6.5%6.5%
6.0%
3.3%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Actual Forecast
Inflation Rates
Source: IMF as of 30/04/2009, SARK
� Surging commodity prices combined with a credit boo m supported a very strong economic performance in 2000-2007
� The international credit crunch and the global econ omic crisis have neutralized these two drivers lead ing to deceleration of growth in 2008 and expected drop in GDP in 2009
Kazakhstan Economy (cont’d)
GDP Growth Rates
Source: IMF as of 30/04/2009, SARK
Page 13
77.885.5
71.8
65.066.1
72.4
99.6
40
60
80
100
2006 2007 2008 2009 2010 2011 LT
Oil Prices (US$/bbl)
Source: brokers’ estimates, August 2009Note: WTI prices
Kazakhstan Economy (cont’d)
Uranium Prices ($/lb)
Source: brokers’ estimates, August 2009, BTA Bank
� Oil prices are expected to recover in 2010, fuelled by the expected recovery of the global economy, wh ich will drive demand
� Uranium demand is expected to grow by an average of 3.7% per year during the next 20 years whereas the prevailing uranium price is perceived as too low to stimulate sufficient supply to cover this future d emand. Hence after the trough reached in 2009 (below $50/l b) the prices are expected to stabilize in the mediu m/long term
Actuals Forecasts
65.063.2
100.1
48.8
63.0
48.1
67.5
65.0
40
60
80
100
2006 2007 2008 2009 2010 2011 2012 2013
Actuals Forecasts
Page 14
Funding Structure of Kazakh Banks (May 2009)
Source: FMSA
Key Banking Sector Trends
Key Figures
Source: SARK and FMSA
Net Profit Evolution ($m)
Source: Analyst report, FMSA, July 2009
� 5.3% of total GDP
� 38 commercial banks
� 1.2% of total economically active population
� Total assets / GDP: 76.4%
� Total loans / GDP: 64.3%
� Total deposits / GDP: 33.8%
� Corporate deposits / GDP: 23.5%
� Individual deposits / GDP: 10.3%
� Total Tier 1 capital / Total assets: (3.0)%
� 8.5% excluding BTA Bank and Alliance Bank
� Total reserves / Total loans: 30.6%
� 3 largest banks account for 58.3% of the total
banking system assets
Corporate deposits
31%
Retail deposits13%
Other sources8%
Eurobonds20%
Liabilities to f inancial
organizations18%
Local bonds 10%
89
1,806801538
(14,556)
2005 2006 2007 2008 30/06/09
Page 15
Evolution of Total Loans and Loss Provisions (LLP) Ratios at Major Kazakhstan Banks ($bn)
Source: Kazakhstan Financial review, June 2009
Evolution of Total Assets ($bn)
Source: Kazakhstan Financial Review, June 2009Note: $1= KZT150
� Total loans in the Kazakhstan banking sector grew t o $68bn in
June 2009 (from $47bn in December 2006). This incre ase was
driven mainly by very high GDP growth rates and eas y access
to foreign funding. The past 6 months, however, sho wed
significant negative dynamics in total loans
� Although the total banking assets have remained sta ble in the
first half of 2009, there was a sharp increase in t he loan
provisioning ratio at Kazakhstan banks, which result ed in a
much weaker performance
Key Banking Sector Trends (cont’d)
817978
31/12/07 31/12/08 30/06/09
47
74 77
68
23
5.9%
11.1%
30.6%
5.6% 5.0%
31/12/2005 31/12/2006 31/12/07 31/12/08 30/06/09
Loans LLP/loans
Page 16
Loan and Deposit Penetration (2008)
Loans/GDP Deposits/GDP
Source: EIU, Central Banks, FMSA (Kazakhstan Financial review, June 2009)Note: (1) CEE: Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia
Banking Sector Penetration Ratios
� System suffers from structurally high loans/deposit s ratio
34%
26%
32%
38%
38%
55%
89%
30%
29%
31%2006
2007
2008
30/06/09
Russia
CEE Average
Poland
Ukraine
Czech Republic
Euro Area
(1)
64%
37%
41%
42%
48%
76%
125%
69%
59%
59%2006
2007
2008
30/06/09
CEE Average
Russia
Czech Republic
Poland
Ukraine
Euro Area
(1)
Page 17
Competitive Landscape
21.8%
20.9%
12.5%
8.9%
7.2%
3.4%
Halyk
KKB
BTA
CenterCredit
ATF
Alliance4.9%
8.0%
8.8%
16.3%
21.0%
21.1%BTA
KKB
Halyk
ATF
CenterCredit
Alliance 6.7%
6.8%
8.8%
12.7%
24.9%
25.6%BTA
KKB
Halyk
ATF
CenterCredit
Alliance
Ranking by Total Assets Ranking by Total Gross Loans Ranking by Total Deposits
Source: FMSA - 30/06/2009Note: $1= KZT150
Total Banking Assets:KZT12,150bn ($81bn)
Total Loans:KZT10,221bn ($68bn)
Total Deposits:KZT5,370bn ($36bn)
Page 18
II Update On Recent Developments – 2009
Page 19
II Update On Current Standings
a. BTA Bank Snapshot Pre-restructuring
b. Recent Developments
c. Recent Financial Performance
d. Current Portfolio Structure
e. Overview of Asset Deterioration
f. Corporate, SME & Retail Loans
g. Investment in Affiliates & Key Subsidiaries
h. Securities
i. Funding and Deposit Outflow
Page 20Page 20
Source: Company information
Overview Key Financials (KZTbn) – 2006 to 2008
Gross Loan Portfolio (31/12/2008)
� 25.6% market share in loans and 12.5% in deposits a s of 30/06/2009
� More than 1.3 million retail and 150,000 corporate clients
� Nationwide branch network including 22 branches and 269 cash settlement centers in Kazakhstan
� Extensive presence in the CIS
� Strategic partnership with Samruk-Kazyna and a leadin g role in servicing government-sponsored financingprogrammes
Retail9.9%
SME9.2%
Corporate80.9%
BTA Bank Snapshot Pre-Restructuring
2006 2007 2008 CAGR 06––––08080808
Balance sheet Gross loans 1,240 2,197 2,504 42.1 Provisions on loans (65) (111) (214) 81.4
Net loans 1,173 2,086 2,289 39.7
Total assets 1,825 2,649 2,915 26.4 Client deposits 495 591 828 29.4 Total equity 167 404 417 57.8 Income statement Net interest income 46 112 152 81.2 Operating income 107 161 167 25.4
Provisions (39) (45) (108) 66.4
Net income 21 49 13 (21.6) Key ratios Cost/income ratio 38.9 33.2 27.8 RoAE 16.0 17.0 3.1
Tier 1 ratio 9.6 13.6 13.9
Tier 2 ratio 13.5 13.8 13.2
%
%
%
%
%
%
%
%
%
%
Page 21Page 21
Historical Balance Sheet
Source: Company information, unconsolidated financials based on local GAAP
(KZT bn) 31/12/2008 31/03/2009 30/06/2009
Securities sold by REPO 52 250 364
Bank accounts and client deposits 828 788 682
Debt securities issued 781 887 898
Bonds to S-K - 648 662
Debt due to banks 623 626 550
Subordinated debt 159 147 147
Other liabilities 56 84 154
Total liabilities 2,498 3,430 3,456
Equity 417 367 (890)
Total 2,915 3,797 2,566
Key Comments
� Loan provisions have grown 10 times by June 2009 y- o-y. A sharp decrease in net loans resulted from additional provisions combined with a decrease in gross loans
� Substantial client deposit outflows in 1H 2009 resu lted in sharp deterioration in BTA’s cash position
Recent Financial Performance
Assets Liabilities / Equity
(KZT bn) 31 /12/2008 31/03/2009 30/06/2009
Cash and obligatory reserves 112 127 67
Trading securities 146 820 780
Loans and deposits to other banks 34 73 78
Gross loans to customers 2,504 2,883 2,897
Provisions (214) (491) (1,602)
Net loans to customers 2,2 89 2,392 1,295
Investments 213 232 233
Fixed and intangible assets 12 12 11
Other assets 109 142 101
Total 2,915 3,797 2,566
Note: (1) Includes Principal Amount + Accrued Interests
(1)
Page 22
Historical P&L Key Comments
� Weak net interest income in
1H 2009 due to a rapid increase in
non-performing loans
� Other non-interest losses in
1H 2009 are largely attributed to
losses from operations with
foreign currencies as well as
dealing transactions
� c. $9bn of new provisions created
due to further internal
investigations with respect to loan
quality
(KZT bn) FY 2008 Q1 2009 Q2 2009
Net interest income 152 34 19
Net fee and commission income 24 5 8
Other non-interest (loss) / income (9) 1 (28)
Operating income 167 40 (1)
Operating expenses (47) (9) (18)
Provisions for loan impairment (108) (246) (1,358)
Other provisions 3 (47) (141)
Profit before tax 16 (262) (1,518)
Income tax (expense) / benefit 3 0 0
Net (loss) / income 13 (262) (1,518)
Source: Company information, unconsolidated financials based on local GAAP
Recent Financial Performance (cont’d)
Page 23Page 23
� Total gross off-balance sheet exposure was equal to c.30% of total gross exposure as of 30/06/2009
� Trade finance operations, represented by L/Cs and g uarantees issued for clients, amounted to c.$1.8bn as of 30/06/2009
Loans and Off-Balance Sheet Exposure (KZTbn)
Source: Company information, unconsolidated financials based on local GAAP
Key Comments
Current Portfolio Structure
31/12/2008 31/03/2009 30/06/2009
Loans to legal entities 2,076 2,353 2,379
Loans to individuals 228 249 236
Total gross balance sheet exposure 2,304 2,602 2,615
Guarantees 902 998 1,006
o/w for clients 189 195 195
o/w Eurobonds 713 803 811
Letters of credit 133 120 93
Total gross off-balance sheet exposure 1,035 1,118 1,099
Total gross exposure 3,339 3,720 3,714
% of loans granted to related parties 1.6 1.5 1.5
Page 24
Тор 21 - 4012.8%
Other loans51.1%
Тор-2026.0%
Тор 41 - 6010.1%
Russia10.4%
Off-shore20.5%
Other CIS0.6% Kazakhstan
47.6%
Other 20.8%
Housing construction
16.1%
Infrastructure construction
8.9%Wholesale trade
11.0%
Individuals9.0%
Agriculture5.6%
Other19.9%
Oil and gas13.3%
Real estate16.2%
Corporate83.3%
SME7.7%
Retail9.0%
USD58.2%
Other2.0%
KZT33.9%
EUR5.8%
Insurance policy4.7%
Other26.5%
Blank17.6%
Goods in future6.5%
Real estate25.7%
Pawned (securities, shares and
others)11.6%
Guarantees7.3%
Currency Collateral Concentration of Borrowers*
Loan Portfolio Breakdown (30/06/2009)
Industry Clients Geographical Concentration
Source: Company information
Note:* only Corporate and SME
Current Portfolio Structure (cont’d)
Page 25
Source:Company information; the 30/06/2009 numbers represent BTA’s management’s view only and have not been independently verified
� The $9bn increase in provisions recorded in 1H 2009 after audit work results were subsequently applied to the local GAP provision figures
� Loan portfolio parameters were also affected by the Tenge devaluation and reclassification of certain as set types based on FMSA rules
Key Comments
Loan Portfolio Performance in 1H 2009 (KZTbn)
Overview of Asset DeteriorationGross Loans and Provisions by Business
31/12/2008 30/06/2009
(KZT bn) Gross loans
Accrued interest Provisions (%)
Gross loans
Accrued interest Provisions (%)
Corporate – Commercial loans 605 53 65 10.8 572 45 266 46.5
Corporate – Investment loans 543 58 24 4.5 687 123 463 67.4
Corporate – CIS excl. Kazakhstan 717 83 72 10.0 919 108 756 82.3
Corporate 1,865 194 161 8.7 2,178 276 1,485 68.2
SME 211 2 22 10.5 201 2 49 24.2
Retail 228 4 31 13.5 236 4 69 29.1
Total gross loans 2,304 200 214 9.3 2,615 282 1,602 61.3
Off-balance sheet exposure 1,035 5 0.5 1,099 99 9.0
Total gross exposure 3,339 219 6.6 3,714 1,711 45.8
Page 26
Source: Company information, unconsolidated financials based on local GAAP
� In 1H 2009 non-performing loans increased from 4.2% to 56.0% of gross loans, while standard loans fell to 25.7% of gross loans (in accordance with local meth odology of creating provisions)
Key Comments
Provision Statistics Based on Local Methodology
Overview of Asset Deterioration (cont’d)
31/12/2008 31/06/2009
(KZT bn) Gross loans Provisions (%) Gross loans Provisions (%)
Standard loans 1,102 0.0 673 0.0
Doubtful loans 1,106 118 10.6 478 147 30.7
1 category (5% provisioning) 715 29 4.1 117 6 5.0
2 category (10% provisioning) 33 3 7.1 23 2 10.0
3 category (20% provisioning) 278 56 20.0 82 16 20.0
4 category (25% provisioning) 38 10 25.0 20 5 25.0
5 category (50% provisioning) 41 21 50.0 237 117 49.6
Non-performing loans (100%) 97 97 100.0 1,465 1,465 100.0
Total on-balance sheet exposure 2,304 214 9.3 2,615 1,611 61.6
1,602
108
138 28.8
45.8
61.3
31/12/2008 30/06/2009
Page 27
Corporate LoansLoan Portfolio Breakdown
Roa ds & Indust ria l
buildings
2.4%
Tra de
28.2%
Che mic a ls
2.4%
Ot he r
1.8%
Oil & Ga s
34.2%
Re a l Est a t e
inve st me nt s
17.3%
Housing c onst ruc t ion
13.7%
Agriculture4 .4%
Other6 .1%
Chemicals3 .1%
Teleco ms2 .7%
Financial Services
4 .4%Energ y and Oil
& Gas11.8%
Real Es tate inves tments
28 .6%
Housing cons truction
22 .3%
Ro ads & indus trial build ings
16 .6%
> 3 years46 .4%
1-3 years36 .4%
6 m-1 year1.6%
1-6 months
4 .6 %
< 1 month0 .0%
Overdue11.0%
RUR2.2%EUR
11.5%
USD86.3%
EUR0 .1%
KZT3 8 .2 %
USD6 0 .4 %
RUR1.3 %
> 3 years54 .1%
1-3 years2 7.9%
6m-1 year5.2%
1-6 months
3 .4%
< 1 month0 .2 %
Overdue9 .2%
JPY4.1%
KZT57.6 %
USD30 .5%
EUR7.8 %
Loan Portfolio Breakdown
919
687
572
30/06/2009
KZT2,178bn
Commercial: 26%
Investment Loans: 32%
CIS: 42%
Fina ncia l Services
4.3%
Te xtile4.3%
Che micals2.8%
Other12.5%
Agriculture16.6%
Energy a nd Oil & Gas12.1%
Tra de7.9%
Trans po rt5.9%
Real Es ta te inve s tme nts
6.8%Ho us ing
co ns truc tio n20.3%
Ro ads & Indus tria l buildings
6.5%
< 1 month5.8 %
Overdue 16 .0 %
1-3 years23 .4%
6m-1 year4 .4%
1-6 months14 .0 %
> 3 years3 6 .3 %
By Industry By Currency By Maturity
Page 28
USD10.5%
Other1.1%
KZT88.4%
> 3 years36.6%
1–3 years22.9%
Overdue2.7%
6m–1 year14.5%
1–6 months21.3%
< 1 month1.9%
31/12/2008
(KZT bn) Gross Loans Provisions (%)
SME Loans 211 22 10.5
Own 191 22 11.4
Government 20 0 2.0
Accrued interest 2 – –
30/06/2009
(KZT bn) Gross Loans Provisions (%)
SME Loans 201 49 24.2
Own 164 47 28.4
Government 37 2 5.7
Accrued interest 2 – –
By Industry
� Diversified loan portfolio
� Provisions increased from 10.5% to 24.2% of gross l oans in 1H 2009
� Loans overdue 30 days amount to 21% of SME portfoli o and are fully covered by accumulated loan loss provisions
Source: Company information, unconsolidated financials based on local GAAP
Key Highlights
SME Loans
By Currency
By Maturity
Manufacturing2 .6%
Trad ing Co mpanies4 6 .2 %
Other15.6 %
Road s & Ind us trial Build ings13 .3 %
Real Es tate Inves tments1.5%
Ho using Co ns truct io n2 .0%
Hosp itality1.6%Agriculture
6 .1%
Energy 1.9%
Transport4 .5%
Food4 .6%
Page 29
Source: Company information, unconsolidated financials based on local GAAP
Key Highlights� Real estate related retail products account for c. 77% of total portfolio
� Up to KZT38bn increase in provisions in 1H 2009 res ulted from a
mandatory change of provisioning methodology (indiv idual assessment
of each loan instead of pooling). Once BTA’s capital position improved,
BTA may return to pooling retail loans for provisio ning purposes and,
therefore, may potentially release all or a part of , these additional
provisions
KZT49.3%
USD50.6%
Other0.1%
1–6 month1.1%
6m–1 year3.8%
<1 month0.1%
1–3 years14.1%
>3 years80.4%
Overdue0.5%
By Currency
Retail Loans
By Maturity
31/12/2008 (KZT bn) Gross loans Provisions (%) Consumer loans secured by real estate 80 12 15.4 Car loans 19 2 12.0 Unsecured loans 30 5 17.5 Mortgage loans 82 10 11.9 Other loans 17 1 7.7
Retail total 228 31 13.5
Accrued interest 4 – – 30/06/2009 (KZT bn) Gross loans Provisions (%)
Consumer loans secured by real estate 85 30 35.8 Car loans 17 5 26.5 Unsecured loans 21 4 20.2 Mortgage loans 97 27 27.7 Other loans 16 3 17.2
Retail total 236 69 29.3
Accrued interest 4 – –
29.1
Page 30
SekerbankA.S.
(Turkey)
LondonAlmaty
Insurance Co
BTA Insurance BTA Life BTA Zabota
BTA Securities
BTA Kazakhstan
Pension FundTemir Leasing BTA Orix
Leasing
OrantaInsurance(Ukraine)
33.98%
100%
100%
100%
26.75%
98.17%99.39%
86% 45.00%
14.01%
Other Financial Institutions
BTA Bank Kyrgyzstan
TemirLeasing
BTA Bank Russia
BTA Bank Ukraine
BTA Bank Belarus
BTA Bank Georgia
BTA Bank Armenia
BTA BankKazan
55.34%
18.88%
49.99%99.29%
71.00% 49.00% 48.93%
Subsidiary Banks
18.40%
Non-commercial entitiesFirst Credit Bureau
100%86.11%100% 100%
SPV TuranAlemFinance B.V. (Netherlands)
BTA FinanceLuxembourg SA
Temir Capital B.V. (Netherlands)
TuranAlemFinance (Russia)
22.26%
47.32%
Temirbank 1
Source: Company information
Note: 1 Voting shares stake amounts to 69.85%
Investments in Affiliates
BTA Ipoteka
100%
Page 31
Subsidiary Description BTA stake
(%) Total assets
(KZTbn) Net assets
(KZTbn) Carrying value
(KZTbn) BTA exposure
(KZTbn) 3
Temirbank Leading retail banking franchise in Kazakhstan
55.3 293 22 73 58
BTA Securities Investment banking arm of BTA 100.0 58 54 51 –
Sekerbank Turkish bank, owned by BTA Securities
34.0 832 114 49 –
BTA Russia Russian subsidiary of BTA 22.3 246 69 34 2
BTA Ukraine Ukrainian subsidiary of BTA 50.0 54 1 30 1 27 <1
Oranta Insurance Leading insurance company in Ukraine
14.0 17 2 7 2 10 –
BTA Ipoteka Specialised mortgaged lender in Kazakhstan
100.0 63 9 5.5 17
BTA Belarus Belarussian subsidiary of BTA 99.3 14 2 5 4.5
BTA Kazan Russian subsidiary of BTA 47.3 54 10 4 2.7
BTA Armenia Armenian subsidiary of BTA 48.9 4 2 1 0.6
BTA Georgia Georgian subsidiary of BTA 49.0 13 3 1 4
Notes:1 1 March 20092 1 April 20093 Funding provided by BTA Bank to its subsidiarySource: Company information
� BTA's share of total net assets in several subsidiar ies is significantly below the carrying value of th ose subsidiaries on
BTA's balance sheet, thus creating risk of additiona l write-downs on these assets
� BTA lost control in some of its subsidiaries (most notably BTA Russia) due to fraudulent actions of pr evious management
Key Highlights
Key Subsidiaries
Page 32
Corporate SecuritiesCredit Organisations’ Securities
State Securities
Source: Company information
Carrying Value Supranational Provisions KZT 46 bn
TOTAL NOMINAL VALUE KZT826b nTOTAL CARRYING VALUE KZT769bn
International Securities
� Alliance and Astana-Finance bonds are impaired asse ts due to financial problems of the respective issu ers
� BTA marks to market its securities portfolio on a m onthly basis - therefore the current numbers reflect fair value of portfolio as of 01/07/2009
KZT bn Nominal Carrying
Value
Samruk-Kazyna Fund 645 645
Ministry of Finance 8 9
Total 653 654
KZT bn Nominal Carrying
Value
Kazakhmys 2 1
Prodcorporation 5 4
Kazakhtelecom 0.03 0.01
Kazmunaygaz 22 22
Total 29 27
KZT bn Nominal Carrying
Value German Government 8.5 8.1 Asian Development Bank 0.03 0.03 American Development Bank 0.03 0.03 International Bank of Reconstruction and Development
0.03 0.03
Total 8.6 8.2
KZTbn Nominal Carrying
Value
Alliance-Bank 16 14
Astana-Finance 25 30
BTA Ipoteka 0.04 0.01
BTA Bank 14 12
Kazkommertsbank 18 12
Bank Halyk 2 2
ATF Bank 4 3
Bank CentreCredit 7 6
Kazakhstan Development Bank 4 3
Total 91 82
Supranational, KZTbn 44 44
Securities portfolioPortfolio Structure as of 01/07/2009
Page 33
31/12/2008 30/06/2009
Total: US$20,818m Total: US$23,042m
� As of 30/06/2009 state funding in the form of bonds to S-K, REPO facilities and state deposits amounte d to 41.4% of total liabilities
� The bank has experienced significant deposit outflo ws from both corporate and retail clients
Source: Company information
State Funding has been Critical in Ensuring Bank’s Operations in 1H 2009
Securities sold by REPO agreements
2.1%
Bank accounts and client deposits
33.2%
Debt securities issuedincl. Eurobonds
31.3%
Debt due to banks24.9%
Subordinated debt6.3%
Other liabilities2.2%
FundingFunding Structure Development in 1H 2009
Securities sold by REPO agreements
10.5%
Bonds to S-K 19.2%
Bank accounts and client deposits
19.7%
Debt securities issued incl. Eurobonds
26.0%
Debt due to banks15.9%
Subordinated debt4.2%
Other liabilities4.5%
Page 34
Samruk-KazynaBonds
� Senior unsecured bonds issued by S-K
� Interest rate of 9%, repayment within 2015–2024
State Programmes
� Long-term funding support for SME
� Long-term funding support for agricultural sector
� Long-term funding support for construction
� Long-term funding support for mortgage market
Other Liquidity Support
� Long-term loans
� Deposits on demand
� Term deposits
Source: Company information
KZT645bn
KZT37bn
KZT8bn
KZT20bn
KZT40bn
KZT3bn
KZT257bn
KZT41bn
Description Amount
� The State and Samruk-Kazyna have invested c. $7bn in supporting BTA through various forms of funding
� Samruk-Kazyna stated that no further support will be provided to BTA Bank before restructuring process is
completed
Funding (cont’d)Extensive State Support
Page 35
Key Highlights
� BTA experienced significant net deposit outflows in 1H 2009, particularly in term deposits (c.62% decr ease)
� Considerable inflow of deposits from state companie s (including S-K) to corporate current accounts has partially mitigated negative impact of deposit run. Deposit levels stabilized in 2Q 2009
Source: Company information
Customer Accounts Dynamics in 2009 (KZTbn) Terms Deposits Dynamics in 2009 (KZTbn)
Customers Deposits
26 25 20 19 20 19 20
75 6864 69 59 59 62
65126
191219
277 282 280166
218 275
308
357 360 362
Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09
Retail SMEs Corporate
247 244201 194 169 151 148
51 50
26 2013 11 12
352
231
274255
165153 148
650
525
501469
347314 308
Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09
Retail SMEs Corporate
Page 36
III New BTA Strategy
Page 37
III New BTA Strategya. Strategy Overview
b. Focus on Current Liquidity
c. Branch Network & Subsidiaries
d. Current Structure & Governance
e. Specific Focus on Risk Management
f. Treasury
g. Human Resources & IT
Page 38
� Due to the deteriorated conditions in capital markets and scarcity of funding sources, BTA is now largely dependent on (i) Samruk-Kazyna funds and other state support; and (ii) customer funds, (e.g. deposits)
� A strong emphasis will also be made on maximising cash-in from existing assets. This includes recovery of non-performing assets. All of these assets have been identified and a dedicated senior recovery team has been assigned to lead the recovery process
� Limited funding opportunities and higher cost of funding would require BTA to scale back its growth prospects as a universal bank and also focus on domestic market. Growth perspectives are expected to become more dependent on Kazakhstan’s macroeconomic outlook
� SME and Retail will have to become the key business segments areas for BTA, while the corporate loan book will need to be rebuilt entirely
� Lending procedures are being reviewed and improved with a focus on managing credit risk more efficiently
� A successful debt restructuring would provide BTA with an advantage over other Kazakhstan banks as BTA would be one of the first Kazakhstan financial institutions to have “overcome the financial crisis” as opposed to a generally distressed banking sector with generally limited funding sources
� A successful restructuring would also boost client confidence (as opposed to expectations of similar issues in other banks in the future), which would give BTA an opportunity both to increase collections on existing assets, as well as to attract new clients, including depositors
� After restructuring, BTA will carry on with capitalising on its historical strengths (network, customer base, experience in servicing state-sponsored programmes)
Funding
Strategy (General)
CompetitiveStrenghts
Strategy Overview
� Following detailed examination of the financial and commercial situation of BTA, and in particular the loan portfolio, BTA's new management has identified the fo llowing key strategic priorities:
Page 39
� Keeping the bank’s core clients is essential
� Focus on domestic customers
� Strict segmentation of clients will allow to create a strong CRM tool to maximise cross-selling opportunities (cash management products)
� Successful debt restructuring would help restoring BTA’s historically strong customer base
� Increased focus on domestic market and exiting subsidiaries and affiliates that are not viewed as strategically important
� BTA is downsizing its network by closing some outlets as well as its staff to reduce the cost base
� Although headcount reductions will be required, BTA will be focusing on retaining its core personnel
� BTA’s new strategy will be focused on strong and sus tainable profitability, rather than expanding the asset base
� Key products and client segments as well as regional markets are being thoroughly evaluated with respect to their revenue and profitability potential. Non-profitable segments will be discontinued
Clients
Optimization of the Bank’s Structure
Strategy Overview (cont’d)
Focus on Sustainable Profitability
Page 40
� Although BTA is almost fully dependent on state fun ds in the very short term, the Bank will gradually diversify its funding base
Attraction of Clients
� Restore confidence and return to historic market share
� Expansion of deposits’ base through possible attractive pricing policy and new products
State Funds
Active Portfolio Restructuring and
Potential Refinancing of the Portfolio
Clients
Samruk-Kazyna
� E.g. Financing Program for Civil-Engineering projects and mortgage lending – US$ 5 bln USD in 2009-2010
Stress Assets Fund
� Possible Repurchase of some of the Bank’s troubled assets
Cross-Selling Maximization
� To support an effective cross-selling system relationship management
Kazakh Development Bank
� Refinance the obligations of the Bank’s borrowers
� Customer confidence is crucial for attracting custo mer funds
State Programs
� Further active state programs involvement in long-term funding ensuring to support SME – US$ 1 bln. in 2009-2010, agricultural sector – US$4 bln USD in 2009 -2011, realization of innovation industrial and infrastructure projects – US$ 4 bln. during 2009 – 2010. (total investment of KZT9.5 trillion is expected during next 5 years)
Focus on Current Liquidity
Page 41
Branch Number of units ATMs POS
Almaty 38 113 185
Aktobe 27 104 168
Semey 24 42 61
East Kazakhstan (Oskemen) 18 48 75
Kokshetau 15 16 24
West Kazakhstan (Uralsk) 14 35 46
Karaganda 13 33 50
South Kazakhstan (Shymkent) 13 51 113
Taldykorgan 12 8 19
Kostanay 11 16 18
North Kazakhstan (Petropavl) 11 17 24
Atyrau 10 45 91
Taraz 10 16 21
Kyzylorda 9 27 32
Astana Branch 9 122 179
Mangistau (Aktau) 7 16 20
Pavlodar 6 48 64
Temirtau 6 16 34
Dzhezkazgan 5 12 19
Ekibastuz 5 21 24
Kulsary 4 3 4
Aksay 2 15 18
Total units 269 824 1289
Total branches 22
Domestic Distribution Network
Source: Company information
Nationwide Coverage
Key Highlights
� BTA’s branch network encompasses 269 outlets, including:
� 154 full service outlets, offering full range of products to corporate and
retail clients
� 45 specialised retail units, servicing all types of retail clients
� 70 cash settlement units, providing payment services to retail clients
� Ongoing branch network optimisation on the basis of performance criteria
� 10 outlets were closed since the beginning of 2009, 44 more outlets
expected to be closed by the year end
� Starting from 2010, the Bank plans to start expanding its Branch network
� Opening of universal units serving retail and SME, reflecting increased focus
on servicing SME and retail clients
Branch Network
290280
260
240230225
279
2008 2009 2010 2011 2012 2013 2014
Page 42
The new BTA strategy will envisage refocusing on th e domestic market. BTA is in the process of a compr ehensive review of its subsidiary network to decide which assets are core for its operations and which assets the Bank will d ispose of
Note: 1 Owns 33.98% stake in Turkish Sekerbank2 Loan facilities and funding extended by BTA to its subsidiaries and affiliates
Key Subsidiaries
� The largest four subsidiaries below together accoun t for
c.80% of BTA’s investments total carrying value
� BTA views BTA Securities as its core asset
� BTA Russia and BTA Ukraine are essential for the
company’s recovery efforts. At the moment, the Bank
pursues legal actions against its former shareholde rs
aimed at regaining operational and management contr ol
over its Russian and Ukrainian subsidiaries
� Temir is regarded as a non-core asset as BTA’s retail
business is based on BTA’s own retail platform
Key Criteria for Core Treatment
� Strategic importance to servicing BTA key client se gments
(cross-selling capabilities, product expertise, acc ess to
regional markets)
� High growth and profitability potential of business segment
where subsidiary operates
(KZT bn) Temirbank BTA securities 1 BTA Russia BTA Ukraine
Strategic Approach NON-CORE CORE
Description Leading local retail bank
Investment arm of BTA Russian subsidiary of BTA Ukrainian subsidiary of BTA
BTA Stake (%) 55% 100% 22% 50%
Net assets 22 54 69 30
Carrying Value in BTA’s books 73 51 34 27
BTA exposure 2 58 - 1 2
Subsidiaries
Page 43
Name BTA
stake (%)
Carrying value
(KZT bn)
Liabilities provided
by BTA (%) Core / non-core Investment strategy
Sekerbank A.S. (Turkey) 34.0 49 – Core Under Strategic Review
BTA Russia 22.3 34 1 Core Preservation in BTA Group
BTA Bank Ukraine 50.0 27 2 Core Preservation in BTA Group
Oranta Insurance (Ukraine) 14.0 10 – na na
BTA Bank Belarus 99.3 5 35 Core Preservation in BTA Group
BTA Bank Kazan 47.3 4 6 Core Preservation in BTA Group
BTA Bank Kyrgyzstan 71.0 3 66 Core Preservation in BTA Group
BTA Bank Georgia 49.0 1 45 Non-core Sale at attractive valuation
BTA Bank Armenia 48.9 1 28 Non-core Immediate sale
? ? Temirbank 55.3 73 21 Non-core Under Strategic Review
BTA Securities 100.0 51 – Core Preservation in BTA Group
BTA Ipoteka 100.0 5 31 Non-core Under Strategic Review
BTA Kazakhstan Pension Fund 86.0 5 – Core Preservation in BTA Group: aimed at growth of investment value
London Almaty Insurance Co 99.4 3 – Core Long-term investments; possible sale if there is optimal situation on market
BTA Insurance 100.0 1 – Core Preservation in BTA Group: aimed at growth of investment value
BTA Life 100.0 0.5 – Core Preservation in BTA Group: aimed at growth of investment value
BTA Zabota 98.2 0.4 – Core Preservation in BTA Group: aimed at growth of investment value
Temir Leasing 45.6 2 – Core Preservation in BTA Group: aimed at growth of investment value
ORIX Leasing 45.0 0.5 15 Core Preservation in BTA Group: aimed at growth of investment value
Source: Company information
For
eign
Sub
sidi
arie
sK
azak
hsta
n S
ubsi
diar
ies
Subsidiaries (cont’d)Focus on Key Subsidiaries
Page 44
CEO
Internal Audit
Source: Company information
� Audit committee
� Risk committee
� Compensation committee
Board of Directors’ Committees
Management Committees
BUSINESS UNITS CORPORATE SERVICES
RECOVERY SUB-COMMITTEE (RSC)
Current Structure
Retail bankingFinance and
risk managementTreasury and
Capital MarketsOperations
Corporate banking and investment projects
SME bankingInternational business Asset restructuringAstana Branch Legal and compliance
BOARD OF DIRECTORS
Page 45
Board of Directors
� Arman Dunayev , Deputy Chairman of Samruk-Kazyna, is appointed as Chairman of BTA’s Board
� New members of the Board of Directors elected on 6th March
� Mr.Iskandirov , Mr.Aitekenov and Mr.Karibzhanov represent Samruk-Kazyna Fund
� Mr.Wokurka (Managing Director at Metzler Asset Management) and Dr.Korishenko (the current President of MICEX – the largest Russian securities and forex exchange) join Mr.Talvitie (principal at East Capital) as independent directors
� Other Board Members are Mr.Saidenov (CEO) and Mr.Tatishev
� The Bank has also announced revision of its corporate governance standards to create higher transparency by formalisation of division responsibilities and control structures
Board of Directors
Page 46
� The Bank’s entire governance structure has been rev iewed in a company-wide effort to effect corporate governance reforms. Some changes and reviews applie d are aimed at reducing risk and strengthening inte rnal controls
Functions and rules of procedure
General Meeting of Shareholders
Board of Directors
Management
� Decisions regarding the composition and terms of reference of the Returning Board and the Board of Directors
� Review and approval of the Bank’s performance
� Capital increases
� The Board of Directors is the supreme authority in the affairs of the Bank between shareholders’meetings, and in that period holds decision-making rights on all important or outstanding issues
� The Board ensures that all operations are in compliance with the laws and regulations governing its activities
� The Board determines the Bank’s strategy and appoints CEO and the Management team
� Execution of Bank’s strategy
� Day-to-day running of the Bank, appointment of senior and branch management
Source: Company information
The bank aims to implement a corporate governance f ramework consistent with international best practice s
Changes implemented
� New BoD was elected (9 members with 3 independent)
� Corporate calendar introduced under which BoDmeets three times a month (once physically, twice remotely)
� More active interaction of BoD with management
� Newly created appointments and remuneration committee
� New management board appointed
� Greater emphasis on committee structure as well as risk management, including credit risk management
� Samruk-Kazyna acquired controlling stake of 75.1%
Governance
Page 47
Assets and Liabilities Committee
� Regulates internal and external audit, monitors efficiency of internal controls system
� Must be composed of at least three members, minimum one member should be independent
� Committee holds meetings on an ad hoc basis, but not less than once per quarter
Board of Directors
� Advisory body supporting BoD decision-making on analysis, assessment and control of risks
� Minimum two members of BoD and Chief Risk Officer
� Meetings on a monthly basis
� Advisory and consultative body, established to increase the Bank’s performance management by developing guidelines for HR and motivation policies
� Minimum three BoD members and two independent directorsDisciplinary Committee
Ethics Committee
Product Committee
Budget Committee
Client Committee of Head Office
Problem Loans Committees
Credit Committees
Source: Company information
� See page 49
� Execution of assets and liabilities policy� Setting pricing for banking products� Weekly meetings
� Responsible for promoting sales growth� Portfolio diversification� Weekly meetings
� Execution and approval of Bank’ s budget� Weekly meetings
� Development/modification of banking products� Weekly meetings
� Development of corporate ethics standards� Ad hoc meetings
� Considers investigation reports and applies sanctions to Bank’s officers
� Ad hoc meetings
� Monitor portfolio to reveal payment delays� Minimise non-payment risks� Work on NPL recovery� Weekly meetings
Management (CEO)
Audit Committee
Appointments and Remuneration Committee
Risk Committee
Governance (cont’d)Committee Structure Ensures Stronger Risk Governanc e
Page 48Source: Company information
Portfolio diversificationPriority given to SME loan business and key agricultural and industrial companies with a focus on full production cycle businessesFinancing state-owned companiesFocus on export and high added value industriesNo new real estate projects, start-up investment pr ojects, and non-residents (including off-shore companies)Development and introduction of MAC (maximum allowable concentrations) of portfolio risksNew borrower risk assessment system
Decrease of lending limits by productsMandatory income confirmationFocus on non-secured lending to employees of corporate clients (salary projects)LTV within 0,5 – 0,75, obligatory initial instalment (e.g. in mortgage and car loans)Closing of a number of risky lending programmes (e.g. secondary market auto lending)Accreditation of companies to employ the borrowersObligatory examination of clients through credit history bureau
Increase of amortisation ratios by all types of real estate (from 30% up to 50% depending on the region)Setting required minimum levels for liquid collateral (deposits, real estate, insured cars and equipment) – at least 70% in the collateral structureSetting limit on a share of land lots and subsurface use rights in collateral – not more than 30% of financingImmovable property under construction may not be taken as collateral if completed less than 80%Any collateral suggested for loans exceeding US$3m will need to be reviewed by the Bank’s special collateral valuation departmentMore rigorous approach towards using the services of independent appraisers. Independent appraisers to work with the Bank subject to regular accreditation
Corporate and SME business
Retail
Tightening collateral policy
Key Parameters of New Credit Policy
Risk ManagementNew Credit Policy
Page 49Source: Company information
Risk Management (cont’d)System of Credit Committees
RetailSMECorporate
� Loan applications of SME clients over branch limits (max US$5m for investments, US$10m for working capital replenishment)
� Meets twice a week
� Control over lending procedures of the Bank, issuance of any financing(including SME super limit)
� Credit methodology (regulations)
� Set limits for subordinate credit committees and contractor banks (over US$ 5m for investments, US$ 10m for working capital replenishment )
� Meets twice a week
Credit committee of branch network (CC BN)
Head Office Credit committee (CC HO)
� Decisions on retail financing issuance in accordance with the Bank’s credit policy
� Decisions on non-standard, over-the-limit loans (in excess of US$1m)
Major Credit Committee for Head Office Retail Business
� Decisions on retail financing issuance (less than US$1m – considers over-the-limit, non standard applications)
� Improvement of Bank’s credit procedures
� Meets daily
Minor Credit Committee for Head Office Retail Business
� Authorized to make decisions within set branch loan limits on one borrower
� Loan applications and CIS countries projects
� Preliminary establishment of loan limits on regional banks and subsidiary banks
� Meets weekly
Credit committees of branches
Regional Credit Committee (RCC)
� Loans issuance within set limits depending on branch portfolio and contingent liabilities quality
Credit committees of branches and authorized persons
Credit Committee System
The Bank Board of Directors MUST approve ANY loan where:
� the borrower has any type of special relationship with the Bank
� the Borrower is affiliated to the Bank
� the loan is an exception from the Bank credit policy
� the loan involve any type of state interest
Page 50
Risk Management team has responsibility for Credit, Operational, Regulatory and Compliance Risks
Chief Risk Officer
Head of Credit and Operational Risks Department
Credit Risks Division of Head Office
Corporate business risks
Loan portfolio monitoring
Banks and financial institutions risks
Credit Risks Division of SME
Small business risks
Branches analysis and monitoring
Branch risk-management
Methodology of retail products
Retail business monitoring
Risks of Retail Business and Underwriting
Division
Credit applications
analysis
Operational Risks Division
Technological risks
Continuous activities management
Identification and monitoring of operational
risks
Methodology
Source: Company information
Chief Executive Officer
Risk Management (cont’d)Current Organisation
Page 51
Real estate investments16.2%
Industrial construction8.9%
Mortgage3.7%
Oil and gas13.3%
Wholesale trade11.0%
Agriculture5.6%
Retail excl. mortgage5.3%
Other19.9%
Housing construction16.1%
76.1
50.357.3
(6.4)(8.7)
41.132.2
33.830.2
(4.8)
(20.4)
42.6
(40)
(20)
0
20
40
60
80
100
2004 2005 2006 2007 2008 Jul-09
(%)
New housing Resale
Source: Company information
� Access to inexpensive sources of financing and rapid growth of real estate prices resulted in excessive exposure to the real estate sector
� The Bank financed risky real estate projects:
� Start-up companies without expected steady cash flows
� Speculative land deals performed at above-the-market valuations
� Development projects in CIS countries related to former shareholders
� Most of these projects are considered to be non-performing
� Projects that are still viable require additional financing to implement them completely
36% of gross loans relate to Real Estate
Note:1 % (decrease) / increase on end of previous period
Source: Company information
Source: The Agency of Statistics of the Republic of Kazakhstan
Risk Management (cont’d)Focus on the Real Estate Market
Key Highlights Loan Portfolio - Industry Breakdown
Housing Prices Development 1
Page 52Source: Company information
� Treasury functions: - regulates the Bank’s external cash flows to meet the Bank’s client demands, as well as internal and regulatory liquidity
standards- hedges the Bank’s currency risks- engages in securities and derivatives trading
Deputy Chairman of the Management Board
Treasury
DealingSecurities and
Derivatives TradingAgency Operations
Treasury Operations Support
� Currency exchange operations
� in interbank market
� with Bank’s branches
� clients
� Exchange transactions in cash with commercial banks
� Management of the Bank’s securities portfolio
� Securities and derivatives trading on external and internal market in order to maintain liquidity and make profit from respective activity
� FX services, FX rate fixing
� Attracting corporate deposits
� Analysis of the Bank’s deposit base by currencies, terms, types etc.
� Development of new products for corporate deposits
� Technical, documentary and procedural support
� Development and improvement of Treasury’s internal documentation, document control keeping
� Design reports
A top priority for the bank now is to maintain curr ent liquidity
Treasury
Page 53
� Total headcount as of 31/07/2009 stood at 5,967, de creasing 9.6% since end 2008
� Branches had 4,120 employees as of 31/07/2009, acco unting for almost 70% of the total headcount of the Bank
� Staff costs per employee being reduced by approxima tely 25% in a company wide effort to improve cost efficiency per employee
Source: Company information
5,259
7,164
6,6016,358
6,2145,967
4,000
5,000
6,000
7,000
8,000
2006 2007 2008 Mar-09 Jun-09 Jul-09
Human Resources Current Landscape
2,086
2,880
2,430 2,320 2,2930 80
0 60
0 450 54
0 68
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 Mar-09 Jun-09
(KZ
T '0
00)
0 0
0 2
0 4
0 6
0 8
1 0
1 2
1 4
(%)
Staff costs/employee (LHS) Staff costs/average total assets (RHS)
Key Highlights
Number of Employees Annual Employee Expenses
Page 54
Key Highlights
� During 2009 the Bank plans to reduce its headcount. Reductions will impact both business and supportin g functions
� Reductions in HQ were much higher than in the regio nal offices. During the first 7 months of 2009:
� The number of employees in head offices is reduced by 16.4%
� The number of employees in regional offices is reduced by only 6%
� Going forward, the Bank plans to increase the share of employees deployed in client facing roles throug h improving efficiency of back-office operations
� It is envisaged that c.100 employees will be workin g on the execution of the recovery strategy. These professionals will include seasoned loan officers, who will refocus on collection functions, lawyers, etc.
Human Resources Planned Changes
Page 55
Retail business front-end applications
FEB CTLKastle ULS 1
Back-end applications
IBSO HQ ORACLE e-Business Suite 2
Trade Innovation
Customer self-service applications
Internet Banking
SMS Banking
Data consolidation and reporting applications
IBSO GLMIS
IBSO Branch
Siebel CRM
SAS OpRisk 3
Branch automation solution
Operation risk management
Customer relationship management
Online money transfer applicationFaster
Source: Company information
The Bank has one of the most modern and reliable IT infrastructures on the Kazakhstan market that prov ides for a high level of automation for both back office and f ront office operations
Notes:1 Migration phase2 UAT phase3 Statistics gathering phase
IT Systems Current Landscape
Page 56
Manage and motivate our people
Maintain focus on risks and controls
Cost control is crucial
Delivery of effective and efficient change
Customer service excellence
Actions for the FutureHighlights From the PastOur Strategy
� Duplication of critical components with the intention of increasing systems reliability
� Capacity planning – monitoring system for threshold values
� Taking advantage of modern, proven and robust technology
� Staff development, turning knowledge into skills
� Customer service must differentiate from the competitors
� Focus on process and control improvement
� Hiring freeze and some reductions
Source: Company information
� Use modern technology to reduce capital and operating expenses
� Increase quality of data, provide consistent classification and resolve data-reconciliation issues
� Develop hardware update strategy based on End of support notifications from vendor
� Reduction of gaps between business and IT
� Focus on product development and service availability
� Information security management: ISO/IEC 27001:2005 certification
Operations Operations
Technology Technology
Technology Strategy
Page 57
IV Corporate Business Strategy
Page 58Page 58
IV Corporate Strategic Plana. Presentation of the Total Gross Loan Portfolio
b. Focus on Corporate Clients
c. Focus on the “Troubled Assets Portfolio”
d. Restructuring and Recovery Strategy
e. Focus on the “Performing Loans Division”
f. Corporate Business Strengths & Development Strat egy
g. Trade Finance Overview
h. Deposits & Lending Dynamics
Page 59
Breakdown of the Total Gross Loan Portfolio (30/06/2009)
Source: BTA Bank
Page 59
Presentation of the Total Gross Loan Portfolio Overview
83%
9%
8%
Corporate Loans Retail Loans SME Loans
The corporate loan portfolio stands for 83%of the total gross loan portfolio
Page 60
Evolution of Total Gross Loan Portfolio
Source: BTA Bank
Industrial Construction
9%
Housing Construction
19%Real Estate investments
20%
Others16%
Agriculture6%
Trade11%
Energy and Oil & Gas19%
42%38%35%
32%
29%19%
26%
33%46%
31/12/07 31/12/08 30/06/09
KZT1,596bn KZT1,865bn KZT2,178bn
Investment PortfolioCIS Commercial
Kazakhstan58%
Russia37%
Others6%
Presentation of the Total Gross Loan Portfolio (cont’d)
Georgia 2.5%
Ukraine 2.4%
Armenia 0.4%
Serbia 0.3%
Commercial Portfolio
CIS excluding Kazakhstan
Investment Portfolio
Internal Segmentation
Financial services 3.0%
Chemical industry 2.8%
Mining 1.6%
Transport 1.6%
Telecommunication 1.4%
Others 5.2%
Split by Sector
Source: BTA Bank
Clients of the Corporate division are defined by:
� A turnover above $25m
� A financing limit above $10m
CAGR: +23%
Overview (cont’d)
Note: (1) Financing of "empty" project companies for realization of financial schemes (mainly applied by former shareholders of Bank)(2) Working capital replenishment within framework of the trade companies financing
Geographical LocationScheme Deals (1) Trade (2)
Investment purposes
Kazakhstan ���� ���� ����
CIS and offshore countries ���� ���� ����
Kazakhstan, Russia, Offshore countries and mixed participation
���� ���� ����
Split by Projects
Page 61
Presentation of the Total Gross Loan Portfolio (cont’d)Loan Portfolio Breakdown
Industrial Construction 2.4%
Chemical industry 2.4%
Mining 0.1%
Others 1.7%
Industrial Construction 6.5%
Transport 5.9%
Financial services 4.3%
Metallurgical industry 4.3%
Textile and leather industry 4.3%
Chemical industry 2.9%
Other 8.1%
Housing construction22% Others
21%
Industrial Construction17%
Real Estate investments
29%
Energy and Oil & Gas12% Agriculture 4.4%
Financial Services 4.4%
Chemical industry 3.1%
Telecommunication 2.7%
Mining 2.0%
Others 4.1%
Trade28%
Others7%
Real Estate investments
17% Housing Construction14%
Oil & Gas34%
Energy and Oil & Gas12%
Agriculture17%
Trade8%
Others36%
Real Estate Investments7%
Housing Construction20%
919
687
572
30/06/2009
KZT2,178bn
Commercial: 26%
Investment Portfolio:
32%
CIS: 42%
By Sector
Source: BTA Bank
Page 62
By Geography By Maturity By Currency
� Portfolio is mostly domestic (99%)
Kazakhstan34%
Offshore50%
Others16%
919
687
572
30/06/2009
KZT2,178bn
Commercial: 26%
Investment Portfolio:
32%
CIS: 42%
Presentation of the Total Gross Loan Portfolio (cont’d)Loan Portfolio Breakdown (cont’d)
Past due16% < 1 year
24%
1 to 3 years23%
Over 3 years36%
Past due9%
< 1 year9%
1 to 3 years28%
Over 3 years54%
Past due11%
< 1 year7%
1 to 3 years36%
Over 3 years46%
Other < 1%
EUR8%
USD30%
KZT58%
JPY4%
Other1%
USD61%
KZT38%
USD87%
EUR11%
RUR2%
Others14% CIS
29%
Offshore21%
Luxembourg36%
Source: BTA Bank
Page 63
Presentation of the Total Gross Loan Portfolio (cont’d)Current Provisioning
163
306
224
CIS InvestmentPortfolio
Commercial
Loan Loss Provisions (30/06/09)
Source: BTA Bank
Net Loans (30/06/09)
Source: BTA Bank
756
463
266
CIS InvestmentPortfolio
Commercial
Gross Loan Portfolio (30/06/09)
Source: BTA Bank
KZT2,178bn KZT1,485bn KZT693bn
919
687
572
CIS InvestmentPortfolio
Commercial
82% 67% 47%
LLP Total Ratio: 68%
Page 64
Focus on Corporate Clients
Concentration
Source: BTA Bank
Other loans51%
Тор 521%
Тор 6-1013%
Тор 11-2015%
Тор 11-2017%
Тор 6-1014%
Тор 533%
Other loans36%
Other loans48%
Тор 521%
Тор 6-1013%
Тор 11-2018%
919
572
687
30/06/2009
Commercial: 26%
Investment Portfolio:
32%
CIS: 42%
KZT2,178bn
Page 65
Focus on the “Troubled Assets Portfolio”
� The Bank has set specific criteria to define the ec onomic scope of the “Troubled Assets Portfolio” in t he Corporate loan portfolio:
Methodology
Criteria for the “Troubled Assets Portfolio” for Cor porate
Economic Legal
1. Inability to serve debt in accordance with loan terms
2. Over 60 days delinquency
3. Provisions charge between 50 % and 100 %
4. Two or more loan extensions
5. Debt discharge in the end of term
6. Need for further investments to complete projects with no interim cash flows
7. Problem sectors: construction and development (civil and industrial), property speculations, building materials production, building materials trading, mining start-ups
1. Suspected related parties transactions
2. No business related loans
3. Uncertain legal status under the bargain
4. Pledge Absence/pledge discharge
Source: BTA Bank
Corporate “Troubled Assets Portfolio”
No legal split. Dedicated teams to manage Portfolio Restructuring
and Recovery
Page 66
Economic Split of the Corporate Loan PortfolioFocus on the “Troubled Assets Portfolio” (cont’d)
Source: BTA Bank
� Corporate loan portfolio split (“Performing Loans” v s. “Troubled Assets”):
= +
42%48%
34%
11%
32%
18%
89%
26%
30/06/09 "Performing Loans Division" "Troubled Assets Portfolio"
KZT2,178bn KZT251bn KZT1,927bn
Investment PortfolioCIS Commercial
Page 67
TAP Gross Value (KZTbn)
Source: BTA Bank
Loan Loss Provisions (KZTbn)
Source: BTA Bank
TAP Net Value (KZTbn)
Source: BTA Bank
Provision StatusFocus on the “Troubled Assets Portfolio” (cont’d)
12
111
CIS InvestmentPortfolio
Commercial
Ø
907
549
348
CIS InvestmentPortfolio
Commercial
919
660
348
CIS InvestmentPortfolio
Commercial
KZT1,927bn KZT1,804bn KZT123bn
99% 83% 100%
LLP Total Ratio: 94%
Page 68
Restructuring and Recovery StrategyMethodology
Step 1
Step 2
Step 4
1
2
3
4
� Specific criteria to define the economic scope of the “Troubled Assets Portfolio”
� Portfolio streaming between “Performing Loans Division” and “Troubled Assets Portfolio”
� Financial impact of restructuring and post-restructuring forecasts
� Possible strategies for the “Troubled Assets Portfolio”:
� Recovery
� Write-off
� Restructuring and transfer to “Performing Loans Division”
Step 3
Page 69
Restructuring and Recovery Strategy (cont’d)Detailed Organization
RECOVERY SUB-COMMITTEE (RSC)
RSC tasked by Strategy Committee
to:
• Identify dubious assets
• Advise on recovery options
• Implement recovery action
Co-ordinator Global advisers
BTA BANK BOARD
STRATEGY COMMITTEE MEMBERS
Anvar Saidenov - Co-ChairChairman of BTA
Marcia Favale-Tarter - Co Chair Senior Adviser to PM
Marat Aitenov SK Legal adviser[Two Investor Representatives]
John Howell – John Howell & Co Lovells - Counsel and UK Team
PWC - Forensic AccountantsMembers
Nikolay Varenko – BTA First Vice ChairmanPavel Prosyankin – BTA Advisor
RSC controls activity and return funds
flow:
• Reports monthly via Coordinator
• Meets weekly
• Ensures recoveries are ring-fenced
(TBA) IndependentAudit of Recoveries
Recovery action undertaken by BTA, global advisers, regional teams
Recoveries in each jurisdiction
returned to BTA controlREGIONAL LEGAL TEAMS
TROUBLED/DUBIOUS ASSETS
Notifications to BTA Board via BTA Co-Chair
Strategy Committee vets spend
Page 70
� Lovells are working with PWC to retrieve data which will enable them to identify potential new claims to
recover assets. Also working to identify potential assets to satisfy claims
� The team is analysing the bank’s accounting systems and taking steps towards the recovery of electroni c
and other documents for review and analysis by both Lovells and PWC
� Work to date has focussed on identifying what data will be useful for the purposes of the wider
investigations, and assessing how this data may be recovered and reviewed in an efficient and systemati c
way
� Once data has been captured, lawyers from Lovells wil l commence a review to identify further claims for the
recovery of assets. The review will identify suspic ious features or patterns in transactions and assess the
merits of claims in relation to each suspicious tra nsaction
� In addition, in-depth forensic work is being carrie d out to establish concrete links between the indiv iduals
and companies involved in various transactions. Thi s will assist ongoing investigations into specific
transactions and help to identify future claims onc e the review process has begun
� Focus of investigations will be on areas most likel y to yield results: loans originated by UKB6, trans actions
with former management etc.
Restructuring and Recovery Strategy (cont’d)General Methodology of Lovells’ Asset Recovery Work
Page 71
Transfer to “Performing
Loans Division”
� Restructuring of credit
� Extension of payment schedules
� Changing repayment schedules
� Collateral enforcement
� Separation of the loans problem parts - Focus on asset recovery - the diversification of business, enhance borrower’s marketing strategy
Restructuring and Recovery Strategy (cont’d)
Investment
Portfolio
CIS Excluding
Kazakhstan
Recovery
� Borrower's property recourse� Collateral sales� Sale of assets� Refinancing to borrower resident corresponding bank
Commercial
Loans
Transfer to “Performing
Loans Division”
Recovery� Collateral sales
� Sale of assets
� Refinancing
Transfer to “Performing
Loans Division”
� Restructuring of credit � Extension of payment schedules� Changing repayment schedules� Collateral enforcement� Separation of the loans problem parts - Focus on asset recovery - the
diversification of business, enhance borrower’s marketing strategy
Recovery� Collateral sales
� Sale of assets
� Refinancing
TAP Gross Value: KZT919bn
TAP Gross Value: KZT660bn
TAP Gross Value: KZT348bn
Actions & Financial Objectives for “Troubled Assets Portfolio”TAP
Ø
Page 72
“Performing Loans
Division”
Performing Loans Gross Value:
KZT251bn
Investment Portfolio
Performing Loans Gross Value:
KZT27bn
Past due1% < 1 year
29%
1 to 3 years28%
Over 3 years42%
Past due1%
< 1 year26%
1 to 3 years26%
Over 3 years47%
EUR5%
KZT51%
USD34%
JPY10%
Other loans28%
Тор 542%
Тор 6-1014%
Тор 11-2016%
JPY9%
USD34%
KZT52%
EUR4%
Kazakhstan75%
Offshore25%
� “Performing Loans Division” does not include loans t o CIS countries
By Geography By Maturity By Currency
� Portfolio is mostly domestic (97% of the total Performing Loans Portfolio)
� Portfolio is entirely domestic (100% of the Commercial Portfolio)
� Portfolio is mostly composed of Loans over 3 years (92% of the Investment Portfolio)
Commercial Loans
Performing Loans Gross Value:
KZT224bn
USD36%
KZT64%
Concentration
Portfolio is mostly composed of loans to Top 5 borrowers (99% of the Investment Portfolio)
Focus on the “Performing Loans Division”
Page 73
Corporate Business Strengths
� Strong corporate franchise which was negatively aff ected by the lending
practices of previous management – to be rectified i n restructuring
� Close contact and support from the Government being the controlling
shareholder – participating in Government industrial support programs,
access to major national corporates
Fundamentally sound corporate banking
franchise
� Highly skilled staff appointed to implement the new corporate strategy
� One of the most extensive geographical branch netwo rks among the
competitors in Kazakhstan banking sector
� Full range of banking products for Corporate client s
Extensive Network & Highly Skilled Management
� Implementation of process automation through projec ts risk testing
� Tightening KYC, client on-boarding procedures, cred it assessment and client record management
Implementation of Modern Operating and Risk Control
Procedures
Page 74
Client Base Recovery
� Restore Bank’s image
� Resume lending
� Get back permanent clients of the Bank while restoring a share of deposits at the 2008 level
� Promote Cash Management products
� Increase fee income from cash and settlement services to be achieved by the return of major clients
� Implement plans to connect major clients (groups of companies) to the remote service via the Internet (BTA online)
Focus on Corporate Clients in Kazakhstan
Productivity Enhancement
� Optimize the cost structure
� Optimize business processes as a consequence of time cutting for the following:
1. Expert examination of projects through introducing internal industry standards
2. Leverage direct distribution and implementation of plans to connect major clients (groups of companies) to the remote service via the Internet (BTA online)
3. Introduction and improvement of liquidity management products
Active Management of Corporate Loan Portfolio
in Kazakhstan
� Restructuring through possible change of credit terms (prolongation, cut of interest rates and other)
� Extra financing for investment projects subject to adequate credit assessment
Government Programs Implementation
� Timely and full disbursements, including those under programs designed to complete housing construction
� Participating in government programs to finance the Construction sector, agro-industrial complex, innovative, industrial and infrastructure projects (expected in the future)
1 2 3 4
Development Strategy
Page 75
BTA will establish conservative and strict risk-lim its directly driven by exposure to specific industries so
as to…
� … Ensure adequate diversification of the corporate loan portfolio
� … Provide credit risk monitoring, including the calculation of capital level of an individual borrower, economic sector, country, product, etc.
� ... Closely monitor risk concentration in the portfolio by economic sectors
� ... Ensure monitoring of lending procedures in accordance with agreed bank rules and regulations
Close monitoring of lending procedures in accordance with credit risk compliance and
restrictions
The following processes will be changed:
� Grace periods for documents forming the borrower's credit folder
� Terms of monitoring
� Data verification of counterparties with the use of relevant control regarding offshore companies
Focus on Lending ProceduresDevelopment Strategy (cont’d)
Page 76
� The 5-year National Industrialization Program
announced by the Kazakhstan President is
aimed at developing new industries through
368 projects (total investment of KZT9.5 trillion)
of which:
� 331 are industrial projects
(total investment of KZT3trillion)
� 37 are innovative projects to be realized within
“30 Corporate Leaders Program”
(total investment of KZT6.5trillion)
Implementation of the Innovative Industrial Projects in all Economic Sectors
Development of the metallurgy Sector
Support for the energy sector
Development of the Chemical Industry
Development of transport infrastructure
Development of the oil refining industry
Development of the construction materials
sector
Support of SME
Action Plan Under the Program
Development of the agricultural sector
New Stage of Development for Kazakhstan
� BTA Bank will aim at becoming an active player in t he National Industrialization Program that will be funded by the Government of Kazakhstan
� This mission will significantly accelerate diversif ication of the loan portfolio while focusing on goo d quality projects due to strict eligibility criteria
BTA Bank within the Kazakh Industrialization Progra mDevelopment Strategy (cont’d)
Page 77
Funds Allocation by Sectors Within Industrial-Innovative Program 2010-2015
Development of the oil refining sector has been identified as a top priority by the President and targets
construction of 6 Petrochemical complexes (total investment of KZT1.2trillion)
Development of the agricultural sector is oriented to creation of the new export production. The main aim is to occupy a competitive position in the Central Asian
region (total investment of KZT148.4bn)
Development of the metallurgy sector as well as Chemical plays a significant role in the industrialization
process (total investment of KZT2.7trillion)
Modernizing the energy sector will allow to eliminate the energy deficit in the future economical growth times
(total investment of KZT1.1trillion)
Modernizing the transport infrastructure is the key step in the industrialization process
(total investment of KZT1.2trillion)
Total Funds Allocated: KZT9.5trillion
BTA Bank within the Kazakh Industrialization Progra m (cont’d)Development Strategy (cont’d)
Metallurgy17 1%
Chemical Industry12 2%
Construction2 6%
Agriculture1 6%
Oil Processing12 6%
Others29 4%
Transportinfrastructure
13 1%Energy11 4%
Page 78
> 3 years60%
< 1 year17%
Between 1 and 3 years
23%
Source: Company information
Total On-Balance Sheet Trade Finance US$1.77bn
Total Off-Balance SheetUS$1.78bn
Off-Balance Sheet Total Outstanding
(US$m)
Discounting of deferred payment 477.1
Other LCs 230.0
Credit Repayment Guarantees 886.6
Other Guarantees 187.7 Total 1,781.4
Trade Finance (On-Balance Sheet) Off-Balance Sheet
By Original Maturities
Note: exchange rate: 30/06/2009 US$1 = 150KZT
� On-balance sheet TF indebtedness is provided to BTA on an unsecured basis and ranks pari passu with other debt of BTA
� Most of the exposure is long-term with maturities in 2015-2017
� Over 48% or US$852m of the underlying client portfolio consists of unsecured loans
� ECA backed exposure amounts to US$921m� A significant portion of the underlying client portfolio is not
performing or is classified as doubtful
Key Highlights
� Most of the off-balance sheet exposure relates to import/export transactions of the Bank’s clients.
� US$897m finance exposure of credit repayment guarantees was used for financing of projects related to former shareholders
Current SituationTrade Finance Overview
Page 79
Evolution of New Corporate Deposits Over 2009-2014 (KZTbn)
Source: BTA Bank
29
5163
7588
21
16
20
23
27
0
115
99
83
66
50
2009E(from July)
2010E 2011E 2012E 2013E 2014E
Current accounts Term deposits
Deposits DynamicsForecasts
Page 80
Evolution of Production of New Corporate Loans Over 2009-2014 (KZTbn)
Source: BTA Bank
0
122
186
239
344
464
2009E(from July)
2010E 2011E 2012E 2013E 2014E
Commercial loans
Lending Dynamics Forecasts
Production of New Corporate Loans will only be focu sed on Commercial Loans
Page 81
V SME Business Strategy
Page 82
V SME Business Strategy
a. Macroeconomic Considerations
b. SME Business Overview
c. Presentation of the Total Gross Loan Portfolio
d. Impaired Assets Criteria
e. Restructuring and Recovery Strategy
f. SME Business Strengths & Development Strategy
g. Lending Dynamics
Page 83
Macroeconomic Considerations
Evolution of SME by Number
Source: BTA Bank(1) SME that performs or could potentially perform entrepreneurial activities
Split by Sector
Source: BTA Bank(1) From Tier II banks
SME shares in GDP and Total Employment
Source: BTA Bank
CAGR: +11%
CAGR: +8%
(1)
� The number of SME businesses in Kazakhstan has
significantly increased between 2005 and 2008
(CAGR of +11%) to reach 1 million in 2008 (92% of
total number of economic entities in the country)
� The share of SME business in GDP and total
employment still remains well below the ones
reached by main OECD countries
(1)
739k846k
985k 1,001k
569k639k
745k 725k
2005 2006 2007 2008
# of registered SME # of active SME
54%
75%
56% 57%
69%
26%
52%
14%
57%50%52%52%
USA Japan UK France Germany Kazakhstan
Share in GDP Share in total employment
25% 21% 24% 20%
23% 27% 16%6%
5%10%
11%
15%
37% 35% 28%
8% 4%
3%
6%4%18%
41%
6% 7%
By # of SME By # of employees By production output By loans received
Other Agriculture Industry Construction Trade Transport & Communication
Page 84
SME Business at a Glance
SME in Kazakhstan includes individual entrepreneurs and companies with assets not exceeding
KZT413m and staff not exceeding 250
BTA is a major player on the Kazakhstan SME market:
� 12% current market share
� KZT201bn gross loans
� 53,000 SME clients, including 12,000 borrowing clie nts
� KZT12.7m per customer in average
� 22,000 customer payments processed per day
� 18 loan products and 3 deposit products
Sale channels involve 22 branches run by seasoned a nd loyal staff (branch managers have in average
over 10 years banking experience and over 5 years o f leadership at BTA). All processes are highly
automated
SME Business Overview
Page 85
As a result, BTA’s market share in SME lending dropped from 16% to 12%
BTA’s gross SME portfolio decreased by 18% since year end 2007 mainly due to more restrictive lending policies introduced at BTA:
� Limitations on new loans
� Higher interest rates
Presentation of the Total Gross Loan PortfolioOverview
82%91%
100%
18%9%
31/12/07 31/12/08 30/06/09
KZT244bn KZT211bn KZT201bn
GovernmentOwn
CAGR: (12)%
Evolution of Total Gross Loan Portfolio
Source: BTA Bank
Page 86
Concentration of Clients (30/06/09)Split by Currency (30/06/09)
EUR 0.9%
JPY 0.2%
RUR < 0.1%
Split by Sector (30/06/09) Split by Maturity (30/06/09)
Production of Machinery & Equipment 2.2%
Housing Construction 2.0%
Hospitality 1.6%
Energy and Oil & Gas 1.9%
Real Estate Investments 1.5%
Mining 1.1%
Chemical Industry 1.1%
Other 13.8%
Source: BTA bank
Trade46%
Transport4%
Other25%
Food industry5%Agriculture
6%Industrial Construction
13%
Past due3%
Over 3 years37%
1 to 3 years23%
< 1 year37%
Others1%
USD11%
KZT88%
Тор 11-202%
Тор 6-102%
Тор-53%
Other loans93%
Presentation of the Total Gross Loan Portfolio (cont’d)Loan Portfolio Breakdown
Page 87
Evolution of SME Loan Portfolio and Provisions (KZT bn)
� BTA has c. KZT88bn SME loans that are free from any provisions
Source: BTA Bank
Current ProvisioningPresentation of the Total Gross Loan Portfolio (cont’d)
Total
91%82%
9%18%
211 201
31/12/08 30/06/09
Gross Loan Portfolio(30/06/09 - KZTbn)
Net Loan Portfolio(30/06/09 - KZTbn)
Loan Loss Provisions (30/06/09 - KZTbn)
189
152
90%
77%
10%
23%
31/12/08 30/06/09
22
49
98%
96%2%
4%
31/12/08 30/06/09
11%
2%
11%
24%
6%
28%
Own Government LLP Ratio%
Government
Own
Page 88
Recovery Department
No legal split. Dedicated teams to manage Portfolio Restructuring
and Recovery
MethodologyImpaired Assets Criteria
� The Bank has set out a number of criteria for defin ing impaired assets which are to be collected by a special department dealing with overdue and non-performing SME and retail loans
Criteria for the “Impaired Assets Portfolio” for SME
Non-standard SME loans identified on the basis of:
� Overdue
� Collateral quality
� Financial performance
� Others parameters
Page 89
Restructuring and Recovery StrategyCurrent Policy
Current Policy for Restructuring Troubled SME Loans
Monthly: General monitoring of the customers standings
Two times a year : financial due diligence of the borrower (to be approved by the credit committee)
Annually: detailed collateral valuation (to be approved by the creditor committee)
SME collects all delinquent loans that do not yet q ualify as impaired loans. The following
restructuring tools may apply depending on the part icular borrower:
� Roll-over� Refinancing � Full or partial prepayment� Obtaining additional collateral� Collateral sale
Troubled loans overdue for more than 60 days are tr ansferred to a dedicated department for
further work on loan repayment with a focus on full recovery through enforcement and sale of
security
Page 90
SME Business Strengths
Exceptional client coverage and infrastructure
� A combination of lending services with current acco unt, payment processing and deposit services)
� Highly competitive pricing and efficiency of proces sing payments of SME clients (over 100 payments for SME clients per bran ch manager daily)
“One-Stop-Shop”approach for SMEs
� SME clients are a major customer base for the “sala ry” programmes ofBTA’s Retail bloc
� Further automation of business processes, including scoring systems for SME lending
Synergies
� Strong branch network (22 branches). 2 nd place among commercial banks in Kazakhstan (269 cash settlement units)
� BTA has retained its highly skilled and experienced SME staff
� Highly loyal customer base among SME, in particular , outside of Almatyand Astana
� Certain of BTA’s branches have market shares well abo ve the market even in view of BTA’s debt restructuring
Page 91
Increase SME Share in BTA
Portfolio to 30%
Three Main Objectives
Regain Market ShareIncrease BTA’s Efficiency
in SME Business
Key Objectives
� Loan origination quality (application processing ti me will be reduced to 16 days from 32 days (mid-sized loans)
� Working with Samruk-Kazyna’s contractors and suppliers (if SME’s)
� Further integration of services to boost synergies and customer loyalty and increase non-interest income
Three Key Steps to Increase Efficiency
Optimization of business processes. Reduce
service time for clients
Potential for further increase of customer base
Funding
Measures to Achieve Them
1
2
Development Strategy
3� c. 50% funding through SME deposits and the rest
covered through retail deposits
Page 92
BTA’s Active Role in SME State Programs
Samruk Kazyna
Kazyna - 2
� Amount : KZT5bn
� Duration: from 15/08/08 to 25/12/08
Kazyna - 3
� Amount : KZT22bn
� Duration: from 19/02/09 to 31/06/09
Damu - Regions
� Amount : KZT6.7bn
� Duration: from July 2008 to 01/05/09
Kazyna - 1
� Amount: KZT12bn
� Duration: from 06/12/07 to 01/12/14
4 State Programs dedicated to SME
Development Strategy (cont’d)
BTA is number one operator of state-sponsored SME f unding programs with an average weighted share of ca.16.3%
Page 93
Evolution of Production of New SME Loans Over 2009- 2014 (KZTbn)
Source: BTA Bank
4893
140 151
202
270
7
30
4754
54
73
55
342
256
205187
123
2009E(from July)
2010E 2011E 2012E 2013E 2014E
Own Government
Lending Dynamics Forecasts
Page 94
VI Retail Business Strategy
Page 95
VI Retail Business Strategy
a. Macro-Economic Considerations
b. Evolution of Retail Clients
c. Presentation of the Total Gross Loan Portfolio
d. Impaired Assets Portfolio
e. Restructuring and Recovery Strategy
f. Retail Business Strengths & Development Strategy
g. Deposits & Lending Dynamics
Page 96
Gross Domestic Product per Capita ($)
Source: IMF and ECB, as of 30/06/2009Note: (1) CEE: Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia
Macro-Economic Considerations
0,3%(*)
0,8%(*)
2,5%(*)
14,1%(*)
82,3%(*)
� Albeit starting from a low level, the Kazakh Gross Domestic Product per Capita is rapidly growing and is expected to reach, in the medium term, CEE countries current levels
� The wealth pyramid is also representing an importan t potential growth driver with the strengthening of t he Kazakh middle class
� Average monthly wage is expected to rise from $505 in 2008 (vs. 735 for CEE countries) to $672 in 2013 (vs. 883 for CEE countries)
Up to $500
$500-$2,000
$2,000-$5,000
$5,000-$10,000
(*) Share in active population
Revenues of Active Population in 2008
Over $10,000
36,946
8,682
7,307
6,805
4,331
12,437
15,198
22,822
17,277
2007
2008
2009
Ukraine
Russia
Poland
Czech Republic
CEE Average
Euro Area
(1)
Page 97
Retail Loans per Capita (US$m)
Source: IMF, FMSA, Central Banks as of 30/06/2009
� Total retail loans almost quadrupled in two years between 2005 and 2007, although the trend changed dramatically in 2008 and 2009
� Total retail loans per capita in Kazakhstan reached US$1,245m vs. US$23,216m in the Euro Area in 2008
� Strong growth potential provided the Kazakhstan macroeconomic position improves
� Total retail deposits per capita in Kazakhstan reached US$799m vs. US$25,506m in the Euro Area as of 2008
Macro-Economic Considerations (cont’d)Penetration Rates of Banking Products
4,508
5,239
23,216
1,203
2,022
1,245
Russia
Kazakhstan
Ukraine
Poland
Czech Republic
Euro Area
Page 98
Evolution of Retail Clients
81% 79% 80%87%
18% 20% 19%13%
< 1%1%1%1%
31/12/06 31/12/07 31/12/08 30/06/09
MidMass VIP
203k 254k 321k 302k
Evolution of Number of Term Deposits’ Accounts
Source: BTA Bank
CAGR: +17%
Page 99
Evolution of Total Gross Loan Portfolio
Source: BTA Bank
KZT49%
USD51%
EUR< 1%
Over 3 years81%
1 to 3 years14%
Less than 1 year5%
Presentation of the Total Gross Loan Portfolio
32% 35% 36%
8%8% 7%
12%13%
9%
38%36%
41%
9% 7% 7%
31/12/07 31/12/08 30/06/09
KZT228bn KZT236bn
Car Loans
Consumer Loans secured by Real Estate
Unsecured Loans Mortgage Loans Other Loans
KZT247bn
Mass
Mid
VIP
Internal Segmentation
Loans Deposits
� Up to $25,000 � Up to $5,000
� From $25,000 to $100,000
� From $5,000 to $100,000
� Over $100,000 � Over $100,000
Split by Currency
Split by Client Split by Maturity
Overview
CAGR: (3)%
Clients' Concentration
Other loans96%
Тор 52%
Тор 6-101% Тор 11-20
1%
VIP23%
Mid34%
Mass43%
Page 100
30
5 4
27
3
Gross Loan Portfolio (30/06/09 – KZTbn)
Loan Loss Provisions (30/06/09 – KZTbn)
Net Loans (30/06/09 - KZTbn)
Source: BTA Bank
Presentation of the Total Gross Loan Portfolio (cont’d)
KZT236bn KZT69bn KZT167bn
Current Provisioning
Consumer Loans secured by real estate Unsecured LoansCar Loans Mortgage Loans Other Loans
36% 27% 17%
LLP Total Ratio: 29%
20% 28%
85
17 21
97
17 14
7054
1713
Page 101
Recovery Department
No legal split. Dedicated teams to manage Portfolio Restructuring
and Recovery
MethodologyImpaired Assets Portfolio
� The Bank has set out a number of criteria for defin ing impaired assets which are to be collected by a special department dealing with overdue and non-performing SME and retail loans
Criteria for the “Impaired Assets Portfolio” for Ret ail
Retail loans that are non standard (with classifica tion from 5% and more) including:
� Overdue
� Collateral quality
� Financial performance
� Others parameters
Page 102
Impaired Assets Portfolio (cont’d)
36% 32%40%
7%8%
6%9% 10%
7%
41% 41%41%
7% 8% 5%
30/06/09 "Performing Loans Division" "Impaired Assets Division"
KZT236bn KZT133bn KZT103bn
= +
Results
Consumer Loans secured by real estate Unsecured LoansCar Loans Mortgage Loans Other Loans
Source: BTA Bank
� The criteria highlighted on the previous slide has led to the following economic split of the Retail l oan portfolio:
Page 103
Impaired Assets Gross Value (KZTbn)
Loan Loss Provisions (KZTbn)
Impaired Assets Net Value (KZTbn)
Source: BTA Bank
30
5 4
27
3
Impaired Assets Portfolio (cont’d)
KZT103bn KZT69bn KZT34bn
Provisioning Status
Consumer Loans secured by real estate Unsecured LoansCar Loans Mortgage Loans Other Loans
73% 70% 60%
LLP Total Ratio: 67%
61% 63%
42
6 7
43
5 2
1611
32
Page 104
Strategy Short term actions Long term actions
� Early stages of restructuring in order to prevent delays in payments
1. Analysis and monitoring of Salary project base
2. Warning telephone calls
3. Classification of standard loans to potential non-performance
1. Loan issuance to salary project employees only
2. Partnership programs with employers
� NPL pool: loan restructuring 1. Individual schedules
2. Mortgage refinancing within governmental program bySamruk-Kazyna NWF resources
3. Deferrals and prolongations
� Work with collateral and Bank’s rights
1. Collateral sale including discount
2. Taking onto the books
1. Management of estate taken onto the Bank’s books
Restructuring and Recovery StrategyActions for Impaired Assets
1
2
3
Page 105
Retail Business Strengths
� Historically strong retail profile
� Successful restructuring will boost confidence amon g retail clientsBTA Brand
� BTA relies on a strong retail network:� 269 outlets and 22 branches� 824 АТМs (III place) and 160 cash&pay self-service terminal s (III place)� 11 currency exchange terminals
� Strong customer base benefiting from cross-selling synergies with Corporate and SME blocs
� “Salary program” customers include Kazakhstan major companies (e.g., Arcelor)
Network and customer base
� Innovative distribution technologies:
� Internet banking (over 50 services, over 1,000 new customers each month, and total monthly volume for transactions of KZT250 m)
� SMS banking (over 41 000 users and over 3 000 new c ustomers eachmonth)
� Telebanking
Advanced Direct Distribution Channels
Infrastructures
� Partnerships with leading express transfer systems Western Union and Golden Crown (local). Developing BTA proprietary transfer system “Faster” among CIS countries
Strong Partnerships
Page 106
Key Principles
Deposits
First Priority
� Recovery of BTA’s lost share and leadership position (objective is to be a top three Kazakhstan
bank with market share of not less than 15%)
� Achievement of 2008 sales by attraction of Middle and Mass segment customers (portfolio
diversification – decrease of VIP segment share)
� Improve customer relations through loyalty programs with current customers.
Non - credittransactions:
Exchange transactionsPaymentsTransfers
Focus on “non-credit” products as a source to suppor t viability of all retail business infrastructure
and leverage massive cross-selling potential due to vast existing client base of the Bank
� Emphasis on exchange transactions (recovery of share from 12% to 20%)
� Improve payment channel availability and range of services to increase market share in this
segment (from current 8% to 15% - and share maintenance)
Loans
� Active participation in Governmental Programs realization (mortgage loans refinancing, interest-
holder financing)
� Lending under market programs (auto, express loans, credit cards, education, under estate
collateral) to the employees under salary projects and of accredited financially stable companies
� Work on NPL: NPL portfolio’s to remain at 20%
Cards� Main communication channel with the customer and main access to the banking services via all
types of channels
� Attraction of new customers via salary projects channel (from 600k to 1m customers)
Development Strategy
Page 107
Customer Segmentation in Retail Business
� Basic segmentation:
� Salary card/current account holders employed by financially stable companies, including companies with state participation (represent 80% of the current database)
� Bank’s depositors� Holders of AmEx type credit cards of any banks� Shareholders and directors of major companies as per official segmentation by corporate unit
� Employed applicants confirming income by SCPP receipt � Shareholders of legal entities provided the companies have stable status and the legal entity is not
Bank’s customer
� «Grey» employees, whose pension payments are partially confirmed by SCPP receipt or without any pension payments to Pension Funds
� Self-employed individuals engaged in entrepreneurial activities
� Focus on employees of companies with state particip ation
� Mass coverage of “non-credit” customers. The Bank’s units cover 100% of city inhabitants and 55% rural inhabitants (c. 600,000 customers per month)
Category C
Category A
Category B
Category D
To determine risk groups from the point of view of account and loyalty control
(customer/ non-customer of the Bank)
By Activities
By Income Level
Development Strategy (cont’d)
Page 108
BTA Group’s Clients Base in RKDevelopment Strategy (cont’d)
Sales Strategy: Comprehensive Customer Service
Internet Banking, SMS Banking, Units, Cash & Pay, P OS terminals
Entity analysis Credit card Express loan Recurrent sales
Collateral loanLong-term order to deposit
Long-term order to payments
Debit card
BTA Bank1,083,680 cl.
PF BTA Kazakstan882,000 cl.
BTA Morgage26,414 cl.
BTA Insurance
Group169,583 cl.
Page 109
� Instruments:
� Special product range is developed for customers
� Active sales system based on customer data
� Direct sales project with preliminary underwriting
� Recurrent sales to current customers
Segment A: salary projects (loyal customers with tr ansparent solvency )
Objective
Provide for an up to 30% loan
penetration level
Development Strategy (cont’d)Retail Loan Strategy
Segments B and C: trade network customers
� Instruments:
� Agency programs with partner networks
� Launch loyalty programs for recurrent sales to current customersObjective
Boost customer loyalty
Page 110
Competitive Advantages
� Service quality :
� A Service Hub client coverage concept allows customer service quality control for all sales channels (cash settlement service, ATM, Cash&Pay, POS terminals)
� To promote customer acquisition and retention efficiency, selective and competitive employee incentive programs have been launched
Sales Strategy for Retail Term Deposits
Objective: 15% market share till 2014
� Ensure volume increase of no less than 20% of the c ountry-wide market increase
� Regain 2008 sales levels Goals
Sales Methods
� Sales via salary projects
� Sales through Service Hubs: acquisition of the Hub’s corporate client employees and capturing general customer base on the Service Hub coverage territory
� Special deposits with automatic repayment for “salary program”customers
� Loyalty programs
� Cross sales and direct sales
Sales Channels
� Bank branch network
� Salary projects
Development Strategy (cont’d)
Page 111
BTA’s Active Role in Retail State Programs
Long-term funding at competitive costs
Samruk Kazyna
Retail
� Refinancing of individual mortgage loans under the state mortgage
refinancing programme
� State mortgage program for residential properties u nder construction
� Kazakhstan Mortgage Company financing programs
Development Strategy (cont’d)
Page 112
Evolution of New Retail Deposits Over 2009-2014 (KZ Tbn)
Source: BTA Bank
Deposits Dynamics Forecasts
4 5 6 5 5
27
5062
8092
(4)
(28)
31
55
68
8597
(32)
2009E(from July)
2010E 2011E 2012E 2013E 2014E
Deposits on demand Term deposits
Page 113
Evolution of Production of New Retail Loans Over 20 09-2014 (KZTbn)
Source: BTA Bank
Lending Dynamics Forecasts
1119
27 29 3144
3 3 33332
3337 4010
19
2729
31
2
1
1
11
11
60
75
10599
91
2009E(from July)
2010E 2011E 2012E 2013E 2014E
Consumer loans secured by real estate Car Loans Unsecured Loans Mortgage Loans Other Loans
Page 114
290280
260
240230225
279
252
2007 2008 2009E 2010E 2011E 2012E 2013E 2014E
Number of Units dedicated to Retail & SME
Source: BTA Bank as of 30/06/2009
ForecastsNumber of Units
Stage 2 – 2010 � Reduce number of cash desks
through introduction of self-service zones, mini-kiosks
� Breakdown of usage:� Traditional channels
(physical service) – 70%� Alternative channels – 30%
Stage 3 – 2011� Create alternative/remote cash
settlement service instead of existing cash settlement service
� Breakdown of usage:� Traditional channels
(physical service) – 60%� Alternative channels – 40%
Stage 1 – 2009� Cashier + Terminal + Consultant� Breakdown of usage:
� Traditional channels(physical service) – 80%
� Alternative channels – 20%
Service Channels Development Strategy
Page 115
VII Q&A