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IBA: Stable Growth in Challenging Environment

Emil MustafayevFirst Deputy Chairman

IBA: Stable Growth in Challenging Environment

Emil MustafayevFirst Deputy Chairman

20.01.2009, Vienna20.01.2009, Vienna

2

Azerbaijan – safe harbor for investmentAzerbaijan – safe harbor for investment

Working economy and stable financial system

Sufficient national reserves

Immunity of a small economy

Fitch (BB+) and Moody’s (Ba1) confirmed ratings at

previous levels; recently received a new one from S&P

(BB+)

Low level of foreign indebtness and their timely servicing

Healthy slow down of rapid economic growth and

reduction in inflation

Development of entrepreneurial culture

3

Measures Taken By Azerbaijan StateMeasures Taken By Azerbaijan State

Reduce key refinancing rate

Increase liquidity by reducing mandatory reserve

requirements National Bank provides loans to commercial banks

Intention of government to allocate funds from State Oil

Fund to commercial banks

Continue investments into infrastructural projects

Support real economy, financial sector SME, agriculture,

construction

4

IBA – Core of the Azeri Banking SystemIBA – Core of the Azeri Banking System

Stable performance and growing customer base

Largest creditor of the national economy

Recently confirmed ratings from Fitch at BB+ and

Moody’s at Baa2

Dominate position in the banking system

Well diversified asset base

Strong shareholder support

Trust of customers and investors

Wide branch network and international presence

5

IBA’s Asset Structure and QualityIBA’s Asset Structure and Quality

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Loan Portfolio DiversificationLoan Portfolio Diversification

Foreign Currency

75%

AZN25%

Agriculture6,0%Transport &

communic.10,0%

Trade and Services26,0%

Iindividuals11,0%

Construction10,0%

Manufacturing10,0%

Oil & energy27,0%

Assets – Currency StructureAssets – Currency Structure

109

87

67 7

2003 2004 2005 2006 2007 2008 2009(forecast)

Non-Performing Loans (NPL)Non-Performing Loans (NPL)Assets Growth in August-December 2008Assets Growth in August-December 2008

4 150

4 3004 400

4 4734 600

Aug Sep Oct Nov Dec

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IBA’s Assets DynamicsIBA’s Assets Dynamics

6

Strong Loan Portfolio and Assets Growth (in USD millions)Strong Loan Portfolio and Assets Growth (in USD millions)

440 510882

1 258

2 120

3 208

4 6005 000

3 250

2 8002 408

1 192739

415203219

2002 2003 2004 2005 2006 2007 2008 2009(Forecast)

Total assets Loan portfolio

7

IBA’s Liabilities – Funding MixIBA’s Liabilities – Funding Mix

Due to fin. instit.9%

Corporates41%

Retail14%

Other borrowed

funds28%

Subordinated Debt3%

Equity8%

Other3%

Repayment of foreign totaling almost 600 mln. USD

Freed up 225 mln. USD as a result of reduction of mandatory reserve by NBA

Consistently growing deposit base even during August – December

8

IBA’s Liabilities DynamicsIBA’s Liabilities Dynamics

Customer Accounts (USD millions)Customer Accounts (USD millions)

8

76 110 167 179 266461

634780

313 309589

810

1 231

1 728 1 8602 050

2002 2003 2004 2005 2006 2007 2008 2009(Forecast)

Retail Corporates

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IBA’s Shareholders Equity DynamicsIBA’s Shareholders Equity Dynamics

9

Total Equity and Share Capital (USD millions)Total Equity and Share Capital (USD millions)

27 36 5491

162

287

382

469

7 10 20 2768

118

236 250

2002 2003 2004 2005 2006 2007 2008 2009(forecast)

Total Equity Share Capital

**

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IBA’s Capital Adequacy and Ownership StructureIBA’s Capital Adequacy and Ownership Structure

10

IBA’s main shareholder is Azerbaijan Republic Ministry of Finance (50.2%)

In order to increase its capitalization, IBA has undertaken 4 large emissions in the last 6 years

IBA's Employees

5,7%

Individuals31,1%

Ministry of Finance50,2%

Legal Entities13,0%

9,4%10,4%

12,8%14,0%

2006 2007 2008 2009(Forecast)

5,2% 5,1%

6,9%8,0%

2006 2007 2008 2009(Forecast)

Tier 1Tier 1 Total CARTotal CAR

Shareholders structureShareholders structure Last emissionsLast emissions

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IBA’s Financial PerformanceIBA’s Financial Performance

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Income Growth (USD millions)Income Growth (USD millions)

Operating Income Growth (USD millions)Operating Income Growth (USD millions)

77

137

215257

295

2005 2006 2007 2008 2009(Forecast)

85124

219

286330

64105

146120

150

2005 2006 2007 2008 2009(Forecast)

Interest income Non-interest income

**

24,4%

34,0%30,0% 32,0% 33,0%

2005 2006 2007 2008 2009(Forecast)

1,8%

2,5%

2,0%

2,5% 2,8%

2005 2006 2007 2008 2009(Forecast)

ROA (Return on Assets)ROA (Return on Assets)

ROE (Return on Equity)ROE (Return on Equity)

1212

International diversificationInternational diversification

Subsidiaries abroad:

IBA – Moscow

IBA- Georgia

IBA – Qatar (planned)

Representative offices abroad:

Frankfurt

London

Luxembourg

Dubai

New-York