Establishing a factoring business in Russia?Factoring market in Russia and CIS: market trends and future scenarios.

ILYA POKAMESTOVBusiness Development Director,

Financial Company POLITEKS(Russia)

• POLITEKS LLC was created in 2003 as an affiliate company of B&N BANK. POLITEKS offers financial lease (leasing) and a whole range of factoring services. In 2008 a limit of operation of financial lease reached 1,1 billion RUB. During operating time such companies became our clients: SBARRO, REN-TV, OOO “City Bowling”, OAO “Volgatelecom”, OAO “Ulyanovskenergo” and others.

• May 2011 POLITEKS commenced operations of factoring services.

• November 2011 POLITEKS member of IFG.

ABOUT POLITEKS

• B&N Bank – is a successfully developing universal bank with a wide sales network over 120 offices in different regions of the Russian Federation.

• B&N Bank is among TOP-50 Russian banks. As of included in TOP-30 biggest Russian banks according to CBR Consolidated Statistical Data.

• B&N Bank – is a successfully developing universal bank with a wide sales network over 120 offices in different regions of the Russian Federation.

• B&N Bank is among TOP-50 Russian banks. As of included in TOP-30 biggest Russian banks according to CBR Consolidated Statistical Data.

B&N BANK‘S NETWORKS

Moreover, the Bank’s sales network is supplemented by branches of two banks consolidated in the banking Group (14 points of Bashinvestbank and 27 points of Vyatka-Bank).

RUSSIA-Market size

0

20

40

60

80

100

120

140

0 100 000 200 000 300 000

Growth Rate [CAGR, 2005-2007]

Market Size, [mln. euros]

Bubble size shows GDP penetration

China

Russia

India

Brazil

UK

Market Volumes

30 576

23 520

14 700

8 420

4 633

2005 2006 2007 2008 2009

45 864

2010

+58%

0.8% 1.1% 1.6% 2.1% 2.7% 3.0%

Forecast

Source: Expert RA, AFC analysis

Market historical volumes and forecast [mln. euros]

Penetration [% to GDP]

882 bln. RUB-TURNOVER 2011, 165 bln. RUB-OUTSTANDING Dec. 2012,

Forecast 2012-1500 bln. RUB

1,8

5,0

8,9

10,0Germany

Finland

UK

Russia

Source: FCI, AFC analysis

Benchmarking against mature markets

Financing per client, mln. euros

Segmentation

10%

47%

43%

2011

49%

36%

14%

2011

LE

ME

SE

5700 Clients

17200 Debtors

73 Operators

Regional aspectsF

acto

ring

clie

nts

base

326 423 958 75,000

2002 2003 2003 2007

Source: Expert RA, AFC

High Coverage

Medium Coverage

Market players

Factoring market: breakdown by type of player [2011]

62%

35%

3%

Factoring departments under bank's umbrella

Factoring companies that operate with banking mother structure

Non banking factoring companies

Source: Expert RA, AFC analysis

Market players

Source: Expert RA, AFC analysis

Label

Label

Label

Label

Market Trends

• Consentration

• IT problems

• HR problems

• Legal aspects

• Risk issues

• No infrastructure

• Lobbying

Market Trends

•Russia's potential to play a major role in the world economy is to be underpinned through the establishment of a financial hub

•So far international factoring in Russia takes only 1% of the factoring turnover, far behind the world's 11%

•Tough Way suggests the appearance of the state regulator in the factoring market. I.E., the licence regime would appear that would be the main lever of the market

•Effectively this would bring the market under state control, undermining its flexibility and adaptability

Regulations-bound scenario

Regulations-free scenario

•Liberal Way means, that factoring market will be developed with a self-regulation scheme.

•In this case – The Russian Association of Factoring Companies will become the main regulation body on the market.

•Flexibility but "fair-play" rules followed

To start factoring business in Russia: Challenges

• Legislation

• Lack of professionals

• IT platforms

• Unstable macro and micro perfomance

• Political risks

• Gross margins

• Huge potential market

• Leading role in community

• CIS markets

• Low entrance barriers

To start factoring business in Russia: Benefits

• Affilate Company

• Factoring departments in international Banks

• Buy out Russian Factoring Company

• Joint venture with Russian Factors

• Joint venture with international investors

Ways to enter Russian Factoring market:

FACTORing in CIS

• Ukraine

• Belorussia

• Kazakhstan

• Moldova

• Armenia

Questions?

Many Thanks!

Contacts:• ILYA POKAMESTOVwww.politeks.ru• +7(495) 748-50-50Director of Business DevelopmentFinancial Company POLITEKSi.pokamestov@politeks.ru

www.factoringpro.ru+7(499) 940-8798 General managermanager@factoringpro.ru