Rescuing investors from pre-crisis private equity funds

RENAISSANCE ASSET MANAGERS

CIS BANKERS KIEV – JUNE 2013

FOR PROFESSIONAL INVESTORS ONLY

SIMON FENTHAM-FLETCHER

1

1991 London ACA 1990’s New York

Blackrock Distressed debt non public markets

2000-2007 London

Schroder's, NFCP Hedge Funds

2007 - Moscow,

Renaissance Global Allocation & Private Equity

I. Summary

01

02

03

Russian Banks – State vs. the rest

04 Implications

Pre-Crisis Private equity Funds

Performance of the rest

OVERVIEW

A Company specific

2

Appendices

PRE-CRISIS FUNDS

3

0

500

1000

1500

2000

MSCI World

Capital Raising has fallen off a cliff, even as MSCI world recovered

I. Summary

01

02

03


04



OVERVIEW

A Company specific

4

Appendices

Implications

STATE BANKS VS. THE REST

5 Source: Central Bank of Russia, Bloomberg and Custom House

•  Russia has a two tier banking sector, the State & the rest

•  Russia’s top 6 state banks account for 53% of deposits

•  State banks “like a bulldozer…with the brakes off“

•  Under banked? – 10% fixed investments financed by loans

•  Fragmented? – circa 1000 banks, only top 50 significant

•  Protected? – no foreign bank branches inside Russia (law 2013)

•  Efficient?

•  Trustworthy?



№ БанкCredit Portfolios Feb 2013 (Mln RUB.)

Credit Portfolios Feb 2012 (Mln RUB.) Change (%)

1 Сбербанк 7975441.43 6 582 802,18 21,16

2 ВТБ 1477562.07 1 334 288,94 10,74

3 Газпромбанк 1290301.31 991 100,41 30,19

4 Россельхозбанк 894523.43 780 933,57 14,55

5 ВТБ 24 836412.99 583 044,00 43,46

6 Альфа-‐Банк 726679.42 536 322,65 35,49

7 Юникредит Банк 426184.51 400 887,98 6,31

8 Банк Москвы 380093.1 338 068,32 12,43

9 Росбанк 358128.55 338 262,32 5,87

10 Промсвязьбанк 335277.87 290 596,23 15,38

11 Райффайзенбанк 316757.57 307 542,59 3,00

12 Транскредитбанк 312391.67 286 404,86 9,07

13 Номос-‐Банк 290691.97 202 017,48 43,89

14 Уралсиб 226903.19 203 669,28 11,41

15 ХКФ Банк 216582.24 105 319,76 105,64

16 Банк Санкт-‐Петербург 206408.63 196 577,90 5,00

17 Московский Кредитный Банк 193770.45 144 451,49 34,14

18 Русский Стандарт 183109.98 103 670,25 76,63

19 Восточный экспресс банк 173525.56 99 442,03 74,50

20 АК Барс 169296.85 152 142,45 11,28

Top 5 banks = 55%

Top 20 Russian banks by Credit Portfolios



Top 6 banks = 53% deposits

Top 20 Russian banks by Deposits № Банк

Deposits Feb 1 2013 (Mln RUB)

Deposits Feb 1 2012 (Mln RUB) Change (%)

1 Сбербанк 8126278.54 6 754 026,84 20,32

2 ВТБ 1800326.28 1 898 921,80 -‐5.19

3 Газпромбанк 1776621.88 1 631 286,30 8,91

4 ВТБ 24 1017877.82 840 103,89 21,16

5 Россельхозбанк 840063.25 858 157,72 -‐2.11

6 Банк Москвы 773952.37 743 936,12 4,03

7 Альфа-‐Банк 659292.16 492 337,63 33,91

8 Промсвязьбанк 465971.65 356 694,21 30,64

9 Юникредит Банк 457773.28 434 048,38 5,47

10 Номос-‐Банк 367740.35 267 008,75 37,73

11 Райффайзенбанк 318572.58 326 879,38 -‐2.54

12 Росбанк 281586.53 309 685,87 -‐9.07

13 Транскредитбанк 275878.93 321 410,54 -‐14.17

14 Уралсиб 275526.87 269 706,18 2,16

15 Россия 261232.59 239 700,56 8,98

16 ХКФ Банк 209306.71 89 462,73 133,96

17 Банк Санкт-‐Петербург 208884.38 209 805,23 -‐0.44

18 Московский Кредитный Банк 202429.17 155 637,58 30,06

19 АК Барс 195285.08 163 650,42 19,3320 МДМ Банк 190838.7 191 244,36 -‐0.21

I. Summary

01

02

03


04



OVERVIEW

A Company specific

8

Appendices

Implications

Underlying banks performance vs. Russian banking sector

PERFORMANCE OF THE REST

9

% owned by RenFin

Total Assets

01.05.2013

Total Equity

01.05.2013

Net income

01.05.2013

ROA (annualis

ed)

ROE (annualis

ed)

% change in total assets,

end-2012

% change in total equity,

end-2012

% change in loan

portfolio, end-2012

% change in

customer accounts, end-2012

Capital adequacy

ratio NPL

ratio*** LLP

coverage ratio****

Bank 1 8.15% 2,184.1 238.0 11.4 1.6% 14.3% 10.5% 11.6% 14.1% 0.5% 12.5% 4.1% 140.6% Bank 2 8.01% 3,438.0 457.5 41.8 3.6% 27.4% -3.4% 8.8% 2.4% -2.7% 11.5% 2.8% 326.8% Bank 3 19.99% 400.8 51.3 3.0 2.3% 17.6% 0.8% 8.1% -2.3% 0.5% 11.6% 5.3% 185.3% Bank 4 0.53% 3,910.1 394.1 16.2 1.2% 12.3% -5.1% 5.9% 4.3% 0.4% 12.7% 4.7% 239.9% Bank 5 12.23% 2,171.4 166.9 7.9 1.1% 14.2% 8.7% 1.4% 13.0% 3.7% 10.2% 3.6% 149.1% Bank 6 3.61% 3,394.3 320.7 5.7 0.5% 5.3% -1.3% -1.1% 1.0% -0.4% 10.8% 6.7% 132.9% Bank 7 5.59% 1,034.3 200.2 7.5 2.2% 11.2% 2.4% 2.5% 1.8% 2.4% 17.9% 4.1% 238.7% Bank 8 10.00% 1,071.4 96.0 9.6 2.7% 30.0% 11.0% 9.9% 17.0% 11.7% 11.2% 2.1% 319.2% Bank 9 19.99% 1,051.4 97.4 9.1 2.6% 27.9% 10.3% 12.1% 19.4% 11.8% 11.2% 1.9% 208.7% RenFin Banks Average 2,072.9 224.7 12.5 2.0% 17.8% 3.8% 6.6% 7.9% 3.1% 12.2% 3.9% 215.7% Russian bank sector***** 1.9% 14.7% -0.7% 1.2% 1.7% 0.2% 13.4% 3.7% 166.5%

* Source: companies and CBR data. Balance Sheet figures are reported net of interbranch settlements, all changes and ratios are calculated based on RUR-denominated figures ** consolidated figures presented by X Bank (figures represent IFRS figures as of 31.12.2012)

*** NPL ratio - non-performing loans to total gross loan portfolio

**** LLP coverage ratio - loan loss provisions to non-performing loans

***** Source: CBR data

I. Summary

01

02

03


04



OVERVIEW

A Company specific

10

Appendices

Implications

11

IMPLICATIONS

•  Capital adequacy rules strict

•  Survival of regional banks questionable

•  Consolidation a fact under 900 Russian banks 2013 vs. 1330 in 2000

•  Generally poor in comparison with western peers

•  Room for efficiencies

•  The elephant in the room

I. Summary

01

02

03


04 Portfolio activity



OVERVIEW

A Company specific

12

Appendices

13

BANK 1

•  One of the biggest players in the South of Russia with strong presence in Sochi region

•  Well established SME franchise with strong client base – ranked in top-10 banks in terms of both number and volume of issued SME loans (RBC-rating)

•  Aims for long-term sustainable development and supports new businesses by offering a range of services for start-ups

•  Continuously increases efficiency of all business units

Overview

Bank Equity stake owned (%)

Bank 1 8.2%

Geography

Note: These are the beliefs of the fund manager and are subject to change at any time

Financials (RUR MN) 2008 2009 2010 2011 2012

Total assets 50,653 42,912 48,279 54,537 62,572

Cash & equivalents 55 200 4,651 5,946 7,006

Banks loans 50 403 4,511 2,012 1,305

Customer loans 29,133 25,513 30,143 42,011 50,743

NPL 50 403 4,511 2,755 2,980

Equity 5,479 5,442 5,774 6,686 7,593

Net interest Income 2,220 846 2,263 3,034 3,449

Net Profit 308 66 350 1,008 1,111

Ratios (%) 2008 2009 2010 2011 2012

Loans/Deposits 143.2 99.1 98.8 116.2 108.4

Cost/Income 38.2 43.7 51.3 58.6 55.1

NIM 10.7 7.3 5.9 6.7 6.9

ROAA 0.6 0.1 0.5 1.7 1.9

ROAE 5.2 1.2 3.9 14.3 15.6

Adequacy ratio 10.8 12.7 12.0 12.3 12.8

Source: Renaissance Asset Managers and Company data

14

BANK 2

•  Universal bank with corporate and SMEs being key business development areas

•  Sustainable high performance (2011: ROAA of 3.9%, ROAE of 30.8%; E2012: ROAA of 3.4%, ROAE of 25.6%)

•  Great operational efficiency with cost/income ratio not exceeding 40% for last three years

•  Well established risk management system leading to high quality assets

•  Strong corporate governance

Overview


Bank 2 8.0%

Geography



Total assets 57,833 55,852 72,331 93,003 114,514

Cash & equivalents 17,510 10,287 8,542 10,716 15,880

Banks loans 2,327 6,723 6,947 12,590 7,742

Customer loans 31,895 21,939 34,924 44,243 54,479

NPL 1,577 3,032 4,048 2,657 3,687

Equity 6,752 7,824 9,006 12,238 14,918

Net interest Income 3,252 3,576 3,964 5,040 6,064

Net Profit 779 1,138 1,532 2,874 3,199

Ratios (%) 2008 2009 2010 2011 2012

Loans/Deposits 93.4 65.7 73.0 70.0 66.8

Cost/Income 43.6 37.4 38.6 38.6 39.2

NIM 10.1 11.1 6.6 7.5 7.4

ROAA 1.3 2.0 2.4 3.4 3.1

ROAE 11.2 15.4 18.1 26.4 23.6

Adequacy ratio 20.8 24.3 18.4 17.1 18.6


15

BANK 3

•  Leading bank in Kirov region with 28 sales points

•  Bank remains focused on financing mainly SMEs and individuals whose stake in gross loan portfolio equals to 15% and 72% respectively

•  Healthy growth rates in RUR terms and stable financial and regulatory ratios

•  Experienced and highly professional management

•  Adheres to high corporate governance standards

Overview


Bank 3 19.9%

Geography



Total assets 6,639 7,601 10,072 10,277 12,830

Cash & equivalents 1,193 1,088 908 948 1444

Banks loans 430 730 1,075 570 141

Customer loans 4,450 4,909 5,750 6,255 8,771

NPL 468 539 632 695 802

Equity 1,185 1,197 1,251 1,445 1,775

Net interest Income 439 414 347 478 613

Net Profit 229 72 115 186 281

Ratios (%) 2008 2009 2010 2011 2012

Loans/Deposits 91.7 59.6 76.6 88.3 83.7

Cost/Income 42.9 43.0 48.9 49.8 55.9

NIM 8.6 7.0 4.1 5.4 6.2

ROAA 3.0 1.3 1.3 1.8 2.4

ROAE 17.3 7.8 9.3 13.4 17.5

Adequacy ratio 19.1 18.3 13.7 13.1 12.2


16

BANK 4

•  Universal bank with focus on SME and retail business - bank is ranked #15 among Russian banks for the volume of cards issued

•  32nd largest branch network among Russian banks (RBC-rating) with more than 197 outlets in 50 regions

•  Sustainable growth rates, NIM and continuously improving profitability

•  Bank’s rating was upgraded in 2011 by Moody’s to B1 with stable outlook

Overview


Bank 4 0.5%

Geography Geography



Total assets 39,433 59,391 82,897 108,868 126,531

Cash & equivalents 4,192 7,038 8,960 8,387 8,665

Banks loans 3,125 6,782 10,552 11,581 7,771

Customer loans 26,735 30,692 48,889 68,904 85,442

NPL 1,654 3,067 3,561 5,241 6,321

Equity 5,321 5,455 6,035 7,952 8,903


Net Profit 18 156 712 949 873

Ratios (%) 2008 2009 2010 2011 2012

Loans/Deposits 117.2 76.3 85.7 89.5 86.8

Cost/Income 64.4 54.0 68.6 54.6 56.3

NIM 8.0 5.6 5.0 7.1 7.0

ROAA 0.1 0.3 1.0 1.0 0.7

ROAE 0.4 2.9 12.4 13.2 10.4

Adequacy ratio 20.0 17.0 12.8 13.2 13.1


17

BANK 5

•  Major consolidation project – united four banks from different regions under Xbank brand in 2008

•  Offers a full spectrum of services for individuals and commercial entities, with medium to large corporate business prevailing

•  The bank is regularly amongst the top-100 Russian banks based on all primary financial and economic indicators

•  Recent change of beneficiary is expected to strengthen bank’s position

Overview


Bank 5 12.2%

Geography



Total assets 25,333 32,633 41,121 46,645 60,886

Cash & equivalents 567 817 743 1,031 1,260

Banks loans 1,676 2,154 2,707 7,233 5,319

Customer loans 16,328 22,288 25,866 29,240 39,222

NPL 775 1,366 1,543 1,724 1,986

Equity 4,443 4,560 4,130 4,351 6,035


Net Profit 157 117 33 221 1,684

Ratios (%) 2008 2009 2010 2011 2012

Loans/Deposits 184.6 120.8 93.0 76.0 77.2

Cost/Income 118.1 71.9 81.2 97.4 84.6

NIM 8.7 7.3 8.0 6.4 6.9.

ROAA 1.0 (0.1) 0.6 - 3.1

ROAE 6.0 (0.5) 6.3 (0.1) 32.4

Adequacy ratio 18.8 14.2 11.3 11.7 12.1


BANK 6

18


Bank 6 3.6%

•  Has good profitability and strong positions in central Russia and the Urals through wide branch network (#3 among Russian banks)

•  Well established mature banking business with balanced retail, SME and corporate exposure

•  Aggressively develops financial services businesses, such as consumer finance bank and an on-line bank

•  Adheres to high corporate governance standards

•  Technically ready for IPO, but RenFin Team prefer faster trade sale.

Overview

Geography



Total assets 25,333 32,633 41,121 46,645 178,667

Cash & equivalents 567 817 743 1,031 5,629

Banks loans 1,676 2,154 2,707 7,233 14,575

Customer loans 16,328 22,288 25,866 29,240 73,495

NPL 775 1,366 1,543 1,724 6,330

Equity 4,443 4,560 4,130 4,351 15,050


Net Profit 157 117 33 221 2,507

Ratios (%) 2008 2009 2010 2011 2012

Loans/Deposits 114.1 95.7 86.8 69.1 62.6

Cost/Income 58.2 51.1 66.4 74.3 67.6

NIM 12.1 10.8 12.5 15.3 14.3

ROAA 0.3 0.2 1.6 1.6 2.2

ROAE 2.4 1.8 16.0 17.3 25.8

Adequacy ratio 13.5 12.4 11.1 10.1 10.3


19

BANK 7

#60 by deposits volume and #34 by SME loan volumes vs. #106 by total assets

•  The Bank was approached by several strategic buyers although their offers were rejected liabilities

•  #60 by deposits volume and #34 by SME loan volumes vs. #106 by total assets

•  The Bank was approached by several strategic buyers although their offers were rejected

Overview


Bank 7 5.6%

Financials (RUR mn) 2008 2009 2010 2011 Total assets 23,508 23,616 28,489 30,208

Cash & equivalents 2,600 3,099 3,538 2,786

Banks loans 576 2,326 2,535 1,360

Customer loans 13,587 10,526 12,433 15,928

NPL 1,479 2,097 2,032 1,936 Equity 4,856 4,812 5,473 6,044 Net interest Income 1,649 1,637 1,215 1,681 Net Profit 2,308 5 694 628

Ratios (%) 2008 2009 2010 2011 Loans/Deposits 89.0 72.1 65.4 77.1

Cost/Income 54.0 48.6 55.9 70.7

NIM 11.6 10.4 8.2 8.0

ROAA 0.9 1.0 2.7 2.0

ROAE 5.1 4.8 13.5 10.2

Adequacy ratio 18.5 23.3 19.1 21.7

Geography

This is the current view of the portfolio manager and are subject to change at any time


20

BANK 8

• Continues to improve its positioning in the Russian banking sector:

  #88 by retail deposits (up 18 positions vs. 2010)  

#134 by total assets in Russia (up 20 positions vs. 2010)

  #96 on net profit (up 33 positions vs. 2010)

  Sustainable high performance (2011: ROA of 2.5%, ROE of 21.4%) #88 by retail deposits (up 18 positions vs. 2010)   #134 by total assets in Russia (up 20 positions vs. 2010)   #96 on net profit (up 33 positions vs. 2010)   Sustainable high performance (2011: ROA of 2.5%, ROE of 21.4%)

Overview


Bank 8 10.0%


Cash & equivalents 2,135 3,026 2,542 1,772

Banks loans 176 391 394 1,350

Customer loans 5,401 4,455 7,027 12,979

NPL 269 291 - 111 Equity 1,205 1,383 1,805 2,250 Net interest Income 1,123 1,011 1,075 1,505 Net Profit 272 178 451 493


Cost/Income 48.0 42.8 53.8 60.7

NIM 19.0 15.0 10.8 9.3

ROAA 3.2 1.8 3.3 3.0

ROAE 26.3 13.6 24.7 23.7

Adequacy ratio 21.0 20.7 17.4 16.1

Geography



21

BANK 9

• 

2011 IFRS report shows good performance, however, the Fund was not able to receive detailed information on the quality of loan portfolio to form The Fund has a put option on the previous owner, who sold the Bank in its own opinion violation to the Put Option and Shareholder agreements

•  The Fund cooperates with other minority shareholders on key decisions

•  2011 IFRS report shows good performance, however, the Fund was not able to receive detailed information on the quality of loan portfolio to form its own opinion

Overview


Bank 9 19.9%


Cash & equivalents 1,768 858 2,679 2,281

Banks loans 3,600 3,057 4,785 6,709

Customer loans 5,832 5,383 6,934 11,484

NPL 359 925 1,110 1,181 Equity 1,539 1,379 1,298 1,482 Net interest Income 615 713 378 533 Net Profit (99) (202) (510) 184


Cost/Income 81.8 70.1 103.2 76.5

NIM 5.8 5.6 2.0 2.3

ROAA (0.8) (1.5) (2.8) 0.8

ROAE (0.7) (13.8) (38.1) 13.2

Adequacy ratio 28.4 20.5 11.5 13.4

Geography



can be no assurance that the comparable results will be achieved. Renaissance Asset Managers is a trading name of Renaissance Asset Managers (Guernsey) Limited and its affiliated companies. This document is intended only for the person to The value and the income produced by products may fluctuate, so that an investor may get back less than initially invested. Value and income may be adversely affected by exchange rates, interest rates, or other factors. If a product is income producing, part of the capital invested may be used to pay that income. Levels and bases of taxation may change. Investors should consult their own tax advisor regarding their individual tax treatment with respect to the products discussed herein. This document has been issued by Renaissance Asset Managers (Guernsey) Limited who are licensed to carry on controlled investment business under the Guernsey Financial Services Commission (GFSC); Reference Number 2008335. © 2013 Renaissance Asset Managers (Guernsey) Limited . does not intend to conduct a public offering of securities in the United States. This document is for information purposes and does not constitute advice or a recommendation to enter into any transaction or an offer or an agreement, or a solicitation of an offer or an agreement, to enter into any transaction, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract for the same. Before entering into any transaction, you should consider the suitability of the transaction to your particular circumstances and independently review (with your professional advisers as necessary) the specific financial risks as well as the legal, regulatory, credit, tax and accounting consequences of entering into such transaction. We do not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. Opinions expressed herein reflect the opinion of the investment manager and are subject to change without notice.

This document contains certain forward-looking statements with respect to Renaissance Asset Managers’ strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “believe,” “expect,” “anticipate,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions. Renaissance Asset Managers cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and Renaissance Asset Managers assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. In considering the prior performance information contained herein, investors should bear in mind that past performance is not necessarily indicative of future results, and that there can be no assurance that the comparable results will be achieved.

The value and the income produced by products may fluctuate, so that an investor may get back less than initially invested. Value and income may be adversely affected by exchange rates, interest rates, or other factors. If a product is income producing, part of the capital invested may be used to pay that income. Levels and bases of taxation may change. Investors should consult their own tax advisor regarding their individual tax treatment with respect to the products discussed herein. This document has been issued by Renaissance Asset Managers (Guernsey) Limited who are licensed to carry on controlled investment business under the Guernsey Financial Services Commission (GFSC); Reference Number 2008335. © 2013 Renaissance Asset Managers (Guernsey) Limited .

IMPORTANT INFORMATION

22

Date post:	15-Jul-2015
Category:	Economy & Finance
Upload:	cis-bankers
View:	169 times
Download:	0 times

Rescuing investors from pre-crisis private equity funds

Economy & Finance