DEVELOPMENT POTENTIAL OF PRIVATELY-OWNED RUSSIAN BANKS Michel Perhirin, CEO, MDM Bank RUSSIA-NETHERLANDS ECONOMIC FORUM Fifth Session – Amsterdam, 18 – 19 November 2007

2  RUSSIA – THE PLACE TO BE  BANKING SECTOR – THE PLACE TO STAY  COMPETIVE ENVIRONMENT  PRIVATE BANKS’ STRATEGIES  RUSSIAN BANKS VS GLOBAL LIQUIDITY SQUEEZE CONTENTS

3 RUSSIA – THE PLACE TO BE… - If hot for politics and structural weaknesses, Russia would already be an A-rated country

4 …AND SOLID INVESTMENT-GRADE STORY - Russia’s FX reserves exceed USD 450 bn... …This is more than enough to support local borrowers in case of need… …And ensure stability of the local economy.

5  RUSSIA – THE PLACE TO BE  BANKING SECTOR – THE PLACE TO STAY  COMPETIVE ENVIRONMENT  PRIVATE BANKS’ STRATEGIES  RUSSIAN BANKS VS GLOBAL LIQUIDITY SQUEEZE

6 RUSSIA’S BANKING SECTOR – THE PLACE TO STAY Growth rates are returning to a normal pace after several years of extraordinary development. Assets surpassed 60% of GDP in October Growth will continue – although at a somewhat slower rate due to the impact of the liquidity squeeze.

7 …AND TO BENEFIT FROM THE GROWING MARKET Russia is far from saturation in terms of banking services. Banks have room for further growth.

8  RUSSIA – THE PLACE TO BE  BANKING SECTOR – THE PLACE TO STAY  COMPETIVE ENVIRONMENT  PRIVATE BANKS STRATEGIES  RUSSIAN BANKS VS GLOBAL LIQUIDITY SQUEEZE

9 COMPETITION IS INCREASING FROM THE STATE… Source: MDM Bank estimations TOP 30 BANKS BY NUMBER OF OUTLETS State-owned banks dominate in terms of assets and cost of funding… …As well as in terms of physical presence Source: Finans. magazine

10 …AND FROM FOREIGN BANKS Foreign players are aggressively expanding their presence in Russia. …The growing influence of foreign banks primary impacts private Russian owned banks, as both state-owned and foreign players seek to increase their market shares.

11  RUSSIA – THE PLACE TO BE  BANKING SECTOR – THE PLACE TO STAY  COMPETITIVE ENVIRONMENT  PRIVATE BANKS’ STRATEGIES  RUSSIAN BANKS VS GLOBAL LIQUIDITY SQUEEZE

12 PRIVATE BANKS’ STRATEGIES Further consolidation is likely at all levels of the system in order to reduce the difference in cost of funding and to expand regional coverage Private banks will have to pursue smart strategies to combat their rivals… EXAMPLES: VTB Group (VTB; VTB-North-West /former PSB/; VTB24 /former GUTA/) URSA Bank ( Sibakadembank and Uralvneshtorgbank, Vostochniy Express – under consideration + another 4 regional banks in the alliance) Konversbank (Bankas Snoras, Latvijas Krajbanka, Investbank, Grancombank, Yenisei, Baikalinvestbank, Voronezhprombank … Move into higher yield and less competitive areas of business Focus now on Small Business banking and retail products Looking to regions, where the level of competition is still low Providing cross-sale opportunities Increasing the share of funding raised inside the RF Having a more careful approach to borrowers and risks

13  RUSSIA – THE PLACE TO BE  BANKING SECTOR – THE PLACE TO STAY  COMPETITIVE ENVIRONMENT  PRIVATE BANKS’ STRATEGIES  RUSSIAN BANKS VS GLOBAL LIQUIDITY SQUEEZE

14 THE STATE IS COMITTED TO SUPPORTING BANKS The liquidity problem is the most significant risk facing Russian banks, but the Government and the Central Bank are committed and equipped to protecting Russia from the global crisis. Refinancing tools: Primarily direct repo with the Central Bank, in addition to other refinancing tools such as Lombard loans or currency swaps. Nearly RUB 1.3 trln in bonds are eligible for direct repo with the CBR as of the beginning of October. CBR plans to expand the list of assets it can lend against by adding debt of BB- /B+ rated issuers (over RUB 150 bn of bonds affected). Federal Mortgage Agency plans to offer repo against mortgage loans.

15 RUSSIAN BANKS ARE IN GOOD SHAPE NOW Banks managed to close a series of debt and equity deals immediately before the liquidity crisis Redemption schedule of external debt raised in wholesale markets is relatively benign Some banks are more exposed than others, but there are factors (owner support, short assets) mitigating that MDM successfully attracted 1-year, USD 200 mln Equivalent Dual-Currency USD/EUR Syndicated Term Loan Facility in November. In October, we successfully repurchased RUB 6 bn ruble bonds and placed them back to the market

16 RUSSIA IS A SAFE PLACE TO INVEST… THANK YOU!

17 OUTLINE: MDM BANK  Established in 1993 as a Moscow-based bank focused on foreign exchange  Today one of the largest Russian privately-owned financial institutions with a national network  Universal bank: retail, corporate, investment banking, small business banking, private banking and asset management  7,000 corporate, over 3,500 small business, and over 300,000 retail clients  Focus on value growth  Strategic goals: maximum synergies out of the universal model; strong brand; increasing share of regional business; best-in-class infrastructure  Intention to remain predominantly Russian-owned  Leader in corporate governance practices in Russia; the only Russian financial institution with a corporate governance rating from Standard & Poor’s (rating: CGS 6+, last increased in December 2006)  Business is based on financial intermediation between parties non-related to the Bank