Asset Management Company

Russian Bank Capitalization Fund

(RBCF)

2

AMC is a capital mobilization vehicle of IFC:‘crowding in’ investment to emerging markets

Investment Services

Advisory Services

Asset Manageme

nt

• Loans and intermediary services

• Equity and quasi-equity

• Syndications

• Structured and securitized products

• Risk management products

• Trade finance

• Subnational finance

• Treasury operations

• Access to finance

• Corporate advice

• Environmental and social sustainability

• Infrastructure Advice

• Investment Climate

Invests third-party capital in a private equity format

Allows outside investors benefit from IFC’s expertise at achieving strong equity returns as well as development impact

Helps IFC fulfill its role and leverage its balance sheet by mobilizing third-party funds to increase investment

3

What is the Russian Bank Capitalization Fund?

Who?

What?

Investments in bank equityTarget investment sizes US$20-$100 millionShares of 10%-30% (with some exceptions)RBCF investing to profit – need to exit

When?

How?

Private equity fund managed by IFC Asset Management Co Investors IFC, Russian Federation, VEB and international investors

Fund established June 2012Considering investments now2-4 investments per year, maximum ~10

IFC Moscow is primary point of contactPrepare information in advancePresent IFRS financials and investment presentation

•Be realistic: in equity investments, one in twenty-fifty projects make it through full process• Some very good banks will not meet fund criteria•RBCF is not a ‘bail-out fund’

Why?Russian banking sector is promising, but with huge capital needs

Financial sector critical to development of economyBring new investors to Russian banking sector and set examples

4

RBCF legally established June 2012Initial fund size US$275

First investments under consideration

Investor

Target Commitment

(in $M)

IFC $250

Russian Federation 50

VEB 250

Other institutional investors

Up to 1,000

Target Total Commitments:

RBOF established with first close of US$275m

One-half of committed amounts for IFC, RF and VEB

Target investorsTarget investors Target investmentsTarget investments

$1-1.5 billion

Target bank profile

Bank size

# of projects

Avg. investme

nt(in $M)

National consolidators

$4-$20 bln (Assets)

3-5 100 – 300

Medium-sized, high growth, niche and other

$500-$4000 mln (Assets)

8-10 20 – 200

Combination of larger banks with smaller banks with funding fueled growth...

A few larger ticket investments combined with higher-growth mid-

sized banks to benefit from consolidation ‘at both ends’

$1-1.5 billionTarget Fund Size 10-15

5

RBCF Legal Structure

5

IFC manag

ed

IFC Russia Bank

Capitalization Fund

Equity GP

Manager: IFC Asset

Management Company,

LLC.

LP

in

tere

st

GP

in

tere

st

LP 2 LP 3

LP

in

tere

st

LP

in

tere

st

IFC TRUST FUND

LP

in

tere

st

100

% o

wn

ed

•Limited partnership managed by IFC Asset Management•Russian Federation &VEB investments through an IFC-managed trust fund

•Investors: IFC, IFC Trusts 1 & 2•No RF & VEB involvement in management of Fund or investment decisions

6

The Russian banking market is highly fragmented

 0  20  40  60  80  100

100%All

banks

Banks 501-~1000

1%

Banks 201–500

5%

Banks 101–200

5%

Banks 51–100

8%

Banks 21–50

12%

Banks 11–20

10%

Banks 6–10

7%

3%

4%

6%

12%

27%

Fragmented market:~1000 banks, led by a few State

banks

Fragmented market:~1000 banks, led by a few State

banks

Lower cost efficiency in smaller banks of RBOF's target

segment

Lower cost efficiency in smaller banks of RBOF's target

segment

51%

Top 5 banks (all state) account for over half of

all banking assets

25%RBOF's target

segment accounts for a quarter of all banking

assets

Opportunity for value creation through consolidation and improved efficiency

Total assets (%)

Growth / consolidation will help achieve minimum efficient scale and

market power

0

74%

% (1H 2010)

Banks 1-20

Banks 21-50

Banks 51-100

60%

40%

52%20%

80%

53%

Cost1 / income ratio

$6Bn+Asset size $2-6Bn $2Bn-$800M

7

Criteria for Bank Selection – Target Banks

IFC Standards

Investment Thesis

IFC is investing its own funds and those of investorsValue proposition (expected returns to investors) are criticalHow are investors (including IFC) going to profit from the investment?

Real Role in Economy

The Numbers

All IFC performance standards, financial reporting, financial covenants and others are unchanged

IFC is a demanding investor and will look for partners with track record, excellent reputations and good corporate governance

Meaningful role in economy (% of regional market, role in providing necessary financial services to SMEs, households, corporations

Innovative services and products welcomeSize: Primarily top 250 banks by assets, with regional presence

Investment size: $20-100 mln, for stake of 10% -30% (exceptions possible)

Co-investors: RBOF goal is to help attract additional foreign investment – hence structures with more investors get priority

IFC may co-invest and provide debt, risk management and other products

8

Simplified Investment Criteria

Transparency

InvestmentClear answers to why invest? (ROE, NIM, COI, etc)Profitability, stability, capital, growth, potential returnsClear path to sale/exit in 5-10 yearsWhat will market position be during investment period?

Operations

Basic approach

IFRS financial statements by a high-quality auditorClear ownership, reputation of owners and institution criticalQuality of managementProblems: high related party, linked loans, unclear business

Meaningful role in regionsBoth traditional and innovative banking products (non-speculative)

Strong risk managementSize: Primarily top 250 banks by assets, with regional presence

Investment size: $20-100 mln, for stakes of 10% -30% (in most cases, some exceptions)

Largest banks / foreign / government mostly excludedSmallest banks: more likely through acquisitions

9

~ 100 potential targets

• Meeting minimum financial requirements

Robust Sourcing Methodology

~ 1000 banks

~ 300 banks• Locally owned• Privately owned• Good reputation• Non captive

10 target banks in 10-24 months

• $650M• Follow-on

investments anticipated

IFC already in contact with many banks on regular basis• Six banks: equity investment• 26 investee companies + High demand from non-client

banks

Identify commercially viable candidates• Excluding “pocket banks”,

“treasury banks” or “ captive banks”

• Excluding subsidiaries of international banks

• Excluding banks not having basic minimum financials (IFRS requirement)

Identify eligible banks• Screening for key financial

indicators (e.g., minimum scale)• Excluding reputational issues• Screening for private sector (or

to be privatized)

Identify top target banks for focused business development efforts• Specific opportunities have

been identified or are likely, based on IFC’s relationship (excluding recently exited investments), ranking by capital needs, likelihood of transaction, size, and systemic importance (in particular network banks)

Russian Banks

Eligible Banks

Target Pool

Near-term Pipeline

10

RBOF able to identify opportunities and add value

Key issues of Russian marketKey issues of Russian market How RBOF creates valueHow RBOF creates value

Structured exit

Bank selection

Operating phase

Target selection

Efficiency and profitable growth

• Sustained growth improving efficiency, profits and M&A opportunities

Improving bank fundamentals

• Supporting active risk management and NPL recovery

• Ensuring basic banking capabilities

Target selection

•Identifying banks with highest upside potential

•Selecting best banks with basic risk mgmt

•Strong deal flow based on IFC client base

Sale preparation, execution

• Structured exit preparation

• Attracting potential acquirers

• Opening investment opportunities for foreign investors

Reputation• IFC “stamp of approval” and

involvement• Enforcing international

standards of Corporate Governance

FundingEquity funding combined with range of IFC debt instruments and increased market access

1High growth opportunities

Banking market set to out-pace GDP as penetration catches up with Western levels

Mid-sized banks lack

funding and scale

Structural underfunding of economy and banking sector, concentration of large state banksMany banks lack due to scale, credit, and transparency concerns

High NPLs with low standards

of professionalis

m

Need to introduce basic banking standards (e.g., proper risk management, principles of ALM)Over-due loan levels in RBOF's target segment appear to have peaked, but are under-reported

Market Fragmentation

with opportunity to

increase efficiency

>1000 banks in total, led by a few state banks. with ~60% of banks either captive or subscaleOpportunity for value creation through consolidation

2

3

4

5

Attractive valuations

Market valuations currently a fraction of pre-crisis levels

11

IFC has demonstrated strong performance in Russia and financial

services investmentsIFC has a proven track record in

financial services and RussiaIFC has a proven track record in

financial services and Russia

Over past ten years, 3 of 4 of IFC exits from Russian banking investments were

highly successful

Over past ten years, 3 of 4 of IFC exits from Russian banking investments were

highly successful

IRRIRR

• Sold at same price as purchased in ruble terms

103%

47%

46%

-5%

Globally, financial services is one of IFC's most profitable sectors with average IRR of ~30%

IRR since inception at 40% for all sectors in Russia• 1998-2008 IRR was 62.1% for all

sectors...• ...and 67% for financial services

Milestone transactions executed successfully

• First mortgage securitization• Ruble bond issues (partial guarantees)• Close to $1 billion in ruble financing• $500M syndication in 2008• Investments in over six regional banks

Currently no NPLs and none incurred during financial crisis

Bank 1

Bank 2

Bank 3

Bank 4

12

Target banks will be in a position to benefit from the Fund’s resources at a crucial time.

Credible Investors

Fund will be comprised of sophisticated international investors Investees will continue to receive the same level of services and

benefits as if they were transacting directly with IFC, with added oversight from AMC staff

Counter-Cyclical Strategy

During times of financial crisis, foreign investments in emerging markets diminish further as portfolio investments decline rapidly

Fund will act to stabilize banks in order to speed up economic recovery and increase lending to productive sectors of local economies

By directly providing emerging market banks with much needed capital, as well as catalyzing additional capital for those banks in a time of severe crisis, the Fund will:

Support economic growth in Russian economies through financial intermediation

Be well positioned to capture upside via countercyclical investment

Experienced Team

Senior AMC and IFC investment professionals with extensive experience originating, executing and supervising investments in Russian commercial banks

Investment teams have the full support of IFC’s entire investment infrastructure, including dedicated portfolio, risk, corporate governance and equity sales departments

Advisory Services Benefit from advisory services to portfolio banks Strengthening private sector development and improving banks’

economic and financial performance, and their social and environmental sustainability

Key Benefits for Investee Banks

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Rigorous Investment Process

Largest emerging market

deal flow

Deep industry/ regional

knowledge

Capability to develop innovative

structures

Dedicated teams with relevant experience

Origination Evaluation Execution Supervision Exit

AMC leverages IFC’s proven origination, execution and supervision resources while conducting rigorous independent investment evaluation approved by independent

Investment Committees.

Defined strategies

• IFC infrastructure, network and name leads to steady pipeline of potential deals

• Deep and broad analysis of local markets, regulatory regimes and sector fundamentals

• Negotiation leverage due to limited competition and institutional credibility

• Dedicated, locally based portfolio supervision teams in frequent contact with clients

• Frequent use of structural exit mechanisms

• Locally-based business developers supported by AMC and IFC Management

• Due diligence conducted by industry experts and appropriately staffed teams of investment professionals

• Flexibility to offer tailored investment products across the full capital structure

• Strict social and environmental compliance requirements

• Multiple scenarios: - Sale to strategic - IPO - Put to sponsor

• Unique access to challenging markets facilitates deal flow

• Deep knowledge of local legal environment drives efficient deal structuring

• Unique relationship with and access to local regulators

• Experience in less developed capital markets

14

Proven Strategy

Deal SourcingIFC’s unmatched access to emerging market

investment opportunities

• AMC Funds enhance the IFC product offering by enabling additional/larger deals

Fund Management

•Experienced operations staff with long private equity experience at leading fund managers

•Use of first class third party firms for audit and ancillary back-office functions

Investment Selection

•Thorough review of all eligible IFC investment proposals

Independent decision-making

Alignment with fund objectives

•Clear exit strategies

Value-Add• Experienced professionals with extensive

principal investment experience

• Tax and legal structuring with Fund specific focus

• Review and mitigation of conflicts of interest

AMC enhances the time tested IFC investment process that has evolved over the past 50+ years.