Home Credit & Finance Bank 9M 2007 IFRS results: HCFB reports record net profit of RUB 915 million

Moscow, 12/07/2007

Home Credit & Finance Bank ("HCFB" or "the Bank"), rated Moody's Ba3/NP/D-, S&P B+/B, and one of the leading banks specializing in consumer banking in Russia, announces its financial results for the nine months ended 30 September 2007 in accordance with International Financial Reporting Standards (IFRS).

"HCFB continues to deliver on its strategy as a leading consumer finance bank in the Russian market and the on-going improvement in the quality of HCFB's assets, risk management procedures and product diversification is reflected by our record net profit for the nine month period. As we move towards a lending-centric retail banking model, we are setting industry standards in our product offering by delivering quality solutions for our customers that are transparent and easy to understand. We continue to closely monitor developments in the Russian banking market together with the prevailing situation in the international capital markets in order to maximise the efficiency of HCFB's funding, as well as maintaining the strong capital position of the Bank."
Jiri Smejc, Chief Executive Officer

HIGHLIGHTS

Net profit for the period of RUB 915 million (9M 2006: RUB 184 million) - an increase of over 397%.
Strong growth in net interest income to RUB 8,971 million (9M 2006: RUB 5,800 million) attributed to exceptional growth in the cash loan portfolio and the continued growth in the credit card portfolio.
Credit card activities experienced an increase of over 94% in the value of loans granted, compared to 9M 2006, maintaining HCFB's position as the second largest provider of cards in Russia with a market share of 10% and over 6.3 mln cards issued.
In line with the Bank's strategy for product diversification, HCFB saw a modest increase in the number of car loans granted and the residential mortgage loan portfolio grew to RUB 2,477 million in total, comprising approximately 5% of the gross loan book.
The Bank's continuing focus on prudent risk management procedures resulted in a further downward trend in the level of non-performing loans (NPLs) to 13.3% of gross loan book.
HCFB's branch network covers 80 regions across the Russian Federation. As at 9M 2007, HCFB had 81 representative offices, 1 branch, 58 loan offices and approximately 27,000 active point-of-sale outlets at retailers serving over 1,100 cities.
HCFB's client base comprises more than 15 million customers with 50% of these being active clients.
The liquidity position of the Bank is strong with the majority of debt securities with maturities greater than 2 years. HCFB's cumulative net liquidity position within 12 months is positive - RUB 17.6 bln.
HCFB maintains a strong capitalisation with risk weighted CAR of 21.1% assisted by the continuing strong support from its parent company - PPF Group. During the 3Q 2007 period, HCFB received RUB 1.5 bln by way of a capital injection to support the Bank's growth plans going forward.
On 30 October 2007, the international rating agency Moody's affirmed Ba3/NP/D- rating for Home Credit & Finance Bank with a stable outlook.

BUSINESS

The consumer banking market in Russia has continued its expansion and grew by 11% over the 3rd quarter period from RUB 2.06 trillion to RUB 2.78 trillion. The market is further forecast to grow to RUB 3.1 trillion by the end of 2007. As HCFB is continuing to follow its strategy focused on evolving from a monoline product provider to a lending centric retail bank, it has been continuing to grow its credit card and cash loan businesses as its core product offerings, while delivering a moderate increase in point of sales (POS) activities and developing its residential mortgages and car loans business.

The cumulative value of loans granted by the Bank in the nine month period stood at RUB 58.3 billion, which represents an increase of 55.4% when compared to the corresponding period for 2006. The amount of credit card loans outstanding as at 30 September 2007 increased 123% to RUB 19.4 billion. Credit card loans account for 36% of the gross loan book and management expects this trend to increase in the final quarter and into the following year. HCFB's market share for credit card loans remains stable at a level of 10% reinforcing the Bank's position as the second largest provider of credit cards across Russia with nearly 6.4 million cards in issue.

Point of sales (POS) activities increased by 14.5% and the POS loans portfolio increased by almost 20% to RUB 25.6 million compared to the prior year period. It is expected that this growth in the POS product will stabilize going forward into 2008 in line with HCFB's focus on profitability by increasing revenues from the credit card and cash loan operations.

Cash loan activities at the Bank experienced a dramatic increase in business levels with the cumulative value of loans granted from these activities as at 30 September 2007 increasing 704% to RUB 6.6 billion. Cash loans now account for approximately 11% of the gross loan book from a standing start when the product was first piloted by the Bank in Russia in 2006.

In keeping with the Bank's stated strategy for product diversification, HCFB saw a modest increase in the number of car loans granted and the residential mortgage loan portfolio grew to RUB 2,477 million in total, comprising approximately 5% of gross loan book. During the period, the Bank experienced no borrower defaults within the mortgage book.

RESULTS

HCFB reported a record net profit of RUB 915 million for the nine month period ended 30 September 2007 compared to RUB 184 million for the prior year period, an increase of over 397%. The key driver of profitable growth in the nine month period of 2007 is the strong growth in business activity resulting in the further improvement in net interest income to RUB 8,971 million (9M 2006: RUB 5,800 million) and the increase in the net interest margin to 25.05% as the Bank continued to focus on its higher yielding product offerings. The Bank has continued to balance its product mix with non-commission products to meet recent market developments.

HCFB is continuing to focus on increasing the quality of its assets by the on-going strengthening of its risk-management procedures, improving collection processes and maintaining strict underwriting and fraud prevention measures. As a result of these improvements the level of NPLs, as a percentage of the gross loan book, experienced a further decrease in the period to 13.3%.

The risk costs which are calculated as impairment losses to the gross loan book for the period stood at approximately 15% p.a. (compared with almost 16% p.a. as of end 2006). This reflected the increase in business activity and improving risk management procedures.

The Bank's general administrative expenses increased by almost 82% from RUB 2.8 billion from the prior year period to RUB 5.1 billion, driven by growing employee costs and further selective investment into the Bank's infrastructure and distribution network capability. As at 30 September 2007, the number of HCFB employees stood at over 15,000 (9M 2006: 6,800).

HCFB's capital position remains strong as at 30 September 2007 with a risk-weighted capital adequacy ratio of 21.1%, in line with the Bank's target levels and a Tier 1 capital position of 19.7%. The liquidity position of the Bank is strong and the cumulative net liquidity position within 12 months is positive at RUB 17.6 billion.

The Bank also continues to enjoy the full financial support of its parent, the PPF Group, and following two additional capital injections of RUB 1.5 billion each in September and November 2007.

Notes to Editors:

Home Credit & Finance Bank (Moody's Ba3/NP/D-, S&P B+/B) is one of the leading banks specializing in consumer banking in Russia with a 24% market share in the point-of-sale market and a 10% market share of the credit card market as of 30 September 2007.

HCFB offers its clients a wide range of credit products with variable credit terms. HCFB's products are distributed through more than 27,000 POS outlets across over 1,100 cities throughout Russia. The bank's regional network comprises 139 offices across the Russian Federation as of 30 September 2007.

Companies of the Home Credit Group have been operating in the Central and Eastern European as well as Central Asian consumer finance markets and had granted loans in the combined principal of USD 2.7 billion as of 2006 year end. Home Credit Group maintains a leading position in the consumer finance markets of the Czech Republic (entered in 1997), the Slovak Republic (1999), the Russian Federation (2002) and the Republic of Kazakhstan (since December of 2005). Home Credit Group also entered the Ukrainian and Belarusian market in 2006.

The Home Credit Group belongs to the PPF international group of companies which has interests in insurance and consumer finance, and provides complex asset management services. During its 16 years in business, PPF Group has become a leading international financial investor, managing assets of over USD 10 billion as at the end of 2006.

You may contact us on:

Markéta Mühlhoferová
Head of Investor Relations
Tel: (+420) 224 559 174
E-mail: marketa.muhlhoferova@homecredit.eu

Milan Tománek
Group Communication Manager
Tel: (+420) 224 559 573
E-mail: milan.tomanek@homecredit.eu

Alena Zheltova
Deputy Head of Corporate Finance, HCFB
Tel: (+7) 495 514 1017
E-mail: alena.zheltova@homecredit.ru

Natalya Dokuchaeva
Head of Strategic Communications, HCFB
Tel: (+7) 495 514 1019
E-mail: press@homecredit.ru

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12/07/2007

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