Kazakhstan Financial Review September News on Kazkommertsbank: Kazakh banking sector developments:

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1 Official exchange KZT/US$ rate at 1 October Summary News on Kazkommertsbank: The inflation rate in was 0.4%, and 4.7% YTD The National Bank s monetary policy in the next five years will aim to maintain the inflation rate at 5% 8% Liquidity situation in the banking sector has improved significantly NPLs in the banking sector continue to increase, but at a slower rate 29 October. Following a tender among commercial banks, Kazkommertsbank has become a partner on the mortgage programme for employees of the Agip KCO oil company. The Agip KCO programme is part of its local staff development policy, and will cover around 2,000 employees. Apart from mortgage loans, Kazkommertsbank will provide other banking services to Agip KCO and its employees, such as consumer lending, deposits, cash operations and bank cards. 15 October. According to research from Standard & Poor s on informational transparency among Kazakh companies in 2009, Kazkommertsbank is the most transparent bank in Kazakhstan, and the only representative from the financial sector among the four best companies in terms of informational transparency. The informational transparency index for Kazkommertsbank is 61%, while the country average is only 44%. Kazakh banking sector developments: The net loss of Kazakhstan s commercial banks amounted to US$18,717 million in the first nine months of The Kazakh banking sector s aggregate capital was also negative, and amounted to US$ 6,538 million. Aggregate bank assets slightly decreased during ember, by 0.4%, and stood at US$80,006 million. 56.2% of aggregate bank assets were denominated in foreign currency. The gross loan portfolio of the banks decreased by 0.4%, due to an increase in provisioning. The net loan portfolio of the banks decreased by 3.3% during ember. The quality of the loan book also deteriorated, but at a slower pace. Loans that were 90 days and more overdue represented 17.52% of the total loan portfolio. The loan loss provisioning rate was 36.38% according to the FSA. Provisions fully cover overdue loans and the coverage ratio was 207.6% as of 1 ember, according to FSA data. Highly liquid assets increased by 5.8% in, to US$ 16,978 million. This increase was mainly due to an increase in correspondent accounts with the National Bank (of US$ 597 million) and overnight loans (by US$753 million). Aggregate bank liabilities increased by just 1.3% during ember, to US$ 86,544 million. Customer accounts increased by 3.9% (US$1,506 million) driven mainly by term deposits up to 1 year (an increase of 10.6% or US$ 1,148 million). Interbank deposits decreased by 2% (US$ million) and amounted to US$ 9,765 million. Deposits of SPVs decreased by 2.7% (US$ million) to US$ 14,550 million. Kazakh commercial banks aggregate earnings amounted to US$ 36,604 million, of which 18% was interest income and 82% was non-interest income. 85% of interest income was income from the loan portfolio. Income from the recovery of provisions (47.7%) and revaluation income (40.3%) were the dominant elements within non-interest income. The aggregate expenses of the banking system (including corporate tax) was US$ 55,322 million, the majority of which (61%) were provision charges. 1

2 The sector s cost-to-income ratio amounted to 65% as of 1 October The ratio of interest income to interest expense decreased from 158.9% at 1 to 152.1% as of 1 October The interest spread and net interest margin stood at 3.0% and 3.6%, respectively. Major events in the banking sector: 19 October. The National Bank s monetary policy in the next five years will be aimed towards maintaining moderate inflation in the range 5% 8% 13 October. The National Bank included million special drawing rights (SDR) in its international reserves. These SDRs were provided to Kazakhstan by the International Monetary Fund under general and special distribution. 9 October. According to the general agreement signed between five banks, the Distressed Assets Fund, Samruk-Kazyna and Damu Entrepreneurship Development Fund, the Distressed Assets Fund will provide funds to five Kazakh banks for further lending to entrepreneurs in the processing industry. The participants of the Agreement include BTA, Temirbank, Alliance Bank, Kazkommertsbank and Halyk Bank. 9 October. Halyk Bank announced the public placement of 67,500,000 common shares. These represent authorized but unplaced common shares from the global offer to existing shareholders. 7 October. Halyk Bank repaid its US$ 200 million Eurobond. The total amount repaid was US$ 208,125,000 US$ 200,000,000 of principal and a US$ 8,125,000 coupon payment. The Eurobond was issued in 2004 with maturity in October October. The Agency for Financial Supervision issued instructions to Metrocombank to complete its necessary recapitalization measures by 30 October India s Punjab National Bank may become a shareholder of Metrocombank. 6 October. BNP Paribas provided a 10.2 million targeted loan to the Development Bank of Kazakhstan within the framework of an existing 200 million credit line. The funds should be targeted to finance the purchase of Finnish equipment for the investment project to construct a gas-fired, electricity generating power station in the Akshabulak field. The loan was provided with coverage from the Finnvera export-credit agency. Major developments in Kazakhstan s economy: In inflation in Kazakhstan was 0.4% (YTD inflation was 4.7%). saw a 0.3% decrease in the prices of food products, for non-food products a rise of 0.7%, and for paid services an increase of 1%. Annual inflation was 6%, prices for food products increased by 4.3%, non-food products by 0.7%, and paid services by 1%. Average annual inflation was 7.8%. Price increase for food products in January- compared to January-ember 2008 was 6.9%, for non-food products of 6.4% and for paid services of 10.5%. saw an increase in the money supply of 2.7% (YTD increase of 15.8%) to KZT 7,255 billion.the amount of currency in circulation increased by 0.3% (YTD decrease of 5.6%) to KZT 808 billion. The reserve money in increased by 6.6% (YTD increase of 80.1%) to KZT 2,748 billion. The narrow reserve money (money supply less term deposits of the banks with the National Bank) increased by 5.2% in (YTD increase of 47.5%) to KZT 2, billion. The unemployment rate in was 6.3%. The number of people unemployed in was 532,000. The number of people unemployed and registered with authorised employment bodies in was 1.0% of the economically active population. GDP increased by more than 1.5% q-o-q in 3Q09. According to forecasts from the Ministry of Economy and Budget Planning, the GDP for 2009 will be positive. 2

3 In the net international reserves of the National Bank based on current prices increased by 0.64% (YTD by 14%), to US$20.0 billion. Net currency reserves in increased by 2.96% (YTD decrease of 2.76%) to US$ 18.4 billion, while assets held in gold increased by 5.3% (US$116 million) due to a decrease in global prices. As a result, net international reserves (including the National Fund s assets in foreign currency, which are equal to US$23.8 billion) increased by 2.9%, to US$44.5 billion (the YTD decrease is 6.0%). News on Kazakhstan s economy: 19 October. Kazakhstan intends to arrange foreign loans totalling US$ 23 billion to finance investment projects. There are concrete arrangements with foreign partners to attract additional investments to realize joint projects: US$ 13 billion from China, US$ 5 billion from South Korea, US$ 3 billion from Russia, and US$ 2 billion from France. 15 October. Capital investments in January- increased by 8.7%, to US$ 2.2 billion, compared to January-ember This was due to a 200% increase in foreign investment. The major recipients include the mining industry and transport and communication, where the share of investment in January- was 33% and 25%, respectively. 13 October. According to the forecasts of the National Bank, lending to the economy will grow at 10% 15% in The National Bank believes that bank loans should increase at a higher rate than GDP. According to the National Bank, the mid-term perspective is for GDP to grow at 5% 7% per annum, while lending growth should be around 15% per annum. 6 October. The draft of the State budget for 2010 is largely oriented to social ends, which will absorb 40% of total budget spending (up from 31.5% in 2007 and 26.4% in 2008). Social spending, including salary fund for budget employees, exceeds 50% of the total budget expenses. 3

4 Kazakhstan s key macroeconomic indicators Annex Q09 2Q09 3Q09 Domestic economy and financial system Real GDP growth, % ** GDP, US$ million n/a Production, % YoY Registered unemployment, % CPI, % Monetary supply M3, US$ million Monetary base (reserve money), US$ million Real exchange rate Official refinancing rate, %* State finance State budget balance, % of GDP n/a Total sovereign debt, % of GDP n/a Sovereign debt / State budget income, % n/a Sovereign debt, US$ million n/a Balance of payments Current account balance, US$ million n/a Current account balance, % of GDP n/a Capital and finance account balance, US$ million Capital and finance account balance, % of GDP Imports, US$ million n/a Exports, US$ million n/a Foreign assets and liabilities Gross foreign debt, US$ million n/a Gross foreign debt, % of GDP n/a National Bank s Gross International Reserves, US$ thousands National Fund National Fund and international reserves * * From 4 the refinancing rate was reduced to 7.0% ** q-o-q n/a n/a 4

5 Banking sector indicators* ember 2009 Commercial banks (number) Bank branches (number) Major indicators of the banking sector, US$ million Assets Capital Net profit Loans Provisions for loans % of total loans Deposits Including retail deposits Profitability ratios, % NIM RoAA Loss RoAE Loss Banking sector and the economy, % Assets / GDP Loans / GDP Deposits / GPD Trends in the deposit base, US$ billion 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% corporate deposits retail deposits Concentration of banking system assets 100.0% 93.8% 92.2% 88.7% 80.0% 60.0% 40.0% 59.3% 57.8% 55.5% 20.0% 0.0% share of 10 largest banks share of 3 largest banks 5

6 Major indicators of the largest Kazakh banks as at 1 October 2009 Annex 3 Bank Assets Equity Loans to customers Deposits Deposits (without SPV) Retail deposits Net profit Reserves US$ mln BTA % % % % % % % KKB % % % % % % % Halyk % % % % % % % ATF % % % % % % % BCC % % % % % % % Alliance % % % % % % % Eurasian % % % % % % % Kaspi % % % % % % % Nurbank % % % % % % 0 7.6% Temirbank % % % % % % % Subtotal % % % % % % % Other banks % % % % % % % Total % % % % % % % % of loans 25 Trends in major banks' assets, US$ billion KKB BTA Halyk Alliance ATF BCC Kaspi Temir Nurbank Eurasian Sep-09 6

7 Please note that the information provided in this document is based on data from different sources including, without limitation, published announcements made by various state authorities and other organisations. The majority of the information contained herein has been selected from different publications released by the National Bank of Kazakhstan, the Statistics Agency of the Republic of Kazakhstan, the Agency of the Republic of Kazakhstan for the Regulation and Supervision of the Financial Market and Financial Organisations, and the official websites of Kazakh banks. None of the managers or directors involved in the preparation of this document has independently verified the information contained herein. Accordingly, no responsibility or liability is accepted by Kazkommertsbank, its employees or directors as to the accuracy of the information provided herein. The document is directed exclusively to business counterparties. No persons should rely on any information in this document. Neither this document nor any other statement (oral or otherwise) made at any time in connection herewith is an offer, invitation or recommendation to acquire or dispose of any securities or to enter into any transaction. Any readers/users/subscribers are advised to independently review and/or obtain independent professional advice and draw their own regulatory, credit, tax and accounting conclusions in relation to their particular circumstances. This document may contain forward-looking statements made by official authorities in Kazakhstan, but all readers shall make their own judgement when making a decision on prospects, business developments or investments. Analyst: Ms. Gulzhan Arystangulova, Tel , Garystangulova@kkb.kz Investor Relations: Ms. Aliya Nursipatova Ms. Alma Buirakulova Tel Investor_relations@kkb.kz 7