OREANDA-NEWS. October 24, 2008. 1H 2008 FINANCIAL HIGHLIGHTS
Strong return on equity at 22.7% and return on assets at 2.03% supported by a low cost income ratio of 42.9%
Net profit of shareholders up 51.7% to USD 222.6 million compared with USD 146.7 million in H1 2007 due to strong growth in both interest income and fees and commissions
Net interest income up 59.8% to USD 534.6 million compared with USD 334.5 million in H1 2007
Net interest margin at 4.6%, remaining flat as compared with 2007
Total loans up 28.9% to USD 18.7 billion from year end 2007, with strong growth in both retail and corporate lending
Total assets up 22.1% to USD 26.3 billion in H1 2008 compared with the year-end 2007
Sound capital position with a total capital ratio (BIS) at 13%
EPS for the first six months of 2008 at USD 1.71 (RUB 40.17)
USD 220 million term loan facility, CHF 250 million eurobond issue and RUR 10 bln domestic bond issue raised during the first half of 2008

OPERATING AND FINANCIAL REVIEW

The Group’s net profit of attributable to the shareholders for the first six months of 2008 soared 51.7% to USD 222.6 million from USD 146.7 million in the first six months of 2007. The growth of the net profit resulted primarily from the significant increase in lending activities of the Group. Net interest income (net of provisions) grew by 59.8% to USD534.6 million. Net fee and commission income went up 67.2% to USD 134.7 million in the first six months of 2008 YOY.

Despite operating in the turbulent market and a worldwide rise in funding costs, the Bank of Moscow succeeded in maintaining the interest margin flat at 4.6%.

The assets grew 22.1% to USD 26.3 billion in the first six months of 2008. The loan portfolio accounted for 70% of the total assets at the end of the first half of 2008 compared to 66.6% at year-end 2007. The loans to customers increased by 28.9% to USD 18.7 billion for the six-month period ended 30 June 2008 from year end 2007. Corporate loans grew by 26.0% to USD 14.4 billion from the year-end 2007 and constituted 77.3% of the total loan book. Loans to individuals went up 39.4% to USD 4.2 billion from year-end 2007, while their share in the Bank’s loan portfolio increased to 22.7% by the end of June 2008 from 21% at the end of 2007.

The securities portfolio represented 8.1% of the assets compared with 10.4% at the year-end 2007 and comprised primarily fixed income instruments. As a result of the Bank’s prudent risk management policy the high quality of the asset mix has been maintained.

The Bank has a solid and stable funding base which comprises retail and corporate customer accounts including funds of the large state-owned corporations, federal and municipal funds, funds raised on the international and local capital markets. Given its sound financial position, high credit ratings, excellent market reputation the Bank of Moscow is authorized to keep funds and term deposits placed through tenders by Ministry of Finance of the Russian Federation, the Finance Department of the City of Moscow, state-owned corporations.

In the first half of 2008 total customer accounts increased by 15.6% to USD 16.5 billion from USD 14.3 billion at the end of 2007. Corporate deposits went up by 17.8% to USD 10.8 billion, whereas retail deposits grew by 11.5% to USD 5.8 billion. Based on the results of the first six months of 2008 the Bank of Moscow retains its position as the third biggest retail deposit-taker in Russia.

The Bank’s capital base remained strong with a total capital BIS ratio of 13%. ROE stood at 22.7%, ROA – at 2.03%. In the first half of 2008 the Bank of Moscow launched the 12 th rights issue for RUB 8.3 billion, which was finalized in August 2008.

During the first six months of 2008 the Bank of Moscow successfully raised USD 220 million syndicated loan, CHF 250 million eurobond in public debt instruments and placed RUR 10 billion bond on the local market.

The Group’s has one of the largest and well developed branch networks among the Russian banks. In the first half of 2008 the Bank of Moscow opened 15 new outlets on the territory of the Russian Federation. As at June 30, 2008, the Bank’s had presence in 54 regions of Russia, operating 373 offices in the country. In addition, the Bank had 481 desks in Moscow post offices, which distributed the Bank's retail products. The rise of efficiency of the branch network and diversification of the customer base in the regions remains to be the focus of the Bank’s regional policy.

In addition to the Bank' regional network, as at 30 June 2008 the Group's network also included 4 banks outside the Russian Federation: Bank Moscow-Minsk OJSC (five branches and 26 sub-branches in the Republic of Belarus), AS Latvijas Biznesa Banka, AS Eesti Krediidipank (10 branches and 13 sub-branches in the Republic of Estonia), and BM Bank LLC (31 sub-branches in the Republic of Ukraine). In March 2008, the Group also obtained an approval to open a 100 per cent subsidiary bank is Serbia.

The Group's strategic objective is to strengthen its position among the largest banks in the Russian Federation. The Group believes that its foremost goals are to increase its efficiency and expand client base, while preserving prudent risk management and focusing on cost controlling and revenue diversification.