News

Banking Group ZENIT announces financial results for 2007

10 June 2008

Moscow, Russia - Banking Group ZENIT (the «Group»), a leading provider of universal banking services in Russia, today announces its audited consolidated IFRS financial results for the year ended December 31, 2007.

HIGHLIGHTS OF THE FINANCIAL YEAR

• Total assets of US$6,645 million, up 71%
• Record net revenues of US$335.1 million, up 47%
• Record profit before tax of US$133.5 million, up 41%
• Robust growth in earnings per share of 0.9 US cents, up 12.5% as compared to 0.8 US cents on 2006
• Net fee and commission income of US$99.6 million, up 61%, and equating to 29.7% of net revenue
• Acquisition during 2007 of OJSC Lipetskcombank and CB Sochigazprombank LLC (later renamed into Bank ZENIT Sochi)
• Upgrade in Moody's Bank ZENIT's long-term foreign currency rating to Ba3 from B1.

Kirill Shpigun, Chairman of OJSC Bank ZENIT's Management Board, said: «We are pleased with the results. Banking Group ZENIT has retained its leading positions in key business areas, acquired two new banks and enlarged its geographical presence. Group performance has remained remarkably resilient in the face of the difficult global environment.

We have continued to deliver on our business strategy focused on further regional expansion and earnings diversification across different business segments. We are confident that the building blocks are in place to deliver a successful performance in 2008».

FINANCIAL SUMMARY

FINANCIAL REVIEW

• Total loans to customers up 80% to US$ 4,116 million.
• Customer accounts grew 97% to US$3,765 million, substantially outpacing loan growth.
• Ratio of loans to deposits remains a conservative 109%.
• Net fee and commission income of US$99.6 million, up 61%, and equating to 29.7% of net revenues.
• Non-interest income of US$139.7 million, up 36%, and equating to 42% of net revenues.
• The Group continues to be strongly capitalized with a Tier 1 ratio of 11.1% and Total Capital ratio of 13.2% as of end of 2007.
• Net interest margin equal to 5.3%.
• Cost to income ratio of 52.8%, down from 53.1% in 2006.
• Accrued provisions of US$121.5 million represent a conservative 2.9x non-performing loans (Rating III & IV).
• Funding structure comprised of 64% customer accounts, 14% debt securities, 10% due to other banks, 8% Eurobonds and bonds issued, 4% other.
• Moody's increased Bank ZENIT's long-term foreign currency rating to Ba3 from B1 while Fitch changed the rating outlook from «stable» to «positive».

OPERATING REVIEW

• Record results driven by further regional expansion of the Group, rapid growth of both corporate and retail banking assets, broader client reach and increased share of regional clients in the corporate loan book.
• During 2007, acquisitions substantially added to the client base with the number of corporate clients now exceeding 31,000.
• Bank ZENIT actively participated as a financial adviser to the US$2 billion financing of Nizhnekamsk NPZ (TANECO) construction by BNP Paribas, for which the first tranche of US$350 million was issued in December 2007.
• Continued expansion of the branch network which amounted to 150 points of sale at the end of 2007 and 770 ATMs, up from 432, of which 529 belong to the Group and 241 are owned by partner banks.
• The Group approved a development strategy for 2007 - 2011, which aims to reinforce its position in the Russian financial market and provide strong growth across all key business units.

SHARE OWNERSHIP BY DIRECTORS AND MANAGEMENT

• In 2007 new companies representing interests of Mr. Lisin and Mr. Safin diversified the Group's shareholder base with the acquisition of 14.4% and 6.8% stakes respectively.
• Members of the Management Board and Board of Directors held 10.32% of Bank ZENIT shares at 31 December 2007.
• Further milestones in improving corporate governance were reached when two independent directors joined OJSC Bank ZENIT's Board of Directors during 2007. The Corporate Governance Code and the new version of the Articles of Association were approved. Audit Committee and Personnel and Remuneration Committee were set up under the supervision of the Board of Directors.

ACQUISITIONS AND DISPOSALS

• The Group acquired a 97.7% interest in Lipetskcombank, adding 21 points of sale to its network.
• The Group acquired a 99.5% interest in Sochigazprombank, adding six points of sale to its network.
  On 25 December 2007 CB Sochigazprombank (LLC) has been renamed Bank ZENIT Sochi (LLC).

SIGNIFICANT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD

• The Black Sea Trade and Development Bank provided US$25 million bank-to-bank loan to Bank ZENIT for financing small and medium-sized corporate clients (SMEs).
• On 25 March 2008, dividends of RUR 900,000,000 (US$37,759,000) were approved for the year 2007 (OJSC Bank ZENIT).
• On 8 April 2008, OJSC Bank ZENIT repurchased 3 % of its three-year RUR 3 billion bond issue dated 04 April 2007.
• On 16 May 2008, OJSC Bank ZENIT repurchased 3.9% of its five-year RUR 3 billion bond issue dated 15 November 2006.
• A syndicated loan facility for US$218 million was arranged on 27 May 2008

For further information, please visit www.zenit.ru or contact:

Banking Group ZENIT was formed in 2005 as a result of the purchase by Bank ZENIT of a controlling stake in JSB Devon-Credit (OJSC). In 2007, the Banking Group acquired OJSC Lipetskkombank and JSB Sochigazprombank LLC (later renamed into Bank ZENIT Sochi). According to the consolidated statement of the Banking group for 2007, made in accordance with IFRS, the equity capital of the Banking group amounts to $738 mn, the assets amount to $6,645 bn. The Group provides a full-scale range of banking services in the following areas: comprehensive services to the corporate clients, retail services, private banking, investment banking and interbank business. Banking Group ZENIT is represented in 21 of 83 regions of the Russian Federation; its own retail network consists of 150 points of sale. The Group has created a wide international correspondent network of banking partners, with co-operation from more than 80 international institutions in Europe, America and Asia. Bank ZENIT is currently rated Bа3/Stable by Moody's and B/Positive by Fitch. Being an active debt market player, Bank ZENIT arranged 8 international syndicated loans, 2 Eurobond issues (the debut issue was repurchased in 2006) and 4 ruble bond issues (the debut issue was repurchased in 2007).