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Banking group ZENIT announces H1 2008 IFRS financial results

Moscow, October 31, 2008

Banking group ZENIT (the Group), a leading provider of universal banking services in Russia, hereby announces its consolidated financial results for the six months ending June 30, 2008 prepared in accordance with International Financial Reporting Standards.

KEY H1 2008 FIGURES
(on year-on-year basis)

• The Group's total assets increased by 17% to US$7,777 million;
• Net profit increased by 136% to US$89.9 million;
• The Group's total equity increased by 13% to US$832 million.

FINANCIAL RESULTS

FINANCIAL REVIEW

• The Group's loans to customers increased by 15% to US$4,746 million;
• Customer accounts grew by 16% to US$4,371 million;
• Ratio of loans to deposits remains a conservative 109%;
• Net fee and commission income up 93% to US$67.2 million and equating to 28.5% of net revenues;
• Non-interest income rose by 47% to US$78.3 million and makes up 33% of net revenues;
• The Group continues to have a strong and stable Tier 1 capital adequacy ratio of 10.8% and Total capital ratio of 13.1% as of the end of H1 2008;
• Net interest margin equal to 5.6%;
• Cost to income ratio dropped to 42.8% from 49.9% in H1 2007;
• Allowance for loan impairment amounted to US$145 million with 2.8x non-performing loans coverage (Ratings III and IV);
• Funding structure comprised customer accounts, 63%; debt securities, 12%; due to other banks, 12%; Eurobonds and bonds issued, 10%; and other, 3%.

OPERATING REVIEW

• The Bank's long-term growth trend continued in H1 2008. The number of сorporate customers increased by over 9% to more than 34,000 enterprises and organizations by the end of the period. The Bank's branches and Bank ZENIT Sochi became leaders in the expansion of their customer bases (+11.3% and +16.2% respectively). The Bank opened accounts for a total of 2,800+ energy, transportation, construction, light-industry, food, wholesale and retail trade, petrochemical, steel and financial companies and organizations.
• The Group's banking network increased to 154 points of sale. At the period end Bank ZENIT had 96 points of sale, Joint-Stock Bank Devon-Credit 30, OJSC Lipetskkombank 22 and Bank ZENIT Sochi 6 points of sale.
• Banking Group ZENIT ATM network increased by 8.7% in H1 2008 to 580 ATMs (855 ATMs together with partner banks). ATM functionality has increased with payments to cellular operators, utility bills, etc, all possible since the beginning of 2008.
• During H1 2008 the revenue from acquiring networks in retail and service companies - the Group customers, was RUR 1.903 billion, up 50% year on year. The total number of trading companies serviced by the Group, increased by 20% from the beginning of 2008.
• On March 25, 2008, OJSC Bank ZENIT approved 2007 dividends in the amount of RUR 900 million (US$37,588 thousand);
• OJSC Bank ZENIT exercised put options on bond issues 3 and 4. Each issue amounts to RUR 3 billion with maturities of 5 years and 3 years respectively. Issue 3 was placed on November 15, 2006; Issue 4, on April 4, 2007; and the put options were exercised on May 16 and April 8, 2008, respectively.
• When it exercised the put options on bond issues 3 and 4, OJSC Bank ZENIT repurchased less than 4% of the total volume of each issue. The Bank re-sold the bought-out bonds to investors, and today all bonds of each issue are outstanding;
• Bank ZENIT placed its 5th bond issue (volume: RUR 5 billion) that includes a buy-back option exercisable in 1.5 years. The first and the third coupon rates were set at 10% per annum.
• Bank ZENIT obtained a one-year US$218 million syndicated loan at LIBOR+1.45% with a view to finance customers export/import operations.
• Bank ZENIT continued to focus on growing the small and medium-sized enterprise (SME) franchise, signing an agreement with the Black Sea Trade and Development Bank to obtain a five-year US$25 million loan specifically for financing SMEs.
• According to MICEX data, Bank ZENIT continued to be one of the principal and most active operators on the Russian debt market. In H1 2008 the Bank had the 8th largest turnover among all players on the Russian bond market and the 3rd largest among banks.
• ZENIT's Joint Bank Management Fund Vechnye Tsennosti (Perpetual Values) had the 5th highest returns among all JBMF in H1 2008.
• Bank ZENIT consolidated its positions in private banking moving up to 3rd place in Euromoney's Private Banking and Wealth Management Survey 2008.
• OJSC Lipetskkombank won the Banking-2008 prize as the Best Regional Bank of the Central Federal District in commemoration of its achievements in development of loan portfolio.

SIGNIFICANT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD

• In August 2008 Fitch rating agency increased Bank ZENIT's long-term foreign currency rating from B to B+ with stable outlook;
• In July of 2008, Banking group ZENIT took out a RUR 1,500 million subordinated loan from a major shareholder at a fixed rate of 8.5%; it matures in July of 2013.
• On October 8, 2008, OJSC Bank ZENIT exercised put option on bond issue 4 (individual state registration number 40403255B, dated February 20, 2007). The Bank repurchased 66.16% of the total issue which means that a large portion of it remains outstanding;
• Banking group ZENIT upgraded the potential of its ATM network through integration of Bank ZENIT and Lipetskcombank networks, thus taking yet another step towards consolidation of Bank ZENIT and the Group's subsidiaries;
• As per the Banking group's long-term development strategy, Head of Retail Business Department Alexey Rozoryonov and Head of Risk Management Department Yevgeny Grishin joined Bank ZENIT's Managemetn Board. Vladimir Padanin, a member of the Management Board and Head of Branch Network Department, was appointed Deputy Chairman of the Management Board of OJSC Bank ZENIT.

For more information please contact: www.zenit.ru

Press Center of Banking group ZENIT
Phone: +7 (495) 937 07 37, +7 (495) 777 57 07
e-mail: info@zenit.ru

FOR REFERENCE:

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 154 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+/Stable by Fitch.

Disclaimer: some of the information in this press release may contain projections or other forward-looking statement regarding future events or the future financial performance of Banking Group ZENIT. You can identify forward looking statement by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could", "may", or "might" , the negative of such terms or other similar expressions. We wish to caution you that these statements are only prediction and that actual events or results may differ materially. In addition, there is no assurance that the new contract entered into by our subsidiaries referenced above will be completed on the terms contained therein or at all. We do not intend to update these statements to reflect events and circumstances accruing after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statement, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to the company and its operations.

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