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MDM Bank Announces IFRS Results for 2009


Today MDM Bank released its consolidated financial statements for the period ended 31 December 2009 in accordance with International Financial Reporting Standards (IFRS), audited by an independent auditor KPMG.

Over the course of 2009, MDM Bank assets grew by 22.4%, equity by 49.9%, net loans increased by 21.5%, and customer accounts by 69.1%, of which retail deposits were up three-fold, mainly due to the merger of MDM Bank and URSA Bank in August 2009. By now, the merger is effectively complete, the remaining tasks for 2010 being IT integration and the transition to the new brand both on track to be completed in the first quarter.

In the fourth quarter of 2009, MDM Bank earned a comprehensive income of RUB 3 847 m, that is substantially higher than in the third quarter. The comprehensive income for full year amounted to RUB 358 m even after sizable provisioning charges in the first half of the year. Net interest margin of 6.9%* and cost to income ratio at 36.8%* as of the year-end attest to the Banks high profitability and efficiency. Key drivers of the Banks income statement in the fourth quarter of 2009 were trading income of around RUB 1.2 bn and the recovery of provisions in the amount of RUB 0.8 bn. The preemptive provisioning policy of the Bank led to reversal of provisions as early as in the fourth quarter of 2009, when the recoveries already exceeded impairment charges, making a positive contribution to the bottom line.

Over the fourth quarter, MDM Bank assets grew by 7.2%, while the equity was up by 6.6% compared to the third quarter of 2009. The conservative lending policy, principally in corporate sector, resulted in loan portfolio contraction of 6.2% in the fourth quarter. Another factor behind the loan contraction was the repossession of collateral from its non-performing borrowers leading to the increase in assets held for sale from RUB 4.8 bn in September of 2009 to RUB 8.3 bn at the year-end.

The growth of non-performing loans slowed significantly year-on-year allowing the Bank to reduce provisioning charges in the fourth quarter. As of 31 December 2009, non-performing loans made up 17.4% of gross loans, having slightly increased by RUB 3 bn in the last quarter. The policy of restructuring of bad loans based on the assessment of business resilience led to decrease in the restructured loan portfolio by more than 30% in the second half of the year down to RUB 32.8 bn, or 11.7% of the gross loan portfolio.

In 2009, MDM Bank kept a very high liquidity position standing at 27.3% of total assets as of 31 December 2009 and capital adequacy (21.3% as of 31 December 2009), making it one of the best capitalized banks among peers. This enables the Bank to keep a high loss absorption capacity in case of potential economic distress, at the same time positioning it for rapid growth should the recovery become sustainable.

MDM Bank remains committed to the strategic objective of increasing the share of customer accounts in its funding base, focusing on retail deposits in particular. The latter rose by 18.3% in 4Q09, and by 35.6% over the course of the full year, helping improve the loans to deposits ratio from 150% at the beginning of 2009 to 122% at the year-end.

High financial soundness and measured approach risk management of the Bank were appreciated in the recent rating action by Fitch Ratings agency, which put MDM Bank rating to a Rating Watch Positive. The Bank is currently rated at Ba2/Negative by Moodys, B+/Stable by Standard and Poors, and BB-/RWP by Fitch.

In 2009, MDM Bank was named the Bank of the Year in Russia by The Banker magazine, and Global Finance magazine named MDM Bank among the 2010 World's Best Emerging Market Banks in Central and Eastern Europe. The merger of MDM and URSA Bank in August 2009 was recognized as the best merger in the financial sector by the Russian Finans. magazine, while Business New Europe magazine named the Banks USD250m syndicated loan of October 2009 as the best capital market borrowing of 2009 in Eastern Europe.

* calculation based on aggregated financial statements of MDM Bank and URSA Bank for 2008 and 2009.

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