RZBs Trade Finance business activities with a focus on CEE and CIS

March 2008

The Structure
Raiffeisen Banking Group 566 Raiffeisen banks, operating 2,300 branches in Austria
100%

8 Raiffeisen Landesbanks
87.7%*

RZB
TOTAL ASSETS: 205,361mn PROFIT BEFORE TAX: EUR EUR 1,697mn

RZB

Group

Tier 1: 7.4% Regulatory Own Funds: 10.1%

Interests in Austrian Financial Institutions

Central and Eastern Foreign Branches, Offices European Network Banks and Equity Participations
Raiffeisen International

Specialist Companies

OPEC-Fund Trade Finance Workshop

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Long term regional experience and well positioned in CEE and CIS markets
Asi a
Beijing Ho Chi Minh City Hong Kong Mumbai Seoul Singapore Zhuhai Teheran

North America
Chicago Houston New York Los Angeles

Banks Representative Offices Branches

OPEC-Fund Trade Finance Workshop

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RZB Group Key financial data

Rating Data
Agency Bank Financial Strength Long-Term Credit Rating Short-Term Credit Rating Credit Strengths

- Central position within the strongly cohesive Austrian P-1 C (stable) Aa2 (stable) (stable)
co-operative banking sector - Stable funding base - Stable domestic market position in corporate banking alongside well developed franchise in several CEE countries - Profitable wholesale banking franchise in CEE Stable funding base

- Solidarity among Raiffeisen banks underpinned by a

N/A

A+ (stable)

A-1 (stable)

comprehensive protection scheme - Strong market position and well diversified operations in Central & Eastern Europe - Sound financial and risk profile of RZB - Sound financial profile and defensible domestic franchise of the Austrian Raiffeisen banks

OPEC-Fund Trade Finance Workshop

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RZB Group Key financial data

Key figures overview
in EURmn Balance-sheet total Profit before tax RoE before tax Tier 1 ratio (banking book) Total capital ratio Cost/Income ratio 1,882 39.1% 9.0% 10.8% 56.7% 2006* 2006 115,629 1,286 26.7% 9.0% 10.8% 56.7% H1 2006 115,629 643 24.2% 7.2% 9.1% 53.9% H1 2007 103,189 846 25.5% 8.1% 10.1% 55.3% Change H1 07/06 126,057 46.1% 1.3 PP 0.9 PP 1.0 PP 1.4 PP 22.2%

* including one-off effects such as the sale of Raiffeisen Bank Ukraine and 10% of Bank TuranAlem

OPEC-Fund Trade Finance Workshop

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Award winning Service Quality

Best Treasury and Cash Management Provider Global Finance Best Bank in Central and Eastern Europe Euromoney, Global Finance Best Bank / Risk Management in CEE Treasury Management International Bank of the Year in Austria The Banker Best Bank in Austria Global Finance

In addition, the following Network Banks of the RZB Group have been awarded "Best Bank" in their respective countries by international publications:
Albania, Bosnia and Herzegovina, Hungary, Kosovo, Serbia, Slovakia and Ukraine OPEC-Fund Trade Finance Workshop

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RZBs Trade Finance products overview

          

Irrevocable letter of credit Letter of guarantee Standby letter of credit Pre-export financing Post-shipment financing Warehouse financing Commodity and structured trade finance Export finance (ECA) Receivables purchase Discounting of promissory notes Forfaiting

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Mission Commodity and Structured Trade Finance refers to structured shortterm lending to finance the production, the purchase, the storage, the transportation of exchange-traded commodities, where the loan will be repaid from the proceeds of the sale of the commodity to pre-agreed offtakers with a


Close control of the commodity flow Close control of the payment flow

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Customers


Commodity producers in emerging markets (e.g. oil, metal ores,) Processing plants in emerging markets (e.g. refineries, steel plants) International trading companies

Often, balance sheet lending is not possible, therefore we need to structure our financings!!

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Products/Commodities

  

Crude oil & oil products (accounting for ~ 60% of results) Ferrous & non ferrous metals Fertilizers Others (e.g. chemicals, agricultural products)

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Countries
   

Russian Federation Ukraine Belarus Central Asian Republics of FSU (e.g. Kazakhstan, Uzbekistan) Romania Bulgaria Countries of former Yugoslavia

  

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Commodity & Structured Trade Finance

Transaction Types
Pre-export Financing Production & Tolling Financing Storage Financing Transport Financing Post-shipment Financing

    

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Commodity & Structured Trade Finance

L/C facility structure
3. Delivery 3. Delivery

Final Offtaker

Sales contract, assignment to RZB 1. Export L/C in favour of trader

Trader RZBs customer Supply

contract

Supplier

Offtakers bank

RZB

2. Import L/C in favour of supplier 4. Payment under the Import L/C

Suppliers bank

4. Payment under the Export L/C

Collection account of the Trader with RZB

Pledge of collection account to RZB

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Pre-export financing structure
3. Delivery

Final Offtaker

of crude oil Sales contract, assignment to RZB

Trader

2. Delivery of crude oil

Supply contract, assignment to RZB 1. Disbursement

Supplier RZBs customer

6. Release of cash cover

RZB
4. Payment to the collection account Pledge of collection account to RZB

5. Repayment

Loan agreement

Collection account of the Trader with RZB

OPEC-Fund Trade Finance Workshop

Value of loan to the Supplier = max. 80% of the value of crude oil delivery !
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Commodity & Structured Trade Finance

Control of product flow, proof of existence of the goods
      

Production plan of producer Dispatch notice Railway bills Forwarder certificate of receipt Warehouse receipt Bill of Lading DAA (documentary acceptance act) in case of crude oil financing (via pipeline)

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Control of payment flow

Financing not for 100%, mitigation of price risk in case of pre-export financing structure Payment to be effected by the final off-taker to the collection account with RZB Notice of assignment and acknowledgement of assignment from Off-taker

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Assessing the trader
     

Product experience Market experience Track record Strategic partner of producer Any control over the producer Strategic partner of the final off-taker

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Assessing the Off-taker


Payment risk


Off-takers pre-approved by RZB in case of payment on open account All other off-takers have to open documentary L/Cs in favour of our customer Notice of assignment, acknowledgement of assignment

 

Export off-taker vs. domestic off-taker Long term relationship vs. spot

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Documents involved
      

Supply contract Sales contract Performance undertaking/ Surety of supplier Purchase confirmation, documentary L/Cs Invoice of supplier to RZBs customer Invoice of RZBs customer to the off-taker Transportation documents

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Risk overview General risks
   

political risk payment risk fraud risk contractual risks performance risk quantity and quality risk handling risk transportation risk market risk price and FX risks
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risks for Producer/Exporter Trader (Buyer/Seller) Final Buyer

 

   

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Commodity & Structured Trade Finance

Possible securities (combination!)
   

Pledge on Goods Assignment of supply contract and sales contract A certain percentage of cash cover (10-30%) Payment instruments from off-takers issued by 1st class banks (L/Cs, Standby-L/Cs, Guarantees) Payment undertakings or purchase confirmations from first class off-takers Assignment of receivables (assignment of proceeds of Letters of Credit, Bank Guarantees, Sales Contracts, Payment Undertakings, Purchase Confirmations)

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Possible securities (combination!)
  

Pledge on collection accounts Mortgage on borrowers real estate (real estate register!) Careful selection of and close co-operation with


Freight forwarders

Insurance companies  Inspection and surveillance companies

 Warehouse

keepers

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Possible securities (combination!)

 

Syndication of the loan Assignment of claims against insurance companies (RZB being named as loss-payee) Insurance of payment risk of off-takers

OPEC-Fund Trade Finance Workshop

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Commodity & Structured Trade Finance

Trends

What you always wanted to know about .... Commodity and Structured Trade Finance ... but never dared to ask!

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Export Finance
Mission


Competence and know-how:

Competence of top level and decades of experience

Tailor-made export finance services:

The key to successful cross-border business is a reliable associate who thinks globally but acts locally

Comprehensive support:

Consulting and supporting RZBs customers concerning all issues in respect of export insurance and export finance

OPEC-Fund Trade Finance Workshop

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Multi-Sourcing Transaction with ECA

Sample multisourcing transaction with ECA
Raiffeisen Bank Aval

15% Down payment financing Local cost financing Self retention L/C opening bank Loan agreement Commercial Loan

Corporate Ukraine

Delivery 100% of contract value

Loan agreement 85% of contract value + up to 100% of ECA costs ECA Facility

Delivery 100% of contract value

Vienna
Guarantee Finance credit cover
Exporter Austria Sub-supplier Germany * OeKB Austria Euler Hermes COFACE France

Exporter France

Re-insurance OPEC-Fund Trade Finance Workshop

Parallel insurance

* Manufacturing risk cover

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Examples for Successful Export Financing



Long-term financings for clients of our Romanian Network bank in cooperation with/based on guarantees issued by the Norwegian ECA (GIEK) and by the Canadian ECA (EDC) and COFACE (France).* EUR 8,4 mio. Renault TK Axis Deal Leasing Transaction, Russia
EUR 108 mio. Export Project Financing of a cellulose factory in Estonia.

_________________

*) due to bank secrecy we are not permitted to publish the name of the companies without prior written approval
OPEC-Fund Trade Finance Workshop
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Cooperation with International ECAs

Finalized Transactions with international ECAs within

We are currently also in contact with Sinosure (China), EKF (Denmark), IFTRIC (Israel), NEXI (Japan), KEIC (Korea), IGA (Serbia), CESCE (Spain) , SERV (Switzerland), ECGD (U.K.)
OPEC-Fund Trade Finance Workshop
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Export Finance
The Global Export Finance Department, Vienna


has an outstanding Export Credit Portfolio totalling approx. EUR 6 billion as of December 2007 has finalized export financing transactions in the volume of EUR 3 billion in the year 2007

with various ECAs

OPEC-Fund Trade Finance Workshop

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Our Responsibilities



Export insurance Export finance under the Austrian Export Promotion Scheme

ECA-Multisourcing Center of Competence for International ECAs with the exception of US-Exim which is handled directly by RZB Finance LLC, New York, USA. Network Banks Export Finance for deliveries and services originating (NWB) from the CEE countries is offered directly by our experts in the respective Network banks (= NWB), e.g. Raiffeisen banks in Poland, Hungary, Czech Republic, Croatia, Romania and Tatra banka in Slovakia.

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RISK SHARING EXPERIENCE/SYNDICATIONS

RISK SHARING EXPERIENCE / SYNDICATIONS

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Trade Finance Products Kind of Participations used in RZB

 L/Cs, bank guarantees and payment undertakings issued by banks

Negotiable instruments guaranteed by a bank as avalised bills of exchange and promissory notes

Trade related pre- or post-financings to banks

OPEC-Fund Trade Finance Workshop

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Syndication Techniques
Risk Participations Searching for Participants in short-mid term trade related primary transactions offered to other institutions on an undisclosed and usually unfunded basis


Forfaiting 100% without recourse selling of trade related short and middle term transactions to other institutions or primary markets on a disclosed and funded basis

OPEC-Fund Trade Finance Workshop

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Participation under L/C Kind of Participations used in RZB



Funded Risk Participations (not very common under L/CS)

 

Settlement Limit KYC check Settlement limit Counter Party Limit KYC check

Unfunded Risk Participations

  

Agreements used with: External Banks:

   

Master Risk Participation Participation according to Austrian Law IFA (International Forfaiting Association) Guide lines Frankfurter Agreement
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OPEC-Fund Trade Finance Workshop

Participation under Trade Finance Products

Pre-conditions for risk participations under L/Cs
 

L/C has to be confirmed by RZB Following terms and conditions to be met:  L/C available by sight payment or deferred payment  with or without post financing  valid for presentation of documents at the counters of RZB  payable at the counters of RZB  include order for confirmation  acceptable L/C wording

OPEC-Fund Trade Finance Workshop

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Participation under Trade Finance

Confidentiality of data:


especially with L/Cs

Written consent from issuing bank that RZB Vienna is allowed to pass on data to third parties regarding the L/C under the risk participation. (Due to Austrian Banking Law) In case it is not possible to get this agreement from issuing bank, FI management has to authorize syndication department to proceed without such letter under full responsibility of FI.

OPEC-Fund Trade Finance Workshop

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Main Drivers for Risk Participations

Advantages:
        

Reduction of exposure to particular names, sectors or countries presents new reciprocity opportunities Increase in capacity to lend to particular entities/countries Diversification of risk and acquisition of target exposures where appropriate Additional income generation A market oriented capital allocation Building up international market expertise Optimising equity allocation within the group Broadening of the investor base
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OPEC-Fund Trade Finance Workshop

Syndicated Trade Finance Volumes in CEE-CIS (2003-2007)

35.000,00 30.000,00 250

31.575,79
200

181
25.000,00 20.000,00 15.000,00 10.000,00 5.000,00 0,00 2003 2004 2005

207
150

123 87 7.653,46 7.827,47

16.380,54 12.832,75 87
50 100

Vo ume No o Dea

0 2006 2007

Source: Dealogic

OPEC-Fund Trade Finance Workshop

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Trade Finance Investors Geographical Distribution

Trade Finance Investors:
Russia/CIS-CEE region attracting Trade Finance investors
 

EUROPE

Many small investors getting limits for trade related risks to invest Borrowers keen to diversify lending group


ASIA

GCC

OPEC-Fund Trade Finance Workshop

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Trade Finance Market Trends

Market Trends:


Although Trade Finance volumes diminished in 2007, we expect volumes to increase in 2008 upwards due to market conditions (liquidity); Exporters- Importers will use:
  

Less open accounts Less Documentary collections Less cash payments

CEE-CIS Banks will use Trade finance products for their own funding needs,
(Sight L/Cs with Post Financing)

 

Strong competition among Banks, Insurance companies and ECAs Due to the complexity of the Structured Trade Finance Products, corporates used to borrow through projects finance or corporate finance syndicated markets. 2008 and upwards, we expect this trend to be changed.
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RZB expects from potential Partners

    

Regional Expertise Risk taking Capacity Product knowledge Master Risk Participation in place Funding

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Thank you for your attention!

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