Business plan

2022 year

A crucial concept that guided the formation of the Business Plan is the Bank's mandate, which is the creation of a powerful financial supermarket, which operates in the most profitable segments of the most promising sectors of the financial market. An important focus area includes customer focus and attainment and retention of a leading position, following the principle of striving to be a champion, the most appropriate description of the Bank's financial position in 2021.

Our plans serve the main goal of our Bank, which is to become a modern, innovative, dynamically expanding bank serving Uzbekistan with a full range of financial services.

FORECASTS OF THE DEVELOPMENT OF THE BANK

Through 2022, the Bank will keep introducing new automated banking systems and equipment for its operations. As a result, new interactive services can be introduced, and customers can receive fast and round-the-clock support. In addition to automating most business processes, the deployment of the program will enable clients to receive personalized communications built on the basis of data analytics and modeling tools, through the method of interaction they find most convenient.

Business productivity will be increased significantly through improved cost management, the use of the functional-value model, and efficient capital allocation. By 2022, the Bank hopes to expand its interest-bearing operations at a faster pace, focusing on lending to small businesses and retail consumers, which will in turn make its loan portfolio more diversified.

By the end of 2022, the Bank plans to increase its assets to 19.4 trillion UZS, liabilities to 17.3 trillion UZS and total capital to 2.1 trillion UZS. In 2022, the gross income of the Bank (net of income from inter-branch transactions) is planned at the level of 2,635 billion UZS and the expense of the Bank (net of income from inter-branch transactions) is planned at the level of 2,073 billion UZS. A systematic development of all strategic business areas will lead to an increase in income.

CORPORATE BUSINESS

• Large corporate clients;
• Representatives of small business.

Business clients in the large segment have the highest expectations, prefer to be served by multiple banks, have large funds, and utilize a wide range of financial services. They expect prompt payment and lending, as well as complex financial products. Their preference is to work with highly qualified bankers who are knowledgeable about the industry in which they operate.

By offering tailored financial solutions, the Bank aims to develop customer service in this segment. The Bank will expand the product range in the area of short-term lending, trade finance, foreign exchange operations and liquidity management products. Meanwhile, it is important to increase the speed of services, especially in terms of lending. In order to facilitate prompt interaction between managers and representatives of clients, the Bank will set up mechanisms.

As the Bank's primary interest is in the small business segment, there is a potential for an acceptable level of profitability as well as a chance to diversify its customer base. The number of potential Bank customers is growing rapidly thanks to economic reforms and government support of small businesses. To increase the Bank's credibility at the international level, the Bank will actively work towards attracting credit lines from major international financial institutions by 2022. As part of the policy for serving small businesses in 2022, clients will be provided with a convenient and convenient solution for controlling and managing their business finances through remote and online channels. With further development of digital channels, the client manager will be relieved of their responsibilities and new packages of personalized services, customized to the industry, can be introduced.

During the process of establishing a client base, priority will be given to clients with large cash balances and good settlement records. As a result, legal entities will have 9.5 trillion soums in their accounts by the end of 2022 (including foreign currency).

Maintenance of corporate clients' accounts in the national currency is projected to bring commission income of at least 103.6 billion UZS, and maintenance of accounts in foreign currency and services to support foreign economic activity in the amount of 269.6 billion UZS.

In order to maintain the stability of the resource base special attention will be paid to attracting time deposits of legal entities. By the end of 2022, the bank plans to increase their balance to 3,043 billion soums (including foreign currency), interest costs on which will be 335.4 billion soums.

Raised funds will be the main source of financing the Bank's active operations, namely lending. The credit portfolio in 2022 is planned to increase to 11.9 trillion UZS, of which 8.3 trillion UZS accounts for credits in national currency and SUM 3.6 trillion for credits in foreign currency in soum equivalent.

In 2020, lending to small businesses was allocated as a separate direction. Actual financial results in 2020-2021 showed that this step was made correctly, as well as optimization of lending processes, profitability and low share of troubled assets confirmed it.

In 2022, the balance of the loan portfolio for small loans is projected to reach 1.7 trillion UZS soums.

RETAIL BUSINESS

In order to diversify the loan portfolio as a whole, it is important to develop the retail business, including retail lending. According to projections, retail loans will reach 6.5 trillion soums by 2022. The Bank projects that it will receive 1,132 billion UZS in income in 2022 from lending to individuals, given the projected volume of issuance and the projected interest rate.

To develop its retail business in 2022, the bank should:

• In order to simplify and streamline operations such as regular payments, transfer of funds, payments for goods and services, and saving of funds, the operations must be convenient, fast, and profitable. As part of this effort, we will focus our attention on payroll projects, funds transfers between individual accounts, overdrafts and credit lines backed by financial assets. In order to popularize plastic cards and develop savings products, we need to introduce new methods of identifying remote customers;
• Establish partnerships with international payment systems to develop plastic card programs. In 2021, the Bank launched a new partnership program with VISA for issuing soum salary cards with the possibility of payment in foreign currencies among employees of the Bank's head office. A product offering like this will be launched on the mass market by 2022 and will be available to all Bank customers;
• to build long-term and close relationships with customers. The solution to this problem requires understanding the needs of clients and finding an individual approach to each segment. By developing product packages, the bank can compete more effectively with standalone offerings. By collecting, storing, and analyzing client information, the bank will be able to create such packages.

Services to individuals are expected to generate 245.8 billion soums in revenue for the Bank in 2022. At the same time, income from services provided with the use of plastic cards (card issuance, processing of transactions, payment acceptance and income from cash withdrawal from ATMs) will be 199.0 billion soums. Services provided in the retail sector (money transfers, transfers from accounts, cash withdrawals) are expected to generate revenues of UZS 46.8 billion.

Further, it is strategic for the Bank to have retail clients, since they represent the bulk of its resource base, and their funds are prone to low-risk outflows. In 2022 the bank plans to increase deposit balances of individuals to the level of 6.7 trillion UZS, of which time deposits will make 5.7 trillion UZS. Considering the current average rates on deposits, which are 5% on foreign currency deposits and 21% on national currency deposits, as well as the possibility of new deposit products, it is expected that both national and foreign currency deposits will rise gradually.

BANK EXPENSES AND FINANCIAL RESULT

(Excluding interest on inter-branch deposits), interest expenses are projected to reach 893.5 billion soums in 2022. An increase in cash balances on the clients' accounts is connected to an increase in interest expenses. The Central Bank also continued to meet its current requirements for long-term resources, which will require the Bank to attract fixed-term deposits for more than a year, which are more expensive than "short" resources.

Interest-free spending in 2022 is planned at 240.2 billion UZS. In 2022, growth will be driven by an increase in commission income, as well as income from exchange rate differences when making spot and conversion transactions.

There is a forecast of 561.1 billion soums for operating expenses in 2022. There are 3 major spending items that will influence this growth:

• Expenses for employees in the form of salaries and other payments;
• Depreciation of fixed assets and intangible assets;
• Administrative expenses, advertising campaign, taxes, legal, consulting, auditing, insurance services and other operating expenses.

Given the above trends and forecasts, the net profit of the Bank for 2022 is projected at not less than 561.3 billion soums. At the same time the return on assets (ROA) will be 3.3%, and return on total capital (ROE) 32.1% and the operating efficiency ratio (CIR) - 37.4%.

2021 year

The mission of the Bank is “To reproduce success and share it with each of our partners. We aim to create a powerful financial supermarket operating in the most profitable segments of the most promising sectors of the financial market."

The Bank's goal is to further strengthen the position of a modern, innovative and dynamically developing bank of Uzbekistan, which provides a full range of financial services throughout the country.

BANK DEVELOPMENT FORECASTS

In 2021, the Bank will continue to work on the implementation of an automated banking system and equipment for its operation. This step will allow the introduction of new interactive services, provide fast and round-the-clock customer service. After deploying the program, most of the business processes will be automated. This will facilitate the transition to personalized communications based on data analytics and modeling tools available to customers through their most convenient communication channels.

Business productivity will be significantly improved through more efficient cost management, implementation of a functional cost analysis model, and efficient allocation of regulatory capital.

By the end of 2021, the Bank plans to increase its total assets to 8.9 trillion soums, liabilities up to 7.8 trillion soum and total capital up to 1.1 trillion sum. In 2021, the gross income of the Bank (excluding income from interbranch operations) is planned at the level of 1 327.7 billion soums and the Bank's expenditure (excluding income from inter-branch operations) is planned at the level of 1 144.3 billion soums. Income growth will be achieved through the systematic development of all strategic business areas.

CORPORATE BUSINESS

The Bank conventionally divides corporate clients into 2 main segments:

• large corporate clients;
• small business representatives.

The segment of large business is represented by the most demanding clients who prefer to be served in several banks, have large funds, and use a whole range of financial services. These clients require efficiency in making payments and lending, as well as complex products that include sophisticated financial instruments. They prefer to work with highly qualified bank employees who know the specifics of the industry in which the client works.

The Bank plans to develop customer service in this segment by offering individual financial solutions. The bank will expand its product line in the field of short-term lending, trade finance, foreign exchange transactions and liquidity management products. At the same time, it is important to increase the speed of rendering services, especially in terms of lending. The Bank will create mechanisms for operational interaction between client managers and client representatives.

The small business segment is of significant interest to the Bank, since provides an acceptable level of profitability, at the same time allows you to effectively diversify the client base. Thanks to economic reforms and the active support of small and medium-sized enterprises by the State, the number of potential clients of the Bank is growing rapidly. The policy for servicing customers of this segment in 2021 will consist in the development of the customer service process through remote and digital channels, where they will be provided with a convenient solution for monitoring and managing the finances of their business. Further development of the digital channel will relieve client managers and open up opportunities for the introduction of new packages of personalized services, taking into account industry specifics.

When enhancing a client base, a focus will be made on stable clients with big residuals of funds. This will increase the account balances of legal entities to 2.5 trillion soums by the end of 2021 (including in foreign currency).

Servicing corporate clients' accounts in national currency, according to forecasts, will bring commission income in the amount of at least 64.8 billion soums, and servicing accounts in foreign currency and rendering services to support foreign economic activity in the amount of 165.0 billion soums.

In order to maintain the stability of the resource base, special attention will be paid to attracting term deposits of legal entities. By the end of 2021, it is planned to bring their balance to 1 160.1 billion soums (including in foreign currency), interest expenses on them will amount to 98.3 billion soums.

The attracted funds will be the main source of financing for the Bank's active operations, namely lending. The loan portfolio in 2021 is planned to increase to 5.9 trillion. sum, of which 3.2 trillion soums accounts for loans in national currency and 2.7 trillion. sum for loans in foreign currency in sum equivalent.

During 2020, lending to small and medium-sized businesses was allocated as a separate area. The actual financial results of 2020 showed that this step was taken correctly, and the optimization of issuance processes, profitability and a low share of bad assets confirmed this. In 2021, the balance of the Small Lending loan portfolio is projected to reach 0.8 trillion. sum.

In 2021, the Bank will intensify its work in the area of trade finance. Active operations in this area are included in the group of a less risky category, and is a source of stable profitability. The portfolio of new funds attracted and placed in this area is projected to reach 0.9 trillion. sum.

RETAIL BUSINESS

The development of retail business, and retail lending in particular, is a priority and a significant diversification of the loan portfolio. In 2021, the remainder of the retail loan portfolio is projected to reach 1.8 trillion. sum. Taking into account the projected volume of loans and interest rates, the Bank intends to receive income from lending in 2021 in the amount of 764.8 billion soums.

For retail clients, access to services in 24/7 mode, high speed of interaction with the bank and an individual approach are becoming critical. The population is becoming more financially literate, and prefers to use remote channels without direct contact with bank employees.

To achieve this goal, the Bank made a confident step in 2020, creating a new branch, “Digital Bank”. One of the most successful projects of 2020, the launched new mobile application "Apelsin" will continue its development on the basis of this branch.

To develop its retail business in 2021, the bank must:

• make convenient, fast and profitable such simple operations as regular payments, transfer of funds, payments for goods and services, savings and microloans. For this purpose, special attention will be paid to salary projects, transfers of funds between individual accounts, overdrafts and credit lines secured by financial assets. It is necessary to develop products for savings and popularize the use of plastic cards, introducing new methods of customer identification;
• build long-term and close relationships with clients. To solve this problem, it is important to understand customer needs and find an individual approach to each customer segment. The bank will develop product packages that are more attractive than standalone products. To compile such packages, the bank will expand its capabilities for collecting, storing and analyzing customer information.

It is expected that from servicing individuals in 2021, the Bank will earn income in the amount of 170.0 billion soums. At the same time, income from services rendered using plastic cards (issuing cards, processing transactions, accepting payments and income from issuing cash from ATMs) will amount to 142.7 billion soums. Income from services provided in retail business departments (money transfers, transfer of funds from accounts, cash withdrawal) is expected to reach 27.2 billion soums.

Moreover, retail customers are strategic for the Bank, since their funds form the bulk of the Bank's resource base. In 2021, it is planned to bring balances on deposits of individuals to the level 3.6 trillion soums, of which term deposits will amount to 2.9 trillion. sum. Taking into account the current average rates on deposits, namely 4% on deposits in foreign currency and 17% on deposits in national currency, a gradual increase in balances in both national currency and foreign currency is expected.

BANK EXPENSES AND FINANCIAL RESULT

The forecast of interest expenses for 2021 (excluding interest on interbranch deposits) is 424.3 billion soums. Interest-free expenses in 2021 are planned at the level of 191.8 billion soums Growth is expected by 2021, due to an increase in fee and commission income, as well as income in the form of exchange differences, from spot and conversion transactions.

The forecast of operating expenses for 2021 is 385.1 billion soums. The main expense items that will affect the growth of operating expenses are:

• Employee expenses in the form of salaries and other payments;
• Depreciation of fixed assets and intangible assets;
• Administrative expenses, advertising campaigns, taxes, legal, consulting, auditing, insurance services and other operating expenses.

Taking into account the above-described trends and forecasts, for 2021 the Bank's net profit is forecasted at the level of at least 183.4 billion soums. At the same time, the return on assets (ROA) will be 2.3%, and the return on equity (ROE) is 18.3% and the cost income ratio (CIR) - 47.2%.

2020 year

The goal of the Bank is maintaining and further strengthening the position of a modern, innovative and dynamically developing Bank of Uzbekistan which provides a full range of financial services throughout the country.

To achieve this goal, the Bank will focus on the following tasks:

• introduction of modern banking technologies;
• increase the performance indicators by optimizing business process, improving the quality and speed of service while reducing the cost of production;
• expansion of the client base based on the provision of a full range of services, customized to every client, based on their needs and expectations;
• improving the risk management system;
• development of professional potential of employees.

Forecasts of bank development

The Bank is planning to complete work on the implementation of a new automated banking system and equipment in 2020. This step will allow introducing new interactive services which have no analogues in other banks and will provide fast and 24/7 customer service. After deploying the program, most of the business processes will be automated. Also, this program has powerful tools for analytics and reporting, which will allow introducing new methods of integrated management of the Bank. Business productivity will be significantly improved through more efficient cost management, implementation of a value analysis model, and efficient allocation of regulatory capital across products and customers.

With this potential, until the end of 2020 it is planned to increase the total assets to 6.6 trillion soums. Aggressive growth of risk assets will not be planned by Bank in 2020 due to the need to strengthen capital adequacy and liquidity indicators. Active operations will be carried out as part of the repayment of existing assets with the re-allocation of funds into more profitable products.

The gross income of the Bank (excluding income from internal operations among branch) in 2020 is planned at the level of 909.2 billion soums. Income growth will be achieved through the systematic development of all strategic business areas: corporate, commercial and retail.

The corporate and commercial business

The Bank divides its corporate clients into 2 main segments: large business and small business.

The segment of large business is represented by the most demanding clients who prefer to be served in several banks, have large funds, and use a wide range of financial services. Such clients require promptness in making payments and lending, as well as complex products that include sophisticated financial instruments. They prefer to work with highly qualified bank employees who know the specific features of the industry in which the client works.

The Bank is planning to develop customer service in this segment by offering individual financial solutions. The bank will expand its product line in the field of short-term lending, trade finance, currency operations and liquidity management products. At the same time, it is important to increase the speed of rendering services, especially in terms of lending. The Bank will create mechanisms for operational interaction between managers of bank and client representatives.

The bank also has a significant interest to the small business segment, because this segment provides an acceptable level of profitability, at the same time allows to the bank to effectively diversify the client base. Thanks to economic reforms and active government support for small businesses, the number of potential clients of the Bank is growing rapidly. The policy for servicing clients of this segment in 2020 will be aimed at transferring clients to service in remote and digital channels, where they will be provided with a convenient solution for monitoring and managing the finances of their business. Transfer to digital channels will relieve client managers and open up opportunities for the introduction of new packages of personalized services, taking into account industry specifics.

While building up the customer base, the emphasis will be on customers with large balances and good settling. This will increase the balances on the accounts of legal entities up to 2.5 trillion soums by the end of 2020 (including in foreign currency).

Servicing corporate clients' accounts in national currency, according to forecasts, will bring commission income in the amount of at least 65.6 billion soums, and servicing accounts in foreign currency and providing services to support foreign economic activity in the amount of 126.4 billion soums.

In order to maintain the stability of the resource base, special attention will be paid to attracting term deposits from legal entities. By the end of 2020, it is planned to increase their balance to 387.8 billion soums (including in foreign currency), interest expenses on which will amount to 52.8 billion soums.

The funds raised will be the main source of financing for the Bank's active operations, namely lending. The loan portfolio in 2020 is planned to increase to 4.1 trillion soums, of which 2.1 trillion soums accounts for loans in the national currency and 2.0 trillion soums for loans in foreign currency (in the soum equivalent).

The development of retail business, and retail lending in particular, is a priority due to the relatively high profitability and significant diversification of the loan portfolio. In 2020, the balance of the retail loan portfolio is forecasted to reach 1.4 trillion soums.

Taking into account the forecasted volume of loans and interest rates, the Bank intends to receive income from lending in 2020 in the amount of 567.6 billion soums.

Retail business

For individual customers, access to 24/7 services, high-speed interaction with the Bank and individuals are becoming critical. The population is becoming more financially literate, and prefers to use remote channels without direct contact with Bank employees.

To develop retail business in 2020, the Bank must:

• make convenient, fast and profitable operations, such as, regular payments, transfer of funds, making payments for goods and services, saving funds and taking microloans. For this purpose, special attention will be paid to salary projects, transfers of funds between individual accounts, overdrafts and credit lines secured by financial assets. It is necessary to develop savings products and popularize the use of plastic cards, introducing new methods of customer identification.
• build long-term and close relationships with clients. To solve this problem, it is important to understand the needs of customers and find an individual approach to each customer segment. Bank will develop product packages that are more attractive than stand-alone products. To create such packages, the Bank will expand its capabilities to collect, store and analyze customer information.

It is expected that, Bank will earn income in the amount of 82.4 billion soums from servicing individuals in 2020. At the same time, income from services provided using plastic cards (card issuance, transaction processing, payment acceptance) will amount to 56.6 billion soums. Revenue from services provided in retail business departments (money transfers, transfer of funds from accounts, cash withdrawal) is expected to reach 25.8 billion soums.

Moreover, retail clients are strategic for the Bank, as their funds form 40% of the Bank's resource base. In 2020, it is planned to increase the balances on deposits of individuals up to 2.3 trillion soums, of which term deposits will amount to 1.9 trillion soums. Taking into account the current average deposit rates, namely 4% for deposits in foreign currency and 18% for deposits in national currency, a gradual increase in balances in both national currency and foreign currency are expected.

Bank expenses and financial results

The forecast of interest expenses for 2020 (excluding interest on inter-branch deposits) is 295 billion soums. The increase in interest expenses is associated with an increase in rates on financial resources in the market, which is a consequence of the tightening of the monetary policy of the Central Bank. In addition, the Central Bank's requirements for a long-term resource base have increased, for which the Bank will need to attract additional term deposits for a period of more than a year, which are more expensive compared to "short" resources.

Interest-free expenses in 2020 are planned at the level of 83.3 billion soums. Growth is expected by 2020, due to increase in commission income, as well as income in the form of exchange differences, when performing spot and conversion operations.

The forecast of operating expenses for 2020 is 316 billion soums. The main expenditure items that affect the growth of operating expenses are:

• employee expenses in the form of salaries and other payments;
• contributions to the Deposit guarantee Fund. The Bank is going to increase contributions to the Deposit guarantee Fund in connection with further attracting deposits from the population, in accordance with the requirements of the legislation.
• depreciation of fixed assets and intangible assets. In 2020, server equipment is going to start operating, which will increase the cost of depreciation and amortization.
• administrative expenses, taxes, legal, consulting, audit, insurance and other operating expenses.

Taking into account the above-described trends and forecasts, the Bank's net profit for 2020 is forecasted at least 120.7 billion soums. At the same time, the return on assets will be 2.0%, and the return on total capital will be 17.2%.

2019 year

The purpose of the bank is to retain and further strengthen the position of the modern, innovative and dynamically developing bank of Uzbekistan, which provides the entire range of financial services throughout the country.

To achieve this goal, the bank will focus on the following tasks:

• introduction of modern banking technologies;
• increase in efficiency indicators due to optimization of business processes, improvement of quality and speed of service, while reducing production costs;
• expansion of the customer base, based on the provision of a full range of services, with a focus on the individual characteristics of each client;
• improvement of risk management system;
• development of professional potential of employees.

With this potential, by the end of 2019 it is planned to increase total assets to 5.7 trillion UZS, or 19%. At the same time, the growth of the bank’s liabilities for 2019 is planned at the level of 19% and total capital of 17%.

Gross income of the bank (minus income from operations between branches) in 2019 is planned at the level of 792.6 billion UZS, which is 30% higher than in 2018. Revenue growth will be achieved through the systematic development of the main strategic business areas: corporate and retail.

The bank conditionally divides corporate clients into 2 main segments: large business and small business.

The bank plans to develop customer service in the large business segment through the offer of individual financial solutions. The bank will expand its product range in the areas of short-term lending, trade finance, foreign exchange operations and liquidity management products. At the same time, it is important to increase the speed of providing services, especially in terms of lending. The bank will create mechanisms for operational interaction between client managers and client representatives.

The small business segment is of significant interest to the Bank, as it provides an acceptable level of profitability, at the same time allows diversifying the customer base effectively. Due to economic reforms and active state support of small businesses, the number of potential customers of the bank is growing rapidly. The customer service policy of this segment in 2019 will be aimed at transferring customers to service in remote and digital channels, where they will be provided with a convenient solution for controlling and managing the finances of their business. Transfer to digital channels will relieve client managers, and open up opportunities for the introduction of new packages of personalized services, taking into account industry specifics.

For the development of retail business in 2019, the bank should:

• make such simple operations as regular payments, transfer of funds, payment for goods and services, saving funds and microloans convenient, fast and profitable. For this purpose, special attention will be paid to salary projects, transfers of funds between accounts of individuals, overdrafts and credit lines secured by financial assets. It is necessary to develop products for savings and promote the use of plastic cards, introducing new methods of customer identification.
• build long-term and close relationships with customers. To solve this problem, it is important to understand the needs of customers and find an individual approach to each customer segment. The bank will develop product packages that are more attractive than independent products. To compile such packages, the bank will expand its capabilities in collecting, storing and analyzing customer information.

Taking into account the above trends and forecasts, the bank’s net profit for 2019 is projected at the level of at least 83 billion UZS. At the same time, return on assets will be 1.6% and return on total capital will be 16%.

2018 year

The Business Plan defines the major directions for “Kapitalbank” JSCB development for 2018, ensures the objective setting, unity of purpose and coordination of efforts of all units in order to improve the performance of the bank.

The Business Plan serves as a base for further management control over the financial activity of the bank, contributes to the quickest adjustment under the conditions of possible changes in financial environment.

All operational plans of bank’s units for 2018 shall be developed according to principles of and in full compliance with the business plan of the bank.

Goal of the bank is to hold and further consolidate the position of modern, innovative and dynamically developing bank of Uzbekistan, rendering the full range of financial services across the country. To achieve this goal, the bank will focus on solving the following issues:

• introduction of the latest banking technologies;
• improvement of performance indicators due to business processes optimization, improvement of quality and speed of service, while reducing production costs;
• expansion of the client base, based on the provision of a full range of services, with a focus on the individual characteristics of each client;
• risk management system improvement;
• employees professional capacity building.

In the coming year, the bank plans to complete works on the introduction of a new automated banking system and equipment for its operation. This step will allow introducing new interactive services that are unique in the country and ensure quick and round-the-clock client service. After the program is deployed, most of the business processes will be automated. Moreover, this program contains powerful tools for analytics and reporting that will allow introducing new methods of integrated bank management. Business efficiency will be significantly enhanced by more efficient cost management, implementation of cost-effectiveness analysis model as well as efficient allocation of economic and regulatory capital among products and clients.