Collection Operational Excellence

OTP Factoring Ukraine

2nd International Banking Conference Kiev : June 3-7, 2013

Mikhail Vidiakin, Head of Business Development, Network Coaching and Underwriting

2 OTP Group holds strong position at CEE market

SOURCE: Presentation on 1Q 2013 results, www.otpbank.hu

ü  Capital adequacy ratios are significantly above the regulatory minimum

ü  Liquidity position strengthened further in 1Q 2013

ü  Contribution of foreign subsidiaries in profit before income tax is up to 40%

ü  The improvement of the pre-tax profit is mainly due to better Hungarian and Ukrainian results y-o-y.

2 – result of local regulation change

3 OTP Factoring Group is responsible for collection and present at 8 countries

SOURCE: OTP Factoring

OFSE

SERBIA Established : 2010

UKRAINE Established : 2009

ROMANIA Established : 2009

OFU

SLOVAKIA Established : 2010 OFS

CROATIA Established : 2011

OFHr

MONTENEGRO Established : 2010

OFM

BULGARIA Established : 2010 OFB

OFR

HUNGARY Established : 1998 OFH

4 OTP Factoring Ukraine covers all Ukraine

Mortgage loans, 53.8%

Consumer loans, 0.5%

SME loans, 27.1%

Corporate loans, 9.4%

Car loans, 9.3%

Ivano-Frankovsk Uzhgorod

Chernovtsy

Lvov

Lutsk

Rovno

Ternopol Khmelnitsky

Zhitomir

Vinnitsa

Cherkassy

Kiev

Kirovograd

Nikolayev

Kherson

Simferopol

Zaporozhe

Chernigov

Odessa

Sumy

Poltava Kharkov

Dnepropetrovsk Donetsk

Lugansk

1  7  

6  

3  

5  

4  

2  

REGIONS 1 Kiev 2 North-Eastern 3 Donbass 4 Dnepropetrovsk 5 South 6 Podol 7 West

Majority of the portfolio is mortgage and other secured loans

Wide network of 7 regions covers all Ukraine; HQ - Kiev

SOURCE: OTP Factoring

5 Operational Excellence leads to the new organizational culture and better profits

“Operational Excellence is a philosophy of organizational leadership that stresses the application of a variety of principles, systems, and tools toward the sustainable improvement of key performance metrics.

The focus of Operational Excellence goes beyond the traditional event-based model of improvement toward a long-term change in organizational culture.”

SOURCE: Web

“Operational Excellence is the art of building processes in the right way and most effective way. When integrated under the umbrella of Operational Excellence, also referred to as OpX, and applied across the company, a new way of doing business emerges — one that produces higher yields, better profits (recoveries), increases effectiveness and improves quality. Despite strong interest in collection Operational Excellence, debt collection companies cannot implement this philosophy overnight. To achieve true Operational Excellence, they need to commit to a ground-up, ongoing approach to conducting collection business. Equally as critical, companies need the right executives to lead their OpX efforts, due to any operations can't be in a state of excellence by declaration or decree.”

Key factors for successful collection process

•  Processes •  Roles •  Network Structure •  Tools, Products, Solutions •  Decision Making, Authorities •  Staffing Model •  Incentive System •  Coaching •  IT •  Performance Management

6

7 Same roles can be differently effective with different approaches of case handling

Soft Late Hard Legal

Approach 1:

Approach 2: Case handler

Visitor

RE Legal

Skip-tracing

Centralized

Chain

8 Effective incentive system: better solutions – more recovery – more bonuses

Structure

Shares

KPIs

Roles

Rates

Frequency

▪  Cash, repayments ▪  Restructuring ▪  Separate activities

▪  Individual ▪  Group ▪  Manager valuation

▪  Penalty vs cash ▪  Restructuring based on NPV approach ▪  Voluntary vs forced sale

▪  Soft, Hard ▪  Visitors ▪  Legal

▪  Proportions depending on involvement of each role in recovery process

▪  Time-frames

▪  Monthly payouts for cash ▪  Quarterly payouts for group ▪  Restructuring payouts based on

performance

9 Decision making and authorities based on solutions and recovery approach

Highest level

Committee

Management

Regions

Potential recovery Authorities

10 Coaching is very important for knowledge sharing and professional growth

Showing example Reinforcement with

formal mechanics

Convincing and conviction

Change in attitude and

behavior

Skill development

11 Q&A

Thank you for your attention!

Mikhail Vidiakin Head of Business Development, Network Coaching and Underwriting +38 097 926 11 01 mykhailo.vidiakin@otpbank.com.ua