Paris - Based on its strong expertise in emerging markets, VELHON Partners, an independent management consulting firm specialising in banking and finance industry, is pleased to present the EBR 2011 – EMERGING BANKING REPORT - a comprehensive study on the expansion of banking networks in emerging markets.

The report compares the driving forces between different countries and banking group strategies in light of their shareholding structure and level of maturity in a given market. This report is based on the VELHON300 annual ranking, which complements VELHON Partners’ macro markets analysis by reviewing in detail each bank attributes. A decade of conquest On the back of the steady economic growth during the last decade, the banking networks of emerging countries have experienced a strong expansion, thus complementing the progressive "bancarization" of their economy (penetration of banking services). This period of conquest reached its "peak" in the years 2007 and 2008 with an average growth of the networks around 10%. Since, the financial crisis caught up the emerging markets and double digit growth rates in banking networks have become more of an exception.

The financial crisis has shed light on some shortcomings for certain banks and even for whole markets, providing the opportunity for re-invention. "The crisis has undoubtedly translated into a slower growth but it has also accelerated diverging trends in particular according to the geographical zones and the types of players"commented Yoann Lhonneur and Jean-Marc Velasque, Directors of VELHON Partners. Different paces of slowdown since 2009 While emerging countries proved to be a growth driver for many institutions in the early years of the crisis, the networks have decelerated sharply from 2009, with a decrease of more than 8 percentage points in 2010.

This general trend disguises some contrasting trends: § With a 2.5% growth in 2010 against 14% in 2008, foreign banks operating in emerging markets are the most impacted by the crisis(low exposure to Asia where growth remained strong at +10.2% in 2010, rightsizing initiatives, with priority given to profitability at the expense of growth). § Conversely, the state-owned banks have little amended the development strategies of their banking systems, because of the maintenance of active public policies with regard to banking and conservative strategies.

Another differentiating factor lies in the sheer size of banks: § On the one hand, large banks were able to maintain growth of their networks.

§ On the other hand, smaller institutions (mainly located in Africa and Eastern Europe) took advantage of a greater ability to maintain significant growth (5%) of their networks in 2010. § Greatly penalised by new risk management imperatives and streamlining of administrative tasks, the network growth of mid-sized institutions, has declined. Emerging Europe: networks size has remained broadly flat over the last 2 years With 68% of Bank Branch Networks (BBN) showing no growth at all or even negative growth in 2010, the growth of the networks was abruptly halted since 2009.

While some countries amongst the least mature (Ukraine ...) still offer significant growth opportunities, the trends there are firmly that of rationalisation. The same goes for the intermediate countries (Poland, Croatia ...), although Turkey is an exception with an acceleration of its networks in 2010 (7.4% against 4% in 2008). Within the most mature countries (Czech Republic, Slovenia ...), the situation is conducive to the development of banking networks, despite increased competition from alternative channels. Continued strong growth in Africa Most of the banks have maintained a significant growth of their networks, even if the “local players” were the most affected by the crisis (6% growth in 2010, against 13% in 2008). The strong performance of the foreign owned banks came mostly from banking groups active in Morocco and Nigeria and in search of growth outside of their domestic markets.

VELHON300 - the 2011 results § On average double-digit growth rates in BBNs are less common than in the past. For the 50 banks in the ranking, however, the results remain at levels comparable to the best years, § The State Bank of India, 1st bank in the rankings for the 3rd consecutive year, continues to expand its network by 1 049 branches opened in 2010 alone, § The rest of the Top 3 belongs to ICBC (# 2, China) and ICICI (# 3, India),

§ 70% of the banks from the Top 20 came from the BRIC, especially India, which stands out with 10 banks operating in the Top 50 that, as a whole, have opened 2 913 branches. § Continuity among the fastest growing banks with five of the top 10 banks ranked already present at this level last year, § The first bank of the ranking outside of BRIC is Indonesian:

Bank Mandiri which has expanded its network by 275 agencies (25%), § When excluding BRICs, the countries with the most notable increases are Indonesia, Turkey, Vietnam, Morocco and Mexico, § During 2010, the foreign banks(including British, French and other continental Europe players)have stalled, with only one representative - Santander Brazil - in the Top 20.

About the VELHON Partner's EBR 2011 : the study wasconducted on 335 banks in 40 countries of the emerging regions (Asia/Pacific, Africa, Central and Eastern Europe, Latin America), which represents globally 227 000 branches and more than USD 12 400 billion in assets.

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