1

The model of

Garantiqa Creditguarantee Ltd.

in Hungary

Zoltán Urbán CEO

Istanbul, 16.10.2014

www.garantiqa.hu

2

International outlook 2-3

Ownership Structure 4

Credit Guarantee institutions on the

Hungarian market 5

Main figures 6

The impact of creditquarantee activity

on the budget 7

Products, Process, Collaterals 8

Actions of

Garantiqa Creditguarantee Ltd. 9

Content

22.07.2014 3 2

5,1%

In international comparison the role of Hungarian credit guarantee

subsidies is high in the economy

Credit Guarantee Schemes worldwide: volume of outstanding guarantees in portfolio, 2011

As a percentage of GDP

Source: OECD: SME and Entrepreneurship Financing: The Role of Credit Guarantee Schemes and Mutual Guarantee

Societies in supporting finance for small and medium-sized enterprises - 30-Jan-2013

22.07.2014 4 3

5,1%

The role of Hungarian guarantee subsidies is significant in regional

comparison

Outstanding guarantee volumes of national schemes by country in the CESEE region

(%GDP)

Source: EBCI Vienna Initiative: Working group on credit enhancement schemes – September 9, 2014, Brussels

5

Credit Guarantee institutions on the Hungarian market

Market share [%]

0,4%

20,0%

5,1%

74,5%

2013.12.31.

Institution Market share

2013

Garantiqa Credit Guarantee Co. Ltd. 74,5%

Rural Credit Guarantee Foundation (AVHGA) 20,0%

MV Co. Ltd. (Venture Finance Hungary Co.

Ltd.) – JEREMIE Holding Fund

5,1%

Start Guarantee Co. Ltd. 0,4%

10% of the slightly less than HUF 4000 billion SME loan

portfolio as of end 2013

2013 results:

HUF 280,6 billion (EUR 0,95 billion) new guarantees

HUF 332,3 billion (≈EUR 1,12 billion) guarantee portfolio (cca.

33000 contracts) .

Track record

5

Main figures

Significant growth of total exposure

(2005-2009)

Counter cyclical behaviour led to

heavy losses, negative PAT for 2009-

2012

Beneficiary's municipality guarantee

business ran out in 2014 (EIB

Counterguarantee)

Own Risk portfolio declined strongly

Guarantee capacity increased

Observations

-8

-6

-4

-2

0

2

4

6

8

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010 2011 2012 2013

Ne

t In

co

me

, b

illio

n H

UF

Po

rtfo

lio

, b

illio

n H

UF

Portfolio Net Income

Counterguarantee Type (EUR

million) 2008 2009 2010 2011 2012 2013

(EUR million)

State Counterguarantee 1 242,1 1 375,6 1 298,4 1 215,3 1 128,1 995,6

JEREMIE Counterguarantee 0,0 0,0 0,0 0,0 0,3 2,0

Without State Counterguarantee 167,9 354,6 382,1 264,0 201,2 121,2

- EIB Counterguarantee 37,8 57,0 90,3 67,0 60,4 33,3

- Own Risk 130,1 297,6 291,8 197,1 140,8 87,9

Total Portfolio 1 407,5 1 730,2 1 680,1 1 479,3 1 329,6 1 118,9

CAR (Capital Adequacy Ratio) 36,4% 23,4% 17,0% 13,6% 12,3% 33,4%

State counterguarantee rose from

70% to 85% starting from 20 June

2011

The main owner (MFB Co. Ltd.) raised

HUF 3 billion (cca. EUR 10 million)

capital in Garantiqa in June 2013

Changes in operating conditions

6

The impact of creditguarantee activity on the budget – assessment

of the National Bank of Hungary

8

The Financial Stability Report of the National Bank talks about the role of creditguarantee.

The National Bank of Hungary in its analysis about the „enterpreneurial financing” concluded that the impact of Creditguarantee Institution GHG on the GDP was cca.1 % on a cumulative basis. The analytical approach is on a „what if „ basis: What could have been the GDP level without the creditguarantee support to SMEs

Year GDP, million HUF

Potential GDP decrease

p.a. in the lack of GHG-

creditguarantee

/estimation by National

Bank

Potential GDP

decrease in HUF

million

Drawdown of state

counterguarentee in

HUF million

Counterguarantee

drawdown / est.GDP

decrease, %

Counterguarant

ee drawdown /

annual GDP, %

2009 25 626 480 -0,40% 102 506 16 894 16% 0,07%

2010 26 607 339 -0,40% 106 429 20 084 19% 0,08%

2011 27 886 401 -0,30% 83 659 13 675 16% 0,05%

Összesen 80 120 220 - 292 594 50 654 17% 0,06%

The Hungarian State Budget between 2009-2011 cca. 26-26T billion HUF The GDP decrease in 3 consequtive years could have reached 293 billion HUF – stated the National Bank. The direct public cost of creditguarantee is the drawdown of state counterguarantee: 0,06% of the 3 year GDP

resource: 1) GDP-data: http://www.ksh.hu/docs/hun/xstadat/xstadat_eves/i_qpt015.html 2) National Bank of Hungary http://www.mnb.hu/Root/Dokumentumtar/MNB/Kiadvanyok/mnbhu_stabil/mnbhu_stab_jel_201211/jelentes_penzugyi_stabilitas_201211_hu.pdf 3) Counterguarantee figures of GHG

7

Products, Process, Collaterals

Garantiqa offers guarantee for

Loans

Standard, small exposure

products (exp under EUR

80.000)

Széchenyi card (state

supported product, process

fully automatized, collateral:

suretyship of the owner)

Normal products (higher

exposures)

Factoring deals

Leasing deals

All type of SME loans supported:

working capital loans (mostly

overdraft)

Investment loans, etc.

I. standard process, individual assessment

receipt of application

assessment of client and transaction

risks

decision 7 days

II. Simplified process (‘packages’)

surety guarantees undertaken on basis

of bilateral agreements with banks

big number of smaller amount,

standardized loans

preliminary analysis of risk management

and

lending practices of the financial

institution

exact definition of the product terms and

conditions

decision making within 3 days

For transactions guaranteed by

Garantiqa it’s essential to have

sufficient collaterals (prescribed

by law)

Collateral structure must be in

conformity with the risk taken by

Garantiqa

In case of smaller exposures

(under EUR 80.000) the

suretyship of the company

owner might be enough

In case of higher exposures

(above EUR 80.000) with

tangible collaterals

Product Range The Process of Undertaking a

Guarantee Collaterals

8

Actions of Garantiqa Creditguarantee Ltd.

targets

Favorable terms

Simpler, faster process

Support the Funding for

Growth Scheme (FGS)

Counterguarantee

actions

■ Capital increase in 2013, guarantee fees are down

■ Guarantee fee subsidy from the state after June 2013

■ These measures led to fees paid by SMEs reduced from 1,7-2,2% to 0,3-0,8%.

■ Reduced the term for the decision making early in the year 2014 (Simplified process 3

day, individual assessment 7 day)

■ e-application possibility in 2014

■ New scoring system start 31.03.2014

■ On 1 June 2013 the MNB (the central bank of Hungary) has launched Funding for

Growth Scheme (FGS) to alleviate disruptions observed in lending to small and medium-

sized enterprises

■ Garantiqa mainly supported the participation in FGS micro and small companies

■ New terms in JEREMIE counterguarantee since 31.12.2013

■ Scope of EU financial instruments (2014-2020)

9