2011 VTB Group Investor Day2011 VTB Group Investor Day
Moscow
© VTB 201© VTB 201111
MoscowOctober 04, 2011
Some of the information in this presentation may contain projections or other forward looking statements regarding future events or the futureSome of the information in this presentation may contain projections or other forward-looking statements regarding future events or the futurefinancial performance of JSC VTB Bank ("VTB") and its subsidiaries (together with VTB, the "Group"). Such forward-looking statements are basedon numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in thefuture. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and other important factorsthat we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecastedin the forward-looking statements. These forward-looking statements speak only as at the date of this presentation and are subject to change
2
without notice. We do not intend to update these statements to make them conform with actual results.
Agenda
1. Update on Strategy Implementation
2. Integration of New Businesses
3. Retail Banking
4. Corporate and Investment Bankingp g
5. VTB Group Outlook
3
VTB Management Team
AndreyKostin
Mikhail Zadornov
EkaterinaPetelina
YuriSoloviev
HerbertMoos
President and Chairman of the Management Board
President –Chairman of VTB24 Management Board
Member of the Management Board
First Deputy President and Chairman of the Management Board
Deputy President and Chairman of the Management Board
Group Chairman and CEO
CEO / Retail Banking
Head of Group Strategy CEO / CIB Group CFO
4
CEO
Opening Speech
5
Andrey Kostin,President and Chairman of the Management Board
Update on Strategy ImplementationUpdate on Strategy Implementation and Integration of New Businesses
6
Ekaterina Petelina,Head of Strategy, Member of the Management Board
2013 Targets – Delivering Enhanced Profitability and Growth
Strategic goals 2013 Key strategic actions
Net profit of RUB 160-180 bn
Significantly increase share of high-margin businesses (IB, retail, and etc)
Implement large-scale transformations inRUB 160 180 bn
Drive ROE to 15-20%for the Group
Implement large scale transformations in corporate business:
- Build strong transaction bank and significantly increase the share in cash
d ttl t d t
Improve profit quality structure and increase
f f
and settlement products
- Gain fair market share in mid-cap client business
I l t l b l d l fstability of financial results
- Implement global coverage model for TOP-clients, increase share of wallet and profitability in this segment
- Increase operational efficiency and c ease ope at o a e c e cy a dstreamline business processes
Efficiently integrate new acquisitions
Modify Group Governance model in order to
7
y pcreate basis for future growth
Implementation of Strategic Goals is Well on Track
Profitability already transformed… …and reinforced by high-margin businesses growth
K fi i l
Profit before tax(in RUB bn)
2009 2010 2011e1H’11Key financial indicators
54 8 53 6
100
Retail Banking Investment Banking
Profit before tax(in RUB bn)
54.8 53.6Net profit,RUB bn
20.223.4
25.53x
1.8x 1.5x
2x
10.3%
18.1% >15%
(59.6)
ROE
11.27.2
15.1
7.216.4
1H’111H’102009
45 7%
n.m.
10.3%2010
Retail market shares (1)
1H’111H’102009 2010
IB market shares45.7% 44.0% low 40%43.0%
CIR International DCM: 14.9% Domestic DCM: 24.5% Russian ECM: 24.2%
Loans: 12.7% Deposits: 7.8%
8(1) As of 30 June 2011, including TransCreditBank, excluding Bank of Moscow
TransCreditBank – Key Operational and Financial Details
Top-11 by geographic coverage (1)Top-11 by geographic coverage (1) Key financial indicatorsKey financial indicators
290 offices in 194 cities across Russia (in RUB bn) 2009 2010 1H’11
2,419 ATMs and 4,213 POS terminals
> 38,000 corporate clients and >2 mln cards
TCB market share in 1H’2011:
Total assets 258.6 390.9
Net loans to customers
143.3 203.9
Equity 20.1 28.2
426.9
282.9
30.5
Russian Railways and its affiliated companies
– 1.6% in corporate loans, 1.6% in retail loans – 2.1% in corporate deposits, 0.7% in retail deposits
Net profit 4.1 7.5
ROA, % 1.7 2.3
3.1
1.5
LTD ratio, % 102 78 96
Rankings in Russia (2)Rankings in Russia (2)
represent a significant share of TCB’s business ROE, % 22.8 31.9 21.1
No. 11 No. 10
By assets By loan book
No. 5
By mortgage No. 5
By number of ATMs
9(1) Data presented as of 01-Jul-2011.(2) Rankings are based on RAS figures, as at 01-Jul-2011. Source: Interfax, RBC.
y g gportfolio
By number of ATMs
TCB Strategic Focus Post Acquisition
TCB focus Principles of VTB and TCB interaction
Overall integration Integrate TCB by YE’2014
Migrating corporate business to VTB and merging the bank to VTB24
Russian Servicing Russian Railways Product specialisation:– TCB specialised in settlement and cash services cash -
integration strategy
Integrate TCB by YE 2014 Keeping high profitability and growth of the bank; ROE > 20%
Russian Railways coverage
group of companies and its employees is the 1st priority for TCB
TCB specialised in settlement and cash services, cashmanagement, payroll projects
– VTB specialised in lending and investment banking Maximasation of business related to Russian Railways
Coordination of work with TOP clients with VTB CIB team
Other corporate clients coverage
Continue to cover large and mid-cap clients
Coordination of work with TOP clients with VTB CIB team Independent work in other segments for the period before corporate
business migration in VTB Cross-sales of other VTB Group financial products Alignment of TCB risk policy and other key procedures according to
VTB Group standardsp
Retail Business
Focus: Russian Railways payroll clients
Split of business between TCB and VTB24 Payroll projects and corporate selling:
– VTB24 and TCB serves their current clients without changes– Independent work on attraction of new payroll program clients
TCB – no acquiring of new clients
Branch network management
Optimisation of branch network, increasing efficiency
Branch network audit Defining branches which will be transferred to VTB / VTB24 in the
future, implementation of VTB / VTB24 client service standards
10
efficiency future, implementation of VTB / VTB24 client service standards
TCB Integration Timeline
TCB li t t f t VTB TCB clients transfer to VTB Core TCB team transfer to VTB keeping motivation on
retention and growth of business transferred to VTB Keeping existing system of Russian Railways
coordinators in regional branches
Optimising branches of unified bank Transition to VTB24 processes and
procedures
Corporate business migration setup
Corporate business migration (6-9 months)
Legal integration to VTB24 (3 months)
Business integration (12 months)
4Q’2012100% ownership
over TCB
2Q-3Q’2013 3Q-4Q’20133Q-4Q’2014Integration to VTB24
setup
Aligning products, processes Harmonising product rangeI l ti VTB24 t d d
Buy-out of the remaining minority interests, lid ti f 100% h f TCB band infrastructure for corporate
clients migration
Analysing branch network, defining branches, required for Russian Railways, and
Implementing VTB24 standards Developing client communication plan Customising TCB and VTB24 IT systems Developing motivation and retention
systems for TCB personnel during integration process
consolidation of 100% shares of TCB by VTB Group
Execution of required corporate measures Notifying regulatory bodies, clients and
creditors of TCB and VTB24 Integration «branch by branch»
11
y ,opening new lacking branches
g p Training TCB personnel
g y
Bank of Moscow – Key Operational and Financial Details
BoM branch network in RussiaBoM branch network in Russia Structure of assets and liabilities (1)Structure of assets and liabilities (1)
Wide branch network – 380 offices in Russia, of T t l t Total liabilities and eq itwhich 140 in Moscow and Moscow region, and
over 1,900 ATMs Over 100,000 corporate clients and over 6.5 mln
active retail customers19%
Total assets Total liabilities and equity
21%8%7%
OtherRetail
Other
Equity
– 3.6% in corporate loans, 1.4% in retail loans
– 3.8% in corporate deposits, 1.4% in retail deposits
BoM market share (1):24% 57% 64%
Corporate
Retail
Corporate
Rankings in Russia (1)Rankings in Russia (1)
No. 7 No. 5
By assets By corporate loans
No. 5 Strong brand recognition – 41% in
Moscow and By corporate
12
Moscow region
(1) RAS, as of 01-Sep-2011.(2) Data presented as of 01-Jul-2011.
deposits
Bank of Moscow Strategic Focus Post Acquisition
Cooperation with Moscow City
– Continue expansion of the number of municipal enterprises serviced (2,000 entities and 1,500 payroll contracts) and strengthening cross-sales
– Participation in the extensive privatisation program -110 companies for sale
■ Further development of partnership with Moscow Government
City Government
– BoM – is a key transaction bank for Moscow City Purchasing Electronic Auctions with over 2,000 clients served
– Increase participation in infrastructure project financing– Among 3 banks to attract Moscow city deposits – up to RUB 150 bn
■ Integration of investment business with VTB CapitalInvestmentbusiness
Dealing with large-sized clients ■ Coordination of large-cap clients coverage with VTB in order to avoid internal competition within VTB Group
Mid-sized corporate b i i
■ Focus on business development in the mid-cap segment (<RUB10 bn), especially in Moscow and Moscow region, where current market share is low
– Presence in Moscow, Moscow region will allow BoM to cover over 50% of the total Russian mid-sized market
– Focus on developing unique loan and deposit products
42%58% 51% 49%
business in Russia Loan
portfolioDeposits
Moscow and Moscow Region
O
p g q p p
13
Other regions
Bank of Moscow Strategic Focus Post Acquisition
■ Implementation of VTB24 standards■ Further development of successful products and technologies of BoM
(online trading system, public utility service charge payment system, etc)Retail
– credit cards– consumer loans– mortgage and cars loans to be sold by VTB24
(online trading system, public utility service charge payment system, etc)business■ Key loan products:
– mortgage and cars loans to be sold by VTB24
■ Branch network optimisation in those regions where business is inefficientp g■ Increase branch network effectiveness to reach VTB24 standards (2012-2014)
Gaps:Branch network
– in terms of loans per sales point – 5x
Fi i l l
– in terms of current accounts per sales point – 9х – in terms of term deposits per sales point – 3х
■ ROE of 20%Financial goal (2013)
14
New Governance Model in Place – Basis for Future Growth
■ Creating global b siness nit CIB
Key elements of new governance model
Target Group governance model
■ Creating global business-unit CIB responsible for corporate clients (including leasing and factoring) across all geographies of Group’s presence
d i l ti GAM LAM d l f
CEO
Administrative reportingFunctional reporting
and implementing GAM-LAM model for global clients coverage
■ Creating global business unit Retail business responsible for business with
Control and support
functionsRetailCIB International
divisionp
individuals and SME clients across all geographies of Group’s presence
■ Strengthening centralisation and integration of key support and control
Local CEOintegration of key support and control functions (priority – risk and finance)
■ Cost optimisation and efficiency improvement through integrated Control and
support RetailCIBmanagement of IT and operations
ppfunctions
RetailCIB
15
Retail Banking – Key Growth Driver
Mikhail Zadornov
16
Mikhail Zadornov,President – Chairman of VTB24 Management Board
Retail Banking Franchise
#3 largest branch network in Russia (incl. TCB) 857 points of sale (incl. TCB) 7,790 ATMs (incl. TCB)
Profile Distribution network
Leading Russian retail business Track record of continued growth Focus on profitability and returns Excellently placed to capitalise on attractive
opportunities
Market position Regions
Presence in 69 regions in Russia – 86% coverage (1)
Focus on major cities with leading positions in each of the regions
Strong #2 brand in Russia Retail loans market share – 12.7% Retail deposits market share – 7.8%
Business lines Clients
8.6 mln active individuals clients (1)
Over 222,000 SME clients (1) Full range of products and services for
SME and individuals
SME (thsd)Retail deposit market share in Russia
Market share Market share VTB24 client base VTB24 client base
8.8%10.2%
12.2% 12.7%
SME (thsd)
Individuals (mln)
Retail deposit market share in RussiaRetail loan market share in Russia 8.67.8
6.5
4.6
5.7% 6.0%7.2% 7.8%
4.8%
5.9%
72.4 127.5 166.3 197.1 222.22.3
17
2007 2008 2009 2010 1H’2011
(1) Based on VTB24 data
2007 2008 2009 2010 1H’2011
Fast growing and highly profitable business
(in RUB bn) 1H’11 1H’10 y-o-y
N t i t t i 34 2 25 5 34 1%541.5608.6
3.7
Loans to individuals (Gross) (1)Loans to individuals (Gross) (1) Financial highlights (1)Financial highlights (1)
+12%
Net interest income 34.2 25.5 34.1%
Net fee and commission income 8.1 4.8 68.8%
Operating income before provisions 43.7 31.5 38.7%
P i i f l i i t ( 2 8) ( 7 0) 60 0%188 6
387.1435.3
268.4
52.83.1
155.3
40.6
182.9
45.525.2
325.4
60.0
0.6
Provisions for loan impairment ( 2.8) ( 7.0) -60.0%
Staff costs and administrative expenses ( 20.7) ( 13.3) 55.6%
Profit before taxation 20.2 11.2 80.4%
188.6
217.2
89.9
75.9 190.6
155.3
181.7 219.5
2007 2008 2009 2010 1H’2011
(RU
B b
n) 19.03.8
Mortgage loans Consumer loans Car loans Other
Retail deposits (1)Retail deposits (1)
+15%
Retail Banking contribution to VTB Results (2)Retail Banking contribution to VTB Results (2)
142.6160.4
354 1476.5
747.9862.3
+15%
28% 20%
(RU
B b
n)
189.2 285.3392.0
605.3701.9
73.068.8
84.5262.2
354.1
2007 2008 2009 2010 1H’2011Operating income before
provisions (1H’11)Total assets
(1H’11)
18
(1) Data presented as reported in VTB financial statements and includes all retail business..(2) Calculated before intersegment eliminations.
Term deposits Current accounts
Strategic Initiatives
■ Shift from product sales to servicing clients with customized approach to each segment B i b k f ll t il li t
Segment-oriented approach in
■ Become primary bank for all retail clients■ No.1 leadership for service quality
servicing customers
■ Enhance front-office efficiency by 50%■ Promote internet banking penetration for all retail clients■ Transfer of 80% routine customer transactions to automated
channels
Quality changes to drive efficiency
channels
■ Grow VTB24 branch network to 630 – 715 branches■ Development of extensive remote channel network
( 7 000 ATM d t t i l )
Infrastructure targets
(over 7,000 ATMs and payment terminals) ■ Enhance IT platform and technologies
■ Develop integrated approach to the management of VTB GroupVTB Group Retail
■ ROE at above 20%Financial goal (2013)
■ Develop integrated approach to the management of VTB Group retail businesses
VTB Group Retail businesses
19
■ ROE at above 20%(2013)
Retail Business Management on a Group Level
VTB24 experience sharing with VTB24 business model roll out in Integrated business model in Russia,
2008: Process & Technology Transfer 2010: Foreign Retail Platform 2013: International Retail Bank
p gVTB banks in CIS and Georgia VTB banks in CIS and Georgia.
Launch of retail project in Europe (France and Germany)
gCIS, Georgia and Europe under VTB24 management and coordination
VTB Bank VTB Bank
Current organisationCurrent organisation Target organisationTarget organisation
S bsidiar banks inVTB24 –
R ibilit fSubsidiary banks in CIS & EuropeVTB24
Functional coordination & businessmodel transfer
Responsibility for Retail Segment
Management of Retail business
Subsidiary banks in CIS & Europe
line and financial result responsibility
Customised Services and Products Launched
735857 1,008
800
900
1000
Customers segments
Segment-oriented approach in servicing retail customers Current results
PRIME package (launched at the end of 2008):
ges)
203 290426 430
586
422518
735
400
500
600
700
1H’09 2H’09 1H’10 2H’10 1H’11
VIP Individual banking products and services Asset management Non-financial services (advisory, life-style) Premium branches, special internet site and call-centre (n
umbe
r of p
acka
g
1H’09 2H’09 1H’10 2H’10 1H’11
PRIME package sales
PRIVILEGE package (launched at the end of 2008): es)
6 441 8,505 10,287
Total # of packages
Affluent and
Mass-affluent
PRIVILEGE package (launched at the end of 2008):
2,229 2,484 2,163 2,411 1,985
Dedicated service in all mass branches Special pricing on banking products Personal relationship managers (num
ber o
f pac
kag
2,373 4,513 6,441
1H’09 2H’09 1H’10 2H’10 1H’11
Privilege package sales
PRIORITY package (launched in 2011): ges)
Total # of packages
1 990 3,8439,9425,971
81 5811,328
1,853 2,128
3,971
Upper-mass Special pricing on banking products Personal relationship managers Discount programs and non-financial services
p g ( )
(num
ber o
f pac
kag
81 6621,990
21
Jan’11 Feb’11 Mar’11 Apr’11 May’11 Jun’11
Priority packages sales
VTB24 data
Total # of packages
Operational efficiency improved markedly along with increased client flow
100 3117.4 115.7 119.5
127.1
Daily client flow (thsd clients per day)Daily client flow (thsd clients per day) Key trendsKey trends
Over 10 minute waiting for clients decreased by 33% in the last 12 months while daily client flow rose by
84.9 83.9 86.9100.3
34.1 34.6 31.7 31.9 37.1 33.9 33.4 39.9
in the last 12 months while daily client flow rose by 29% over the same timeline
Number of complaints regarding queues in branches reduced by 2 times during the first half of 2011
4Q’09 1Q’10 2Q’10 3Q’10 4Q’ 10 1Q’11 2Q’11 3Q’11
Regional branches Moscow and Moscow region
Average term of complaint processing reduced by 3 times in the last 12 months – from 12 to 4 days
Regional branches Moscow and Moscow region branches
11:00 16%15%100%
Average time of operation (min per client)Average time of operation (min per client) Structure of client-flow by time in queueStructure of client-flow by time in queue
11:009:21 8:52 8:53
8:047:18 7:01 7:14 7:01 07:00 07:058:00
5:19 4:35 4:30 4:09 3:47 57% 57% 63% 67% 72% 78% 80%
43% 43% 37% 33% 28%20%
80%84%
85%
54%48% 22% 20% 16%15%
40%
60%
80%
T ll F t ffi
4:09 3:47 3:35 3:30 3:22 03:26 03:23
4Q’08 1Q’09 2Q’09 3Q’09 4Q’09 1Q’10 2Q’10 3Q’10 4Q’10 1Q’11 2Q’11
57% 57% 63%46% 52%
0%
20%
3Q’08 4Q’08 1Q’09 2Q’09 3Q’09 4Q’09 1Q’10 2Q’10 3Q’10 4Q’10 1Q’11 2Q’11
22VTB24 data
Teller Front-office manager 10 mins and less over 10 mins
Significantly increased penetration of remote channels
10% 10%14%
Internet banking clients
Percentage of all clients
Internet banking clients (thsd)Internet banking clients (thsd) Internet banking retail depositsInternet banking retail deposits
34.8
60.6
74.8
68 4
6.4
5.36%
8%
40 0n)974
1,210
5%8%
13%
19.8
17.131.6
55.368.4
2.7
3.2
-
30.040.0
2008 2009 2010 1H’2011
(in R
UB
bn
211505
974
2008 2009 2010 1H’2011
Term deposits Current accountsShare in deposits
Loan payments through cash-insLoan payments through cash-ins Number of client transactions (payments) by channelNumber of client transactions (payments) by channel
80%paym
ents
)
+21%
1 51.80.80.7
9 111.3
14.0 15.580%
88% 91% 94% 96%
60%
80%
100%
120%
15,0
20,0
25,0
59%
31-Dec-10 30-Jun-11
(% o
f tot
al lo
an
5.1 7.29.3 11.6
13.10.5
0.81.1
1.5
1.41.1
1.07.1 9.1
20%
40%
0,0
5,0
10,0
1H’2009 2H’2009 1H’2010 2H’2010 1H’2011
(in m
ln)
23VTB24 data (RAS)
31 Dec 10 30 Jun 11 1H 2009 2H 2009 1H 2010 2H 2010 1H 2011
ATMsInternet banking
BranchesShare of remote channels
Development of alternative sales channels and CRM
X-sell campaigns and targeted clients X-sell campaigns and targeted clients Share of repeat salesShare of repeat sales
80%
1,784
2,46280
90
100
40%
60%
19 16
423467 229
567938
1,784
30
40
50
60
70
0%
20%
1Q’09 2Q’09 3Q’09 4Q’09 1Q’10 2Q’10 3Q’10 4Q’10 1Q’11Number of campaigns
5 1016
0
10
20
2H’2008 1H’2009 2H’2009 1H’2010 2H’2010 1H’2011
Sales volume through pre-approved offers Sales volume through pre-approved offers Key trends Key trends
Car loansConsumer loans Credit cardsNumber of clients with preapproved offer (thsd)-
■ X-sells campaigns – effective mechanism to increase LTV by client and raise client loyalty
■ Approx 10% of car and consumer loans already)
6.4 7.0
9.2
■ Approx. 10% of car and consumer loans already being sold using direct mails campaigns
(in R
UB
bn)
1.22.1
3.2
2H’2008 1H’2009 2H’2009 1H’2010 2H’2010 1H’2011
24
2H 2008 1H 2009 2H 2009 1H 2010 2H 2010 1H 2011
Corporate and Investment Business
Yuri Soloviev
25
Yuri Soloviev ,First Deputy President and Chairman of the Management Board
CIB Franchise
ProfileInternational presence
Fully fledged player with competitive and innovative product range
Leading management team with global experience
Corporate business: CIS, Asia ,Europe and Africa Investment Banking Business: Moscow, London,
Singapore, Dubai and Hong Kong
ClientsMarket Position
#2 in terms of corporate loans and deposits in Russia
#1 Eurobond bookrunner in Russia and CIS by (Dealogic &Thomson Reuters)
#1 Ruble bond bookrunner in Russia (Bloomberg)
Client Base (3) Corporate Clients
VTB Bank 195,000
Transcreditbank 38,000
Bank of Moscow 100,000 #1 Ruble bond bookrunner in Russia (Bloomberg) #1 Equity Bookrunner in Russia and the CIS by
(Dealogic & Bloomberg)• #1 VTB Capital research team (Thomson Reuters)
,
Corporate customers market shares in RussiaCorporate customers market shares in RussiaVTB Capital league tables (June 2011) VTB Capital league tables (June 2011)
Russia-related international DCM# Lead Manager Amount, USD mln # of deals Share, %1 VTB Capital 4 087 17 14 9%1 VTB Capital 4,087 17 14.9%2 JP Morgan 3,598 12 13.1%3 Deutsche Bank 2,457 11 9.0 %
Domestic DCM
# Lead Manager Amount, RUB mln # of deals Share, %1 VTB C it l 138 338 31 24 5%
12.2%
12.8%
11.8%
15.0%
12.8%
16.4%
1 VTB Capital 138,338 31 24.5%2 Troika Dialog 125,280 40 22.2%3 Raiffeisenbank 48,000 22 8.5%
Russian ECM# Lead Manager Amount, USD mln # of deals Share, %
31-Dec-10* 30-Jun-11*30-Jun-10
Corporate loan market share in Russia
% Corporate deposit market share in Russia
%
26
g , ,1 VTB Capital 2,466 7 24.2%2 Deutsche Bank 1,910 4 18.7%3 BoA Merrill Lynch 1,090 1 10.7%
share in Russia market share in Russia
CIB Model
PRODUCT CLIENT SUPPORT■ Corporate and Investment banking units are now under one leadership umbrella
Total overhaul of the coverage model
Sales
Total overhaul of the coverage model
– Product neutral one-window approach– Organised by sectors globally– Client grouping into IB-intensive, commercial and regional to
ensure proper attention at all levels
Trading
Product sales realignment
p p– CRM-backed
– Divided into flow and structured Trading
Middle ffi
Client coverage
Support
■ Reinvigorated transaction bank
– Structured divided into Russia/CIS and international– Run jointly between Equities and FI– Flow sales run globally through product/geography matrix
office– New organisational structure – TOP-3 position achieved in major products– Product-focused
■ Branch network optimisation under wayStructuring
■ Branch network optimisation under way
Enhanced origination capability incore market
Enhanced origination capability incore market
27
Key Strategic Priorities
Loan distribution is• Proper distribution is a
E h d
Loan distribution is key
Major pricing advantage
1
2
major competitive advantage
• Initial focus on Russia with first attempts onEnhanced
origination implies ability to distribute
j p g g
Improve risk profile and, hence, cost of
2
3
with first attempts on the international market
• International to distribute, boosting balance sheet velocity and
funding
Balance sheet turnover and higher ROE
4
distribution platform build-up
• In parallel, selective and well thought outvelocity and
ROEROE
Greater market share and broader client5
and well thought out origination to complement Russian distribution
M t l i f tand broader client franchise • Mutual reinforcement
• Access to global talent
28
Large-scale CIB Transformations in Place
New liquidity management products and tariff packages have been introduced Functionality of the Remote banking system is permanently improvingProducts
ff i
Building strong transaction bank
Solutions for top clients are being customisedoffering
Head of Cash Sales hired from JPM; New Trade Sales head appointed 45 complex Cash Management solutions for clients, special solutions for priority clients
Salesp g , p p y
600+ entities in pipelines Sales team is now focused on Sales only – other functions removed
Focused Business Unit for Transaction banking responsible for all products (CC, acquiring,Processes
Focused Business Unit for Transaction banking responsible for all products (CC, acquiring, cash services, etc.) is in place
New concept of the Tariffs Policy with full responsibility for pricing is being approved by the Client Committee
Processes
New unified lending framework implemented New mid-cap clients ranking methodology in place Deadlines are included in motivation system of staff involved in credit process
Improving lending process
Processes Deadlines are included in motivation system of staff involved in credit process New pricing policy is implemented Time to decision cut by 50-70% for large-clients, by 30-40% for mid-cap clients
New center of competence – CIB Credit Department – was created
29
Organisation Credit Committees structure improved Delegation of authority system for Branch and HQ Credit Committees revised
Market Challenges: VTB Response
Herbert Moos
30
Herbert Moos,CFO, Deputy President and Chairman of the Management Board
Russia 2011 versus Russia 2008
2008 – 2009 2011Economy Stretched after nearly a decade of growth at 7%
CAGRCooled off, credit cycle resumed only this year
Banks, corporate and Share of RUB in liabilities has spiked in late 2008 Now less dependent on FX as RUB is more flexiblepopulation due to sharp RUB devaluation
Banks Highly dependent on cross-border wholesale funding
Banks are 40% less dependent on external funding, a significant portion of foreign liabilities are long-term as it was raised after the crisis. Imminent conversion of deposits into FX in September will reduce demand fordeposits into FX in September will reduce demand for FX funding from abroad.
Regulator Regulator measures were effective and timely, but some were untested
Regulator has much richer toolbox for providing refinancing to banks. Liquidity injection system is in place.
Oil revenues share is still about 50% Oil revenues share is still about 50% Fiscal discipline slipped during the crisisFiscal discipline slipped during the crisis
1.7%
4.3%
7.5% 7.4%5.4%
4.1% 2.7%5%
10%
30%34%
42%
47%
37%
47%
41%
46% 48%
40%
50%
60%
Avegare 2003-2010
-5.9%-4.0%-4.1%
-2.6% -2.5%-3.5% -3.3%
-6.5% -7.9%-10%
-5%
0%30%
10%
20%
30%
31
-13.6%-12.6%
-15%2003 2004 2005 2006 2007 2008 2009 2010 1H11
Budget balance Non-oil budget balance
0%2003 2004 2005 2006 2007 2008 2009 2010 1H11
Oil&gas share ravenues in total, %
Source: Bloomberg, Source: MinFin, VTB Capital Research
Volatility in RUB, not in interest rates – big picture
140
1602022
USDRUB (LHS, inverted)RUBBASK(LHS i t d)
80
100
120
14024262830
RUBBASK (LHS, inverted)Crude oil, Brent (RHS)
RUB
BASK
D/bb
l
20
40
6032343638
USDR
UB,
US
040
25
30
25
30MIBOR, O/ NCBR refinancing rateCPI YoY
10
15
20
10
15
20CPI, YoY
% %
0
5
10
0
5
10
01 02 03 04 05 06 07 08 09 10 11
32Source: Bloomberg, Source: MinFin, VTB Capital Research
01 02 03 04 05 06 07 08 09 10 11
Russian Corporates and Banks – Different from 2008
Leverage of top-20 Russian companies is moderate (0.9 net debt / EBITDA in 2010)
Floating RUB is a natural hedge for exporters Progressive taxation is additional hedge for oil companies
“Stress scenario” for the Russian banking sector
2012-2013
No significant asset qualityProgressive taxation is additional hedge for oil companies FX exposure significantly replaced by local currency borrowings
No significant asset quality deterioration as underwriting rules remained strict and as of Aug’11 bad loans were 116% provisioned
Local debt market value has exceeded that of EurobondsLocal debt market value has exceeded that of Eurobonds
No interest rate shock due to exchange rate flexibility
Some NIM widening on 49% 44%
Eurobond issuance
Ruble bond issuance
216 345
higher funding costs and faster asset re-pricing
Lending growth to slow down to 5-10% on weakening
51% 56%
2008 Aug 2011
(US
D,b
n)
confidence, with retail being more resilient
Cost pressures for banks are to be addressed again given 60
70
80Eurobond issuanceRuble bond issuance
New bond issuance shifted to local marketNew bond issuance shifted to local market
g gweaker top-line growth
Banks’ funding much healthier, loans/deposits = 91 4% (2008: 122%)10
203040
50
33
91.4% (2008: 122%)0
2003 2004 2005 2006 2007 2008 2009 2010 2011YTD
Response to Market Turbulence
■ Direct REPO operations (RUB 1,000 bn turnover in September)
Government has all necessary tools to support liquidity Government has all necessary tools to support liquidity
■ Budget auctions of Ministry of Finance (RUB 1,000 bn as of 26 Sep)
■ FX swaps
■ Subordinated debt issuance mechanism
■ CBR more closely monitors FX banking activity having ‘commissar’ in every major institution
Unsecured lending
VTB’s estimated funding availabilityVTB’s estimated funding availability VTB Bank’s liquidity (on the daily basis in RUB bn) VTB Bank’s liquidity (on the daily basis in RUB bn)
■ Unsecured lending
500 Funding sources (in RUB bn)REPO 572.2Secured loans from CBR 60.0Loans from Ministry of Finance 30.0L f M t 19 0
0
1-Jul 15-Jul 29-Jul 12-Aug 26-Aug 9-Sep 23-Sep
Highly liquid assets Total liquid assets
Loans from Moscow government 19.0
Interbank and other 126.6Total 807.8
34(1) Utilisation of uncollateralised loan limit from MinFin automatically reduces uncollateralised loan limit from the CBR
VTB Strong Results in 1H’2011 Backed by Solid Capital Position
■ Record net profit in 1H’2011 − RUB
1H’11 highlights 1H’11 highlights Profitability already transformed…
2009 2010 2011e1H’11Key indicators ■ Record net profit in 1H 2011 RUB 53.6 bn with ROE at 18.1%
■ CIB and Retail Banking post a solid 1H’2011 pre-tax profit of RUB 51.2 bn
54.853.6
100
Net profit,RUB bn
and RUB 20.2 bn, respectively
■ Operating income before provisions up 45% y-o-y to RUB 153.0 bn
10.3%
n.m.
18.1% >15%(59.6)
ROE
16 8%19.0%19.5%
BIS Group capital BIS Group capital ■ Strong growth of net fee and
commission income – up 52% y-o-y to RUB 17.9 bn
505 522 547 566570
101100193193193667670740715698
14.1%15.5%16.8%
12.0%13.2%12.4%13.9%14.1%
RU
B b
n)
■ Net interest margin stable at 4.8%
■ Improving asset quality with NPL ratio down 90 bps YTD followed by declining
Tier I Tier II less deductions
Total capital adequacy ratioTier 1 ratio
505 522 547 566570
30-Jun-10 30-Sep-10 31-Dec-10 31-Mar-11 30-Jun-11
(R
down 90 bps YTD followed by declining provision charge: down from 2.1% in 1H’2010 to 1.1% in 1H’2011
35
BIS ratio remains solid at 14.1% with Tier I ratio at 12.0%
Bank of Moscow – Acquisition of 81% Stake Finalised
19 Sep 2011 VTB Debt Center acquired 46.48% of the Price paid for BoM is in line with initial total price guidance of RUB258 bn (inc RUB100 bn capital injection)
TimelineTimeline Key factsKey facts
19 Sep 2011
VTB Group acquired 80.57% shares
BoM ordinary sharesRUB258 bn (inc. RUB100 bn capital injection)
RUB 295 bn invested in a specially issued 10-year Russian Federal loan bond (OFZ) at 8.16% p.a.
in BoM29 Sep 2011
BoM will be fully consolidated in 9M’11 Financial Statements with 1day effect in P&L
BoM 6M’11 Financial statements to be issued until the end of Oct. 7th. Basel I requirements will be met
DIA issued RUB 295 bn 10-year loan to BoM at an annual rate of 0.51%
BoM FY’11 outlookBoM FY’11 outlook
Loan book growth 18%
by YE’2012VTB Group expects to provide BoMwith additional capital of RUB 100 bn. VTB h i B M h 100%
Net profit RUB 3 bn
ROE 4%
VTB share in BoM to reach 100%
36
Cost Optimisation Program
Cost optimisation program 46%44%
Strategic goalsStrategic goals
to be announced by YE’2011 CIR44%
Low 40s
2009 1H2011 2013
Key areas of focus Key areas of focus
Branch network reorganisation Back office Administrative
functions
Personnel structureoptimisation
Centralisation of the backoffice system and functions
Increasing effectivenessof administrative support
Property management IT infrastructuremodernisation Centralised procurement
37
VTB’s Targets
VTB Group net profit and ROE 2013 targetsVTB Group net profit and ROE 2013 targets
ROE
≈20%
>15%160-180
120-140
neg.
10.3%
neg
54.8 old target
new target
old target
new target
88100
1H 53 6t t
50
B b
n)
neg.
2009 20132010 2011
1H: 53.6target
(RU
B
Loan book
VTB Group 2011 targetsVTB Group 2011 targets
CIR:Не удается отобразить рисунок . Возможно, рисунок поврежден или недостаточно памяти для его открытия. Перезагрузите компьютер, а затем снова откройте файл. Если вместо рисунка все еще отображается красный крестик , попробуйте удалить рисунок и вставить его заново.
Low 40’s
NIM:Не удается отобразить рисунок . Возможно, рисунок поврежден или недостаточно памяти для его открытия. Перезагрузите компьютер, а затем снова откройте файл. Если вместо рисунка все еще отображается красный крестик , попробуйте удалить рисунок и вставить его заново.
> 4.5%
Cost of risk:Не удается отобразить рисунок . Возможно, рисунок поврежден или недостаточно памяти для его открытия. Перезагрузите компьютер, а затем снова откройте файл. Если вместо рисунка все еще отображается красный крестик , попробуйте удалить рисунок и вставить его заново.
1-1.5%
Loan book growth:
Не удается отобразить рисунок . Возможно, рисунок поврежден или недостаточно памяти для его открытия. Перезагрузите компьютер, а затем снова откройте файл. Если вместо рисунка все еще отображается красный крестик , попробуйте удалить рисунок и вставить его заново.
+15%
Tier 1:Не удается отобразить рисунок . Возможно, рисунок поврежден или недостаточно памяти для его открытия. Перезагрузите компьютер, а затем снова откройте файл. Если вместо рисунка все еще отображается красный крестик , попробуйте удалить рисунок и вставить его заново.
≈ 10%
38
Appendix
39
Operating Efficiency Improvements
504 476531
5678,000.0
9,000.0
600
ATMs
Branches19,208
Branches and ATMs of key peers Branches and ATMs of key peers Branches and ATMs of VTB24 (1)Branches and ATMs of VTB24 (1)
4,0004,996 5,371
163
328
504 476
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
200
300
400
500
Branches
1,3471,800
568
0.0
1,000.0
2,000.0
2006 2007 2008 2009 2010 1H’11
0
100
567446
269 192
Sberbank VTB24 Alfa-Bank Gazprombank Russian Standard
f (2)f (2) (2)(2)Retail loan portfolio per branch (2)Retail loan portfolio per branch (2) Retail deposit portfolio per branch (2)Retail deposit portfolio per branch (2)
SberbankAlfa-BankGazprombank
SberbankAlfa-BankGazprombank
825 864 906Russian StandardVTB24
583
793 839911
1,1891,288Russian Standard
VTB24
(in R
UB
mln
)
59 67 75
203 204 183181242 286
432 415 440
187 242 258139
334 399387465 452
583(in
RU
B m
ln)
40(1) VTB24 data. As of 30.06.2011 number of branches (incl. TKB) – 857, number of ATMs (incl. TKB) – 7,790(2) VTB24 calculations based on CBR data (RAS)
2009 2010 1H’2011 2009 2010 1H’2011
TCB and BoM Acquisition Price
BoM Acquisition Price (1)BoM Acquisition Price (1)TCB Acquisition Price (for 74.48% stake)TCB Acquisition Price (for 74.48% stake)
Total price paid RUB 258 bn
BV after recapitalisation RUB 170 bn
Total price paid RUB 38.3 bn
BV (as of Dec 31, 10) RUB 20.9 bn
P/BV ≈ 1.5x P/BV 1.8x
41
(1) Management forecast.