© VTB 2011 1 2012 VTB Group Investor Day London October 29, 2012
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© VTB 2011 1
2012 VTB Group Investor Day London October 29, 2012
© VTB 2012 2
Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of JSC VTB Bank ("VTB") and its subsidiaries (together with VTB, the "Group"). Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and other important factors that we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. These forward-looking statements speak only as at the date of this presentation and are subject to change without notice. We do not intend to update these statements to make them conform with actual results.
© VTB 2012 3
VTB Group 7
Retail Banking 14
Corporate and Investment Banking 29
Agenda
VTB Group Financial Performance and Outlook 51
Strategy Implementation 11
Introduction 4
© VTB 2012 4
Introduction
© VTB 2012 5
Russia: prominent opportunity – fundamentally strong economy
Source: Rosstat, EIU, Bloomberg
Prudent approach to government spending
Clean sovereign balance sheet
One of the largest FX reserves globally
Budget surplus / (deficit) as % of GDP (FY’2011)
Top countries by FX reserves, USD bn (FY’2011)
0.8%
(1.4%) (1.6%) (2.1%) (2.3%)
(4.5%) Russia Turkey Poland BIC CEE EU
Prudent approach to government spending
One of the largest FX reserves globally
Real economy maintains momentum
3,203
1,258 540 454 386 350
China Japan Saudi Arabia Russia Taiwan Brazil
Government debt as % of GDP (FY’2011)
9.8%
29% 42% 48% 52%
86%
Russia BIC Turkey CEE Poland EU
Clean sovereign balance sheet
Source: Rosstat and VTB Capital
CBR switching from FX to IR targeting
Source: CBR
0
40
80
120
160 20
25
30
35
40
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
USD/RUB (inverted) Basket/RUB (inverted) Crude oil, Brent, USD/bbl (RHS)
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
CPI, % YoY MIBOR, O/N
2008 2009 2010 2011 2012F
Fixed capital investment,% Retail sales, % Real GDP, %
(15.7)
(5.1) (7.8)
9.9 6.0 8.3 6.5 13.6
6.4 7.0 6.0 5.2 4.3 4.3 3.5
© VTB 2012 6
Long term potential – solid opportunities for banking business development
Growth potential driven by low penetration
Commentary
Secure funding base enhances stability
Loans as % of GDP (FY’2011) Retail loans as % of GDP (FY’2011)
Overdue loans and loan loss provisions as % of gross Russian banking sector loan portfolio
Source: For Russia CBR and VTB Capital analysis; for other countries Fitch, ECB, EBA, E&Y, Swiss Re BIC stands for Brazil, India, China
Growth potential driven by low penetration
Strong capital base enhances stability
Retail is an important source of growth and margin
Decreasing NPL levels
NPL LLP
(1) VTB Capital estimations for EY’11
Russian banking sector: growth supported by quality fundamentals
77% 147%
55% 55% 45% 43%
BIC(1) EU(1) CEE(1) Poland Turkey Russia
6.3% 5.7% 5.1% 4.8%
11.6% 10.5%
8.6% 8.2%
2009 2010 2011 1H’2012
62%
34% 31% 28%
16% 10%
Poland Turkey Russia EU(1) BIC(1) CEE(1)
16.7% 13.7%
17.1% 15.6%
11.3% 13.5%
9.6% 12.1%
7.1% 3.5%
Russia Poland Turkey BIC median Eurozone
CAR Equity/Assets
(FY’2011)
© VTB 2012 7
VTB Group Andrey Kostin, President and Chairman of the Management Board
8 © VTB 2012
VTB: successful growth story – through organic growth and M&A
Establishment and recognition
Development and growth
Efficient growth strategy
1990-2001 2002-2010 2010-2013
2005: Launched VTB24 2007: VTB became the 1st Russian bank to
launch its IPO. 2008: Launched VTB Capital
Established in October 1990 VTB Bank joined the top 5 largest
banks in Russia
2010: Launched its new strategy based on efficient growth.
Targeting above market growth for retail and efficiency for CIB
VTB corporate history
In the past 10 years, VTB Group demonstrated 36-fold increase in total assets
Acquisition of
Armsberbank (now VTB Armenia)
Guta-Bank (now VTB24)
Acquisition of
ICB (later VTB North-West) MNB (now VTB Capital plc) BCEN-Eurobank (now VTB France) Donau-Bank (now VTB Austria) OWH (now VTB Germany) UGB (now VTB Georgia)
Acquisition of
Mriya (now PJSC VTB Bank (Ukraine)
Acquisition of
Slavneftebank (now VTB Belarus)
Acquisition of
TransCreditBank
Acquisition of
Bank of Moscow
12 major acquisitions in 10 years
188 231 331 494 1,057 1,380
2,273
3,697 3,611 4,291
6,790 6,858
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1H‘2012
(RU
B b
n)
© VTB 2012 9
Acquisitions update: integrations progressing to plan
■ Distribution network 285 offices with 5% in Moscow and Moscow region
■ c.2.3 mln retail customers ■ 33 thsd corporate customers
31-Dec-11 30-Jun-12
ROA 2.0% 2.1%
ROE 27.7% 24.0%
Tier I 9.3% 11.4%
BIS CAR 15.2% 15.4%
TransCreditBank
Source: TransCreditBank financial statements
Profile ■ Distribution network 296 offices
with 46% in Moscow and Moscow region ■ Over 6.5 mln active retail customers ■ Over 100 thsd active corporate customers
31-Dec-11 30-Jun-12
ROA 2.6% 2.3%
ROE 24.7% 12.2%
Tier I 27.0% 23.5%
BIS CAR 33.6% 29.0%
Bank of Moscow
Acquisition profile:
■ Consolidation in Q4’2010
■ On September 28, 2012, JSC VTB Bank increased its stake in TransCreditBank to 99.6% from 77.8% by purchasing the remaining shares held by JSC “Russian Railways”
Acquisition profile:
■ Consolidation in Q3’2011
■ In June 2012, JSC VTB Bank increased its ownership share in “Bank of Moscow”, OJSC to 95.52% by purchasing shares from the non-controlling interests.
Selected indicators Selected indicators
Source: Bank of Moscow financial statements
© VTB 2012 10
Key strategic initiatives to drive income growth and enhance risk management
Above market expansion in
Retail Efficient
growth in CIB
Optimal utilisation of
costs, funding and capital
Integration of recent
acquisitions
Growth of profits, ROE and shareholders’ value Focus on reduction of earnings’ volatility and risks
© VTB 2012 11
Strategy Implementation Herbert Moos, Deputy President and Chairman of the Management Board, CFO
© VTB 2012 12
Well on track to deliver 2013 targets
ROE: in line with expectations
Outperforming asset target
CIR
3,611 4,291
6,790 6,858
0 2009 2010 2011 1H’12 ... 2013
(target)
(RU
B b
n)
6,300 -6,500
15%-20%
neg.
10.3%
15.0%
2009 2010 2011 ... 2013 (target)
Low 40%
45.7% 43.0%
45.2%(1)
2009 2010 2011 ... 2013 (target)
Gross loans and advances to customers
0 2009 2010 2011 1H’12 ... 2013
(target)
2,545 3,060
4,590 4,645
(RU
B b
n)
5,100 -5,500
(1) Adjusted for loss from financial instruments.
© VTB 2012 13
An attractive equity story
The top universal bank
in a highly attractive banking market
Leading corporate and retail banking
franchise
Leading investment
banking franchise
Market leading and efficient distribution
platform
Substantial value creation
opportunity arising from
recent acquisitions
Significant cross-sell potential
between well-organised segments
VTB has unique platform that position it strongly in the highly attractive Russian and CEE banking metrics
14 © VTB 2012
Retail Banking Mikhail Zadornov, President – Chairman of VTB24 Management Board
© VTB 2012 15
Continued growth in Russian retail banking
Population, mln people Retail loans to GDP
Retail loans to GDP (incl. mortgages)
Mortgages to GDP
Retail loan market Retail deposit market
3,641 4,140 5,591 6,601
13.4% 13.7% 12.2%
10.2%
30-Jun-12 31-Dec-11 31-Dec-10 31-Dec-09
(RU
B b
n)
VTB retail loan market share in Russia
7,485 9,818
11,868 12,830
9.1% 9.0% 7.2%
6.0%
30-Jun-12 31-Dec-11 31-Dec-10 31-Dec-09
VTB retail deposit market share in Russia
(RU
B b
n)
10 11
38
74
143
199
Hungary Czech Poland Turkey Russia Brasil
39%
31% 34%
16%
10%
15%
21% 21% 21%
5% 3% 5%
Hungary Czech Poland Turkey Russia Brasil
© VTB 2012 16
Overview of VTB’s retail banking
Profile Distribution
Products Market position
Fast developing business with great opportunity to grow
We use all possible sources to sell our products
We bring innovative products and services to
satisfy all client needs
Service quality and client retention are among our main goals
Leading Russian retail business with full range of
banking products and services for individuals and
SMEs
Steadily developing retail business in the CIS,
Georgia and Europe
4th largest branch network in Russia
Focus on major cities with leading positions in each of
the regions
Loan and deposits for individuals
Cards
SME lending and services
Private Banking
Packaged offerings with flexible conditions
Investment products for individuals
Second largest retail business in
Russia
Retail deposits market share – 9.1%
Retail loans market share – 13.4%
Targeted X-sell campaigns
10,300 ATMs
1,234 branches/outlets
Data as of 30-Jun-2012.
© VTB 2012 17
2009 2010 2011 1H'2012 2013 (target)
Key financial targets (2013)
Retail banking – key goals and results
Key results as of 1H’2012
Key goals
Loans & deposits
ROE
CIR
Achieving 20%+ ROE and 40%- CIR
Segmented approach to client servicing
Use VTB24’s expertise and technology to develop retail business in the CIS
Leadership in quality, IT development
ROE and loan book growth targets achieved
Spread between loans and deposits is intact (10.4% in 1H’2012) despite margins shrinkage
VTB24 technology and methods are used to enhance retail business in the entire group
Integration of TCB and BM going according to plan
8%
19% 26% 24%
2009 2010 2011 1H'2012 2013 (target)
> 20%
48% 47% 51% 51%
2009 2010 2011 1H'2012 2013 (target)
< 40%
Retail loan portfolio Deposits from individuals
2,000 560
851 788
1,299 1,444
988
518 460
(RU
B b
n)
2.5-3x
2.5-3x
Source: management estimates
© VTB 2012 18
334 312 309 281 220
87 79 76 70 60
529 470 439 412
329
950 861
824 763
609
30-Jun-12 31-Mar-12 31-Dec-11 30-Sep-11 30-Jun-11
Retail banking – robust growth
Retail loan portfolio
VTB Group’s revenues breakdown
Term deposits
Current accounts
Retail Deposits
Mortgage loans Car loans
Consumer loans & other
(RU
B b
n)
(RU
B b
n)
+13% +15%
VTB Group’s total assets breakdown
1,050 948 907 881 702
265 242 255
198
160
1,315 1,190 1,161
1,079
862
30-Jun-12 31-Mar-12 31-Dec-11 30-Sep-11 30-Jun-11
66%
28%
6% Retail
banking
1H’2012
74%
23%
3%
1H’2012
Retail banking
© VTB 2012 19
Retail banking – solid performance
(1) Operating income before provisions is calculated before provisions for impairment of debt financial assets.
Operating income before provisions
+49% +68% +52% +300%
(1)
Profit before taxation
1H’2011 1H’2012 1H’2011 1H’2012
34.9
8.2 1.5
44.6 52.0
13.8
2.1
67.9
Net interest income
Net fee and commission
income
Other operating income
Operating income before
provisions
(RU
B b
n)
+21%
(11.6)
(34.8)
(2.9)
(23.9)
44.6 41.7
17.8
67.9 56.3
21.5
Operating income before
provisions
Provision charge
Operating income after provisions
Staff costs & administative
expenses
Segment result (PBT)
(RU
B b
n)
© VTB 2012 20
▪ Dedicated communication channels: premium branches, separate web platform and call-center
▪ Dedicated personal relationship managers ▪ Package offering of Group products
(banking, insurance, asset management) ▪ Tailor-made pricing and product offering ▪ Lifestyle and concierge services
Retail Banking – segmented approach and distribution
Customers segments
Segment-oriented approach in servicing customers
PRIME PACKAGE
(launched in 2008)
PRIVILEGE PACKAGE
(launched in 2008)
PRIORITY PACKAGE
(launched in 2011)
Targeted products
VTB24
Leto Bank
VIP
Affluent
Mass affluent
Upper mass
Mass
Lower mass
Customers not using banking products
▪ Dedicated service sectors in all mass branches ▪ Exclusive conditions for banking products ▪ Non-financial services (e.g. advisory)
▪ Strong cost optimisation strategy with focus on delivering high quality service
▪ Special pricing on banking products
▪ Focus on transferring basic transactions to alternative banking channels
▪ Standard product offering ▪ Focus on maximum standardisation and cost
optimisation ▪ Promote cross-sales of VTB24 and Group’s
products to existing customers
© VTB 2012 21
(RU
B, m
ln)
(RU
B, m
ln)
19,029
1,234 641 205 223
Sberbank VTB(1) Rosbank Raiffeisenbank Russian standard
67 92 116 221 282 308 343
491 534 415
516 625
864
1,058 1,117
2010 2011 1H2012
Sberbank Rosbank Raiffeisenbank
Russian standard VTB24
242 286 311 196 205 204
465 515 585 710
980 1,052 1,189
1,358 1,400
2010 2011 1H2012
Sberbank Rosbank Alfa-bank
Raiffeisenbank VTB24
568 476 820
1,242 1,234 1,800 4,000
7,334
10,160 10,300
-5000
-3000
-1000
1000
3000
5000
7000
9000
11000
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
2008 2009 2010 2011 1H2012
Branches
ATMs
Branches and ATMs of VTB Retail Banking Branches of key peers
Retail loan portfolio per branch (1) Retail deposit portfolio per branch (1)
VTB24 – leader in operating efficiency in Russia
(1) Branches attributed to Retail Banking. As of 30-Jun-2012. (2) VTB24 data. As of 30-Jun-2012.
© VTB 2012 22
Start of VTB24 products sales through TCB
distribution network
Launch of TCB distribution
network transformation
Completion of TCB distribution
network transformation
Completion of IT integration
process
Merger with VTB24
CASH LOANS, CREDIT CARDS, DEPOSITS, ACCOUNTS AND COMMISSION PRODUCTS, MORTGAGES
PACKAGES AND SEGMENT-ORIENTED PRODUCTS
PAYROLL PROJECTS
SME, CAR LOANS (REDIRECTION TO VTB24)
TransCreditBank – integration timeline
1-Apr-2013 15-Jan-2014 1-Oct-2014 2015 5-Nov-2013
Stages of harmonisation of TCB product range with VTB24
© VTB 2012 23
TransCreditBank (TCB) distribution network
283 branches
180 103
140 40 103 0
Complementary to VTB24
Overlap with VTB24
Overlap with VTB24
Complementary to VTB24
243
Overlap with VTB24 40
86%
14%
Moscow region
TransCreditBank – distribution network
Analysis of combined distribution network Utility of TCB distribution network for VTB24
TCB network
VTB24 network
New markets for VTB24
Branches 283 677 -
Regions 64 69 3
Cities 195 230 97
TCB branches in cities with
VTB24 presence
TCB branches in cities with
no VTB24 presence
TransCreditBank branches
City population TCB network VTB24 network
4% 17%
> 1 mn people 13% 22%
500K - 1 mn 20% 22%
100K – 500K 26% 30%
< 100K 37%
61%
9%
63%
VTB data. As of 30-Sep-2012.
Complementary to VTB24
© VTB 2012 24
Bank of Moscow (BM) distribution network
296 branches
272 24
Moscow region
Bank of Moscow – distribution network
Analysis of combined distribution network Utility of BM distribution network for VTB24
BM network
VTB24 network
New markets for VTB24
Branches 296 677 -
Regions 56 69 1
Cities 116 230 22
BM branches in cities with
VTB24 presence
BM branches in cities with
no VTB24 presence
City population BM network VTB24 network
45% 17%
> 1 mn people 18% 22%
500K - 1 mn
37%
22%
100K – 500K 30%
< 100K
61%
9%
63%
BM distribution network strategy
10 regions have highest priority for business development
Bank of Moscow SME business has the leading role in choosing regions to go into; retail business follows the regional roll out, but pursues its own network development strategy in the regions
VTB data. As of 30-Sep-2012.
© VTB 2012 25
1. Distribution network development - Network development criteria approved - VTB24 best practice of branch standards implemented in Bank
of Moscow branch book - Branch roll-out time and costs decreased with VTB24
consulting and expertise
2. New retail sales model - VTB24 implemented new sales approach in Bank Moscow
(cash loans sale productivity grew 1,7 times during pilot project)
3. Combined mortgage offer - VTB24 mortgage products to be sold in Bank of Moscow
branches (projected sales volume in 2012 – RUB 3.5 bn)
4. Management team reinforcement - Key management positions held by VTB Group and VTB24
managers - Collegiate bodies to include VTB Group and VTB24 managers
VTB24 and Bank of Moscow joint Retail Banking Management Committee responsible for: Optimisation of distribution network at Bank of Moscow Increase in front line productivity of Bank of Moscow Optimisation of product pricing at Bank of Moscow
Bank of Moscow – retail business integration to create synergies
Key interaction areas Principles of VTB24 and BM interaction
VTB24 is responsible for functional management: Risk Finance Operations IT & HR
Simple and fast decision-making through management committee
Clear priorities and project rules
Focus on the result of the whole global business line ‘Retail Banking’ (as opposite to the result of a single legal entity)
Key success factors to generate synergy
Targets for 2013
• Branch and POS network development
• Launch of sales in 260 client centers,
2,500 POS & 100 banking corners
• New product development and launch
Leto Bank – new retail mass market initiative
Key developments in 2012 • Business model developed and approved • New brand and trademark registered; marketing strategy approved
• IT infrastructure developed and implemented
• Organisational structure approved; management team formed • Pilot launch of distribution strategy.
40 branches and 500 POS to be opened by the end of 2012
• Pilot sales launched in 3Q’2012
Leto Bank key competitive strengths:
• Professional and experienced management team
• Stable and cheap funding comparing to other POS lenders
• Flexible and attractive product offering
• Well-developed expertise in retail banking
Leto Bank – POS loans build the customer franchise
• POS loans market CAGR 2012-2016 varies from 6% (negative scenario) to 20% (positive scenario)
• Key parameters of POS loan portfolio: • Short average term: 10-12 months • Average loan amount: RUB 18-21 thsd • High rate (up to 70% p.a. w/o insurance) • High credit risk (12% p.a.) • High operational costs
• Main objective of POS loans – customer base accumulation for further cross-sales
120106
155
189
227
2008 2009 2010 2011 2012F
POS loans market
23.2%
22.0%
14.4%
14.3%
8.4%
4.5%
13.2%
POS loans market (2011)
HCFB
OTP Bank
Alfa Bank
Russian Standard
Rusfinance
Cetelem
Other
(RU
B b
n)
Leto Bank – cash loans deliver profitable growth 1Q’2012 Cash loans
(in RUB bn) Market share
(%)
Sberbank 980 33.3%
VTB24 307 10.4%
Russian Agricultural Bank 152 5.1%
OEB 77 2.6%
Trust 72 2.4%
HCFB 68 2.3%
Rosbank 58 2.0%
TCB 44 2.0%
Alfa Bank 44 1.5%
Raiffeisenbank 44 1.5%
Bank of Moscow 43 1.4%
Probisnessbank 42 1.4%
Other 999 34.1%
Total 2,930 100%
• Cash loans – the largest (15 times larger than POS loans market) and fast-growing market (2x faster than POS)
• Key parameters of cash loan portfolio in Leto Bank segments: • Average term: 2-3 years • Average loan amount: RUB 70-75 thsd • Low (for this segment) interest rate (21-35% p.a.) to
be compensated by aggressive insurance products sales (penetration – up to 95%)
• High credit risk (12% p.a.) to be mitigated by cross-sales to clients from POS-channel
• High operational costs to be mitigated by active cross-sales to existing clients
• Main objective of cash loans to provide highly profitable portfolio
1,9731,620
1,829
2,7252,930
2008 2009 2010 2011 1Q2012
Cash loans market
(RU
B b
n)
29 © VTB 2012
Corporate-Investment Banking Yuri Soloviev , First Deputy President and Chairman of the Management Board
© VTB 2012 30
Russian corporate banking sector
GDP, nominal (FY’2011) Corporate loans to GDP (FY’2011)
Corporate loan market Corporate deposit market
(RU
B b
n)
VTB corporate loan market share in Russia (1)
VTB corporate deposit market share in Russia (2)
(RU
B b
n)
(US
D b
n)
12,542 14,063 17,715 18,806
13.0% 12.0%
18.7% 17.3%
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
31-Dec-2009 31-Dec-2010 31-Dec-2011 30-Jun-2012
(1) Calculated based on CBR data (for Russian corporate loan market) and Rosstat data (for loans provided to Russian companies from abroad). Numerator represents VTB Group’s consolidated corporate loan portfolio (under IFRS). (2) 1H’12 data adjusted for promissory notes (equal to RUB 95.2 bn) that according to management view, can be classified as customer deposits.
7,475 7,346
10,544 10,615
12.7% 15.0%
21.1% 19.8%
-3.0%
2.0%
7.0%
12.0%
17.0%
22.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
31-Dec-2009 31-Dec-2010 31-Dec-2011 30-Jun-2012
1,860 774 288
7,298
2,431 3,607
2,778
Russia Turkey Malaysia China UK Germany France
33% 35% 51%
86% 77%
63% 62%
Russia Turkey Malaysia China UK Germany France
Emerging markets Developed countries Emerging markets Developed countries
31 © VTB 2012
CIB – financial result
(1) Represents gains less losses arising from financial instruments and foreign currencies.
1H’2011 1H’2012 1H’2011 1H’2012
CIB operating Income CIB profit before taxation
63.1
10.9
29.4
6.4
109.8
64.5
10.4 13.0 5.1
93.0
Net interest income
Net fee and commision
income
Net result from financial
instruments
Other operating income
Operating income before
provisions
(RU
B b
n)
109.8 95.6
56.8
93.0
72.5
26.8
Operating income before
provisions
Provision charge
Operating income after provisions
Staff costs & administative
expenses
Segment result (PBT)
(RU
B b
n)
(20.5)
(14.1)
(47.1)
(40.3)
CIB contribution to VTB Group’s revenues CIB contribution to VTB Group’s total assets
66%
28%
6%
1H’2012
74%
23% 3%
1H’2012
CIB CIB
© VTB 2012 32
Key financial targets (2013)
Total revenues*
ROE*
CIR*
Key goals and results: Investment Banking franchise
36% 31% 31%
2009 2010 2011 1H'2012 2013 (target)
> 30%
39% 37% 37%
2009 2010 2011 1H'2012 2013 target
< 50%
Start up
(*) Revenues from external customers
Start up
Key results as of 1H’2012
Key goals
(*) Excluding management prop book. Source: management estimates
(*) Excluding management prop book
46.7 50.8 45.2 27.7
2009 2010 2011 1H'2012 2013F
Top 3 in Russia
TOP-3 investment bank in Russia
Integration into an leverage CIB platform to boost origination and client franchise
International expansion
Product diversification
Leading investment bank in Russia
#1 in ECM, DCM and M&A in 2011
#1 fixed income market player
Top brokerage house in Equities
# 1 Research
New client coverage and product origination model
Team overhaul; distribution of loans and structured funding; originate-to-distribute model in EM
2013 (target)
© VTB 2012 33
VTB Capital global business model and key achievements
#1 in Investment Bank by Fees YTD’12 #1 in ECM, DCM and MA league tables of 2011 USD122 bn current deal value of M&A and ECM Pipeline 20 significant cross- border transactions
Portfolio Management: 282% increase of assets under management in 2011 and amounted over US$4 bn 1H2012 Venture capital: over US$ 300m assets under management
2011, 2012 #1 All-Russia Research Team 2011, 2012 #1 Research Team in Russia Country Analysis TOP 3 Research Team by Sectors
#1 All-Russia Trading Team in 2012 #1 Equity Sales Team in Russia in 2011 TOP-3 in Secondary Market Leading private Equity franchise
Equities Best FX services in Central and Eastern Europe and
the CIS according to EMEA Finance (2011,2012) Market Share increase from 18% to 22% in 2011 Products traded – FX / IR Options, Non-Delivery FX
forwards, Cross Currency Swaps, IR swaps, Exotics New EM markets: CIS, China, CEE
FX & Rates
Products – REPO, Credit and Leverage Finance and Investments, Structured Credit Trading Top 5 in CIS and Top 10 in Russia by syndicated loans Major boost in distribution International origination
Investment Credit
RUR Bonds market share increase from 8% to 11% in 2011
Eurobond market share stable at 15% New EM: CIS, MENA, CEE, Turkey
Cash Bonds
Global Banking
Global Markets
Investment Management
Research
© VTB 2012 34
35% 40% 39% 44%
2009 2010 2011 1H'2012 2013 (target)
< 40%
Key Financial Targets (2013)
Key goals and results: loans and deposits
Key results as of 1H’2012
Key initiatives
Loans & deposits (RUB bn)
ROE
CIR
Corporate loan portfolio Deposits from legal entities
2,000
2,211
3,424
1,419
2,291 1,999
2009 2010 2011 1H2012 ... 2013 (target)
3,338
1,123
1,958
15% - 20%
negative
(RU
B b
n)
2-2.5x ~2x
Shift from extensive to intensive development, client base diversification
Optimise sales and service model to medium segment, increase regional network efficiency
Enhance client coverage, increase cross-sales
New comprehensive client coverage model introduced, strong coverage team in place
Loan book and deposits are close to target
Regional network reform
6%
20% 12%
2009 2010 2011 1H'2012 2013 (target) Source: management estimates
35 © VTB 2012
Key goals and results: global transaction banking
Key results and strategy implementation as of 1H’2012
Key goals
Organisation
■ Fully operational team in place with close to 90 professionals from top International and Domestic banks ■ Teams established for cash management and trade sales along with product teams to innovate and streamline execution
Sales Development ■ Complex and customised cash management solutions established and sold to 80 large groups of companies
(over 300 entities), bringing more than RUB 400 mln in new revenue ■ Cash management sales pipeline reached more than RUB 1.5 bn. ■ Strong cash management cross sell linked to loans ■ Documentary business portfolio increased by 40% to c. RUB 475 bn
Key product development updates ■ Best in class internet based electronic banking platform developed and deployed in Russia for Cash and Trade products ■ Market leading suite of liquidity (pooling, zero balancing, reporting and budgeting tools) developed and deployed ■ Development started on supply chain financing along with VTB factoring
■ Develop and actively promote cash management products
■ Develop the product managers force
■ Improve the product line and quality of services for payment and account management products
■ Strengthen focus on cross-sales
36 © VTB 2012
Key initiatives: CIB
Results expected
Increase of large and mid-sized business revenue contribution to group PnL
New revenue streams
Client base expansion
Boost loan growth, with risks kept under control
Supporting margins
Client and product diversification
Client – deepen penetration outside Top; share of wallet
Product – away from plain vanilla; distribution; EM
Geography – regional network in Russia – international distribution for local EM presence
Overlay product-neutral relationship approach on product sales
Optimise portfolio by margin, risk and concentration between industries and client segments
Strengthen client attraction in industries with weak penetration, increase share of wallet where VTB positions are strong
Boost to balance sheet velocity and ROE
Optimal capital utilisation between geographies
New stage with emphasis on loans and structured products distribution
Non-Russian risk origination: developing EM presence
Roadmap for exiting loss-making subsidiaries or minimising group presence
Increase customer accounts share in liabilities structure
Increase F&C income contribution to group PnL
Focus on customer accounts as primary funding source
Integration of strong GTB sales team
Innovation-led products offering
Focus on profits
International strategy
Industry-specific strategy of client coverage
GTB development
37 © VTB 2012
International Strategy
Alexei Yakovitsky , Global CEO at VTB Capital
© VTB 2012 38
VTB Bank VTB Capital VTB Bank & VTB Capital
Dubai
USA
United Kingdom
Namibia
Angola
Russia Ukraine
India
China
France
Germany
Austria
Vietnam
Singapore
Hong Kong
Belarus
Bulgaria
Cyprus
Armenia
Georgia
Azerbaijan
Kazakhstan
VTB Bank and VTB Capital global presence
Distribution – key developed financial centers
Origination – CIS, Central Europe, Balkans, Africa and Middle East
Follow our clients internationally – China, Africa, other Asia
© VTB 2012 39
International strategy
Target to derive 20 % of IB revenues from international clients in 2-3 years
New stage with emphasis on loans and structured products distribution to boost balance sheet velocity and ROE
Integral part of our IB strategy from day 1
#1 in ECM in 2010, 2011 7% market share in 2011 in Cash Equity #1 in DCM in 2010, 2011, 1H’2012 13% in Cash bonds in 2011, 1H’2012
Fixed Income sales team reshuffle More than 150 YTD on-boarded new clients EMEA push to expand product offering and boost relevance with clients (structured credits, repo, leverage CLN, wide range of EM ccy base for FX and Derivatives) New geographies: New York, Hong Kong
Non-Russian risk Origination: developing local EM presence
Leverage VTB Bank international subsidiaries
Originate to distribute in CEE and MENA Selective approach where we see an edge European crisis helps as competition subsides Ability to attract best talent Client driven international solution business
Business model realignment away from “booking entity” Extend distribution capabilities From legal entities to global business lines Intra group capital usage optimisation
40 © VTB 2012
Client Coverage and Global Banking
Riccardo Orcel, Deputy CEO of VTB Group – Head of Client Coverage and Global Banking
© VTB 2012 41
Client coverage: overview
Key clients of each industry sector with diversified product demand, appetite for complex products and investment services
Individual approach to fill in specific client requirements
Special task force to push derivative products
Key focus for Coverage team to diversify clients base and increase margin
Demand in corporate banking solutions to fill in daily requirements
Individual approach if necessary
Mostly served via extensive VTB Group branch network
Demand in simple products that can be provided as quickly as possible
Key origination force Team of Senior Professionals with
direct access to key decision makers “One-window” approach to
streamline origination process Product-neutral to maximise
cross-sell and profitability per client
What is client coverage?
Global industrial verticals Client segmentation to avoid
“an elephant hunt” Integration with the regional network
in all points of presence
How is it organised?
Industry Approach
© VTB 2012 42
#1 Investment Bank by
Fees YTD'12 (1)
$122bn current deal value of
M&A and ECM pipeline
20 significant cross-
border transactions completed or in progress since
1 January 2012 in 14 non-CIS countries
Global Banking: overview
What is Global Banking? IB Sector Groups M&A ECM DCM Infrastructure Capital & Project Finance Advisory
Why have this business?
Post-crisis decline in EM focus of International Banks created business opportunity to be IB of choice for investors seeking exposure to Russia/CIS and to advise Russian/CIS clients seeking to expand internationally
Capital light, few fixed costs, potentially high margin business Vital for dialogue, relationship and cross-selling with top executives at corporate clients. Critical for supplying product to Markets area
Attraction of business
Sector expertise upgraded and international capability added BUT overall headcount reduced by added efficiency and performance management
JV Approach to international - Gain Global Reach but don't overpay/take risks to do it Move from balance sheet led to advisory led model Target fees not volumes Opportunistically take advantage of banking vacuum in CEE
Maximising shareholder value
(1) M&A, ECM and DCM fees earned in CIS per Dealogic as at 10 October 2012.
© VTB 2012 43
Bookrunner in Eastern Europe DCM (Dealogic) (1)
Domestic Bond Bookrunner in Russia (Dealogic / Bloomberg / Cbonds) (1)
Bookrunner in Eastern Europe ECM (Dealogic) (2)
Equity Bookrunner in Russia (Thomson Reuters) (2)
Financial advisor to Russian M&A by value (Dealogic) (2)
Research team in Russia Country Analysis (Thomson Reuters Extel) (1)
All-Russia Research team (Institutional Investor) (1)
#1 DCM
M&A
Research
(1) FY 2011, 2012 (2) FY 2011
Global Banking: overview
Selected Deals
Russian Federation
USD 7 billion
Eurobond Issue
Joint Lead Bookrunner 2012
Vivacom
Pending
Acquisition
Financial Advisor 2012
ECM
Uralkali
Corporate Broker
Joint Corporate Broker 2012
Polyus Gold
USD 635 million
Placement
Financial Advisor 2012
Northern Capital Highway
Construction and operation of a toll motorway (PPP)
Advisor, Investor 2011-12
Magnit
USD 350 million
ABB
Global Co-ordinator 2011 - 2012
ECM
ALROSA USD 1.3 billion
ECP issue
Joint Lead Manager and Bookrunner
2012
Russian Railways
Pending
Acquisition of GEFCO
Joint Financial Advisor 2012
Ukraine USD 2 billion
Sovereign Eurobond
issue
Joint Bookrunner 2012
© VTB 2012 44
Liberty International, US (M&A)
Akbank, Turkey (ECM)
Turkey Bulgaria
BulgarTabac, Bulgaria (M&A, IC&PF)
GEFCO (France)
Russian Railways (M&A) $1bn+ Acquisition of GEFCO, French logistics
business from PSA Peugeot Citroen Group through highly competitive bidding process
First major x-border M&A deal VTBC has advised on
France
Vivacom, Bulgaria (GB area involved: M&A)
$0.9bn acquisition by CCB/VTBC One of the largest M&A Telecom deals worldwide
this year and the largest by far in CEE
Italy
Subsidary IPO
Czech
Buy-side Advisory in
Russia
Greece
Buy-side Advisory
Slovakia
Sell-side advisory
Romania
Sell-side Advisory
USA/ Brazil
Cross-border M&A for
Russian client
Bulgaria
Sell-side Advisory
Serbia
Sell-side Advisory
Various Countries
Sell-side Advisory
Cyprus
Sell-side Advisory
Switzerland
Stake sale
Portugal
Sell-side advisory
China
Polyus Gold $635m Private Placing (M&A)
International progress in Global Banking C
lose
d de
als
USA
Advised one of the 5 biggest P&C insurers in world
Acquired KIT Insurance
€100m acquisition of 80% stake in BulgarTabac
Successful co-operation across VTB Capital
Advised Polyus Gold on sale of stake to Chinese investor CIC
Citi sold its $1.15bn stake in Turkish lender Akbank through a placing
First ECM deal for VTBC to be involved with in Turkey
Rec
ently
an
noun
ced
deal
s
Bulgaria
Wor
k-in
-Pr
ogre
ss
© VTB 2012 45
World’s Largest economy 52% share of Global IB Wallet Potential Partner: Evercore (IB partnership) Employees: 610 Offices: 16 US League Tables: M&A: #6 in North America Status: Announced today
Brazil Population: 200m World’s 7th largest economy (and representing over half of the aggregate LatAm economy) driven by strength in commodities (including mining, oil and coffee) Growth: 2010 7.5%; 2011 2.7% Selected Partner: BTG Pactual (listed IB) Employees: 1,870 Offices: 12 Brazil League Table 2010/11: M&A #1, ECM #1 Status: Agreement signed and co-operation between teams in progress
World’s 4th largest economy by GDP on PPP basis Growth: 6.5% Selected Partner: TBC Status: Early stages
World’s 2nd largest economy 2011 GDP Growth: 9% Selected Partner: TBC Status: Advanced discussions, agreement expected by end of year
World’s 3rd largest economy Growth: Q1’12: 1.2% Selected Partner: TBC Status: Partner to be determined
Latin America
North America
India
China
Japan
Global Banking: international alliance strategy
Building a Partnership Network Global reach critical to being able to provide Russian clients with international service comparable or better than ‘bulge bracket’ banks Global reach also vital for attracting foreign investors to Russia Network of best in breed local Investment Banks being created to offer global origination with local expertise Approach avoids expensive build out of offices, significant headcount additions or credit risk taking in non-core locations
46 © VTB 2012
Global Transaction Banking
Gurinder Nihal, SVP – Head of Global Transaction Banking
47 © VTB 2012
GTB business strategy in VTB Group
to build a top of the class transaction bank to double its revenues every three-four years GTB aims
Internally Externally
Be the provider of cheap source of funding for VTB Group
Contribute reliable and sustainable relative risk free income to the bottom line
Provide Growth of fees and commissions
Be the provider of choice for our target client base To be known in the market as client centric solution provider To be able to present and sell consolidated solutions to clients from
a Working Capital Management perspective To entrench VTB products and services into the roots of client
organisations making it difficult for the client to move elsewhere
We will do this through:
Focus on products and client / market segment mix Innovation of product line Creating solutions that add and demonstrate value to clients Having the best professionals showcasing our capabilities in sales / coverage Streamline processes to be more client centric rather than internally focused Optimising the cost income ratio
48 © VTB 2012
GTB performance and key developments in 1H’2012
GTB operating income before provisions Industries share
GTB net interest income GTB net fee and commission income
Fees
(RU
B b
n)
10.9
19.4
1H’2011 1H’2012
+77%
(RU
B b
n)
6.5
11.3
1H’2011 1H’2012
+74%
(RU
B b
n)
6.2
8.0
1H’2011 1H’2012
+29%
Revenues
State sector (16.2%)
Large business (52.9%)
SME (27.4%)
Foreign subsidiaries (3.6%)
Foreign subsidiaries (2.9%)
SME (30.1%) Large business
(38.5%)
State sector (28.4%)
© VTB 2012 49
GTB business line development within CIB Model
GTB business line
CIS and European subsidiaries TransCreditBank Bank of Moscow1
Set up organisation and governance structure
Ensure appropriate and adequate levels of staffing
Align growth with coverage and asset team
Double the business in CIS and ESH over 3 years
Expand product offerings in geographies based upon needs
Integrate remaining subs into CIB model post 2012
Migration of the Russian Railways and other corporate business into VTB
Retention of all Russian Railways and affiliates corporate business
Provide new Products / Solution capabilities to Russian Railways and other clients
Provide support and help to GTB Business at BOM
Tariffs and product line synchronisation
Coordination of the service for large corporate clients
Share limits for key documentary deals
(1 ) not currently part of GTB CIB Model
50 © VTB 2012
Innovation led product offerings
Main changes:
Electronic Banking system development and Treasury work continue to outperform market
VTB has initiated deposits and letters of credit via E-banking system
Current account offerings enhanced with minimum balances and average balances products
Liquidity management variant products developed and delivered to clients
VTB has partnered with Visa International and Seventh Continent to launch the innovative pay Wave contactless payments
Supply chain and factoring consolidation started
Customisation at upper end of client segment and standardisation at lower end
Current account services
Term deposits
Cash management
Currency control
Documentary business
Factoring supply chain
VTB
Gazprombank
Rosbank
Uralsib
Citibank
Promsvyazbank
Sberbank
Alfa Bank
UniCredit
. .
.
.
.
. In accordance with market practice
Some gaps exist Some important products are not offered
Many products are not offered
Product is not implemented
51 © VTB 2012
VTB Group Financial Performance and Outlook Herbert Moos, Deputy President and Chairman of the Management Board, CFO
52 © VTB 2012
Solid and growing core earnings power
Net fee and commission income Net interest income
+98%
(RU
B b
n)
Revenues from trading excluding proprietary book
+167%
224.8 227.0 171.1 152.2
113.6
1H’12 annualised
2011 2010 2009 2008
43.6 39.2
24.7 21.0 16.3
2011 2010 2009 2008
11.6 2.7
13.9
25.3 1.1 6.6
1.8
1.7
12.7 9.3
15.6
27.0
-
2011 2010 2009 2008
Fixed Income Equities
(RU
B b
n)
(RU
B b
n)
1H’12 annualised
1H’12 annualised
53 © VTB 2012
(1) 95% confidence level, 1 business day holding period; based on market risk in trading activities for JSC VTB Bank and VTB Capital Holding.
Securities portfolio breakdown
(in RUB bn) 31-Dec-11 31-Mar-12 30-Jun-12
Equity securities 272 265 247
as % of total assets 4.0% 4.1% 3.6%
Scaling down market risk exposure
■ Level of market risk has been materially reduced through 2012
■ Principal equity book is set to be unwind or hedged by YE’2012
■ Full focus on avoiding substantial volatility of trading results further on
Securities portfolio VaR dynamics in 2012 (1)
0.0
1.0
2.0
3.0
Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Sep-12
(RUB, bn)
Source: management estimates, not audited or reviewed.
Equity securities
54 © VTB 2012
Cost management
Acquisitions cost base optimisation
VTB’s cost base was affected by acquisitions
VTB is efficient in terms pf
+11%
SC&AE adjusted for BoM and TCB
27.1 29.5 30.7 20.2
38.3 31.3 34.2
4Q’10 1Q’11 2Q’11 3Q’11 4Q’11 1Q’12 2Q’12
(RU
B b
n) Avr.: 30.2 bn
Merger with VTB24 in 2013 will generate potential costs savings up to RUB 4 bn annually starting from 2014
Cost optimisation program in place to decrease BoM CIR to low 40’s in the next 3 years and potential costs savings up to RUB 1.5 bn annually starting from 2013
2.68 2.57 3.09
1.70
2.99 3.02 2.70
2Q’12 1Q’12 4Q’11 3Q’11 2Q’11 1Q’11 4Q’10
BoM
TCB
Total costs as % of average assets (1)
TCB
BoM
2010 avr: 24 bn
Reported SC&AE
27.1 33.0 34.3
23.5
50.7 42.5 44.6
4Q’10 1Q’11 2Q’11 3Q’11 4Q’11 1Q’12 2Q’12
(RU
B b
n)
TCB
BoM
1Q’11-3’11 avr: 30 bn
4Q’11-2’Q112 avr: 46 bn
(1) Annualised
55 © VTB 2012
Asset quality
Сost of risk down 70 bps q-o-q to 1.0% …
NPL Ratio
Provision charge for loan impairment / Average gross loan portfolio
Provision charge for impairment of debt financial assets
(1) Non-performing loans (NPLs) represent impaired loans with repayments overdue by over 90 days. NPLs are calculated including the entire principal and interest payments. Ratio is calculated to total gross loans including financial assets classified as loans and advances to customers pledged under repurchase agreements.
… up 30 bps in 1H’12 y-o-y to 1.4%…
NPL Coverage Ratio
Allowance for loan impairment / Total gross loans NPL ratio (1)
9.6 8.0 6.3
20.4
11.9
1.2% 0.9% 0.5%
1.7%
1.0%
2Q'11 3Q'11 4Q'11 1Q'12 2Q'12
(RU
B b
n)
17.3
32.3
1.1% 1.4%
1H'11 1H'12
(RU
B b
n)
7.7% 5.9% 5.4% 5.5% 5.6%
8.6%
6.6% 6.3% 6.6% 6.8%
30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12
111.8% 110.7% 111.3%
118.4% 117.0%
30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12
56 © VTB 2012
Bank of Moscow – adequately reserved, franchise delivering
Corporate loan portfolio
(in RUB bn)
Gross loans
Legacy portfolio
Provisioning ratio
− Lending to SPV − Lending to operating companies
Retail loan portfolio
Legacy portfolio
956 24%
410 53%
Market Portfolio Related Parties Portfolio
177 9% 233 87%
135 99% 99 70%
84 16%
43 30%
(1) Source: management estimate.
Bank of Moscow legacy loan portfolio (1)
FY’2011 1H’2012 FY’2011 1H’2012
897
438
174 264
135 129
75
56
26%
53%
12% 80%
98% 62%
17%
23%
Legacy portfolio as % of gross corporate loan portfolio 43% - 49% -
Legacy portfolio as % of gross retail loan portfolio 51% - 75% -
57 © VTB 2012
VTB balance sheet – conservative risk weightings
Russia applies higher risk weights of its balance sheet compared to other emerging markets
VTB applies higher risk weights of its balance sheet compared to other emerging markets
Source: Goldman Sachs (1) Total Assets excl/ Derivatives (exc. Derivatives and insurance assets under Basel III) (2) Sample based on Alfabank, Bank Saint Petersburg, Gazprombank, NOMOS, Sberbank, VTB and Vozrozhdeniye Bank
RWA / Assets (1H’2012(1)) RWA / Assets (1H’2012(1))
103%
86%
64%
61%
57%
54%
52%
45%
40%
39%
36%
36%
Russia
Poland
South Africa
Greece
Italy
Spain
UK
Total EMEA
France
Ger/Au
Benelux
Nordic 27%
38%
48%
51%
51%
52%
54%
84%
85%
DB
BNP Paribas
Santander
HSBC
Standard Chartered
UniCredit
Erste
PKO
VTB
58 © VTB 2012
VTB balance sheet – conservative leverage ratio
VTB ‘s leverage ratio is more conservative vs peers
Source: Goldman Sachs excl. Derivatives
Total Assets / Total Equity (1H’2012)
24.7
14.4
16.9
13.4 12.8 13.2 13.1
10.8
8.2
Deutsche Bank
Santander BNP Paribas
UniCredit Erste Bank HSBC Standard Chartered
VTB PKO
Avr.: 14.2%
59 © VTB 2012
Capital plan
Focus on the capital consolidation
Tier I Tier I+II
Perpetual Hybrid Tier 1 issuance Additional share issue
Perpetual hybrid Tier 1 USD 1 bn Subordinated Lower Tier 2 Notes USD 1.5 bn
8.9%
12.8%
30-Jun-2012 pro-forma inc. tier 1 increase
≈15 %
10-11%
pro-forma inc. perpetual and lower tier2 notes
9.5%
14.2%
60 © VTB 2012
VTB Group management targets
New strategy to be approved in 2013
Financial targets
In line with the market
High-teens
Below 50%
10-11%
Corporate loans
ROE
CIR
Tier 1 ratio
Retail loans
ROE: 15-20%
Assets: RUB 6,300 – 6,500 bn
Loan portfolio: RUB 5,100-5,500 bn
Net profit: RUB 120-140 bn
2013 Strategy targets
Done
On track to deliver
On track to deliver
On track to deliver
VTB is well on track to deliver 2013 targets
Outperform the market
61 © VTB 2012
VTB is a strong investment opportunity
1) Excluding intersegment eliminations.
Leading Russian bank with strong and consolidated positioning in all key segments – #2 by assets and all key banking metrics – Russia represents over 95% of revenues
Leading player in Russia
Operating in 22 countries, servicing about 16 million customers
Well positioned to support Russian businesses abroad
Diversified business model – Successful expansion of retail franchise – VTB is the leading investment bank in Russia
Strong and rapidly expanding positioning in a growth economy
Supported by acquisitions – VTB24, Promstroybank, TransCreditBank, Bank of
Moscow
2 2 2 2 2
Investment banking
Other
Retail Loans and Deposits & Transaction banking
Angola
UK France
Germany Austria
Italy
Cyprus
Dubai
Belarus Ukraine
Russia
Armenia
Georgia
Azerbaijan
Kazakhstan
Kyrgyzstan
China
Vietnam Singapore
India
New York
Market Share
With focused international presence
Well established universal banking model
Successful growth story
~1,700 branches worldwide
~ 10,000+ ATMs in Russia
~ 400 branches in Europe and CIS and Georgia
National champion
Globally connected to significant trade flows / interests with Russia
Russia and CIS DCM: #1 (38 deals) Russia and CIS M&A: #5 (8 deals)
Well diversified revenue mix(1)
Strong domestic IB
Superior growth in retail Retail revenues: 45% CAGR (08-1H12)
Strong asset growth
Total assets (RUB bn)
15.4% 17.3% 19.8% 13.4% 9.1%
Assets Corporate Loans Corporate Deposits Retail Loans Retail Deposits
188 231 331 494 1,057 1,380 2,273 3,697 3,611 4,291
6,790 6,858
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1H 12
28% 57% 7% 8%
Rank
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