2012 VTB Group Investor Day. London October 29, 2012

Transcription

1 2012 VTB Group Investor Day London October 29, VTB 2011

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. 2

3 Agenda Introduction 4 VTB Group 7 Strategy Implementation 11 Retail Banking 14 Corporate and Investment Banking 29 VTB Group Financial Performance and Outlook 51 3

4 Introduction 4

5 Russia: prominent opportunity fundamentally strong economy Prudent approach to government spending Budget surplus / (deficit) as % of GDP (FY 2011) 0.8% Real economy maintains momentum (1.4%) (1.6%) Clean sovereign balance sheet (2.1%) (2.3%) (4.5%) Russia Turkey Poland BIC CEE EU (5.1) (7.8) Fixed capital investment,% Retail sales, % Real GDP, % (15.7) F CBR switching from FX to IR targeting Source: Rosstat and VTB Capital Government debt as % of GDP (FY 2011) 86% % 29% 42% 48% 52% Russia BIC Turkey CEE Poland EU One of of the largest FX FX reserves globally globally Top countries by FX reserves, USD bn (FY 2011) 3,203 1, USD/RUB (inverted) Basket/RUB (inverted) Crude oil, Brent, USD/bbl (RHS) China Japan Saudi Arabia Russia Taiwan Brazil CPI, % YoY MIBOR, O/N Source: CBR Source: Rosstat, EIU, Bloomberg 5

6 Long term potential solid opportunities for banking business development Commentary Growth potential driven by low penetration Growth potential driven by low penetration Loans as % of GDP (FY 2011) Retail is an important source of growth and margin Retail loans as % of GDP (FY 2011) 147% 77% 62% 55% 55% 45% 43% 34% 31% 28% 16% 10% EU (1) BIC (1) CEE (1) Poland Turkey Russia EU (1) Poland BIC (1) CEE (1) Turkey Russia Secure Strong funding capital base enhances stability stability Decreasing NPL levels (FY 2011) 16.7% 13.5% 13.7% 9.6% 17.1% 12.1% 15.6% 7.1% 11.3% 3.5% Overdue loans and loan loss provisions as % of gross Russian banking sector loan portfolio 11.6% 10.5% 8.6% 6.3% 5.7% 5.1% 4.8% 8.2% Russia Poland Turkey BIC median Eurozone CAR Equity/Assets H 2012 NPL LLP Russian banking sector: growth supported by quality fundamentals Source: For Russia CBR and VTB Capital analysis; for other countries Fitch, ECB, EBA, E&Y, Swiss Re BIC stands for Brazil, India, China (1) VTB Capital estimations for EY 11 6

7 VTB Group Andrey Kostin, President and Chairman of the Management Board 7

8 VTB: successful growth story through organic growth and M&A VTB corporate history Establishment and recognition Development and growth Efficient growth strategy Established in October 1990 VTB Bank joined the top 5 largest banks in Russia 2005: Launched VTB : VTB became the 1st Russian bank to launch its IPO. 2008: Launched VTB Capital 2010: Launched its new strategy based on efficient growth. Targeting above market growth for retail and efficiency for CIB In the past 10 years, VTB Group demonstrated 36-fold increase in total assets 12 major acquisitions in 10 years 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 Slavneftebank (now VTB Belarus) Acquisition of TransCreditBank Acquisition of Bank of Moscow 6,790 6,858 (RUB bn) Acquisition of Armsberbank (now VTB Armenia) Guta-Bank (now VTB24) Acquisition of Mriya (now PJSC VTB Bank (Ukraine) 1,057 1,380 2,273 3,697 3,611 4, H

9 Acquisitions update: integrations progressing to plan TransCreditBank Bank of Moscow Distribution network 285 offices with 5% in Moscow and Moscow region c.2.3 mln retail customers 33 thsd corporate customers Distribution network 296 offices with 46% in Moscow and Moscow region Profile Over 6.5 mln active retail customers Over 100 thsd active corporate customers Acquisition profile: Consolidation in Q 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 Q 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 31-Dec Jun Dec Jun-12 ROA 2.0% 2.1% ROE 27.7% 24.0% Tier I 9.3% 11.4% BIS CAR 15.2% 15.4% ROA 2.6% 2.3% ROE 24.7% 12.2% Tier I 27.0% 23.5% BIS CAR 33.6% 29.0% Source: TransCreditBank financial statements Source: Bank of Moscow financial statements 9

10 Key strategic initiatives to drive income growth and enhance risk management Growth of profits, ROE and shareholders value Focus on reduction of earnings volatility and risks Above market expansion in Retail Efficient growth in CIB Optimal utilisation of costs, funding and capital Integration of recent acquisitions 10

11 Strategy Implementation Herbert Moos, Deputy President and Chairman of the Management Board, CFO 11

12 Well on track to deliver 2013 targets Outperforming asset target Gross loans and advances to customers 6,790 6,858 (RUB bn) 3,611 4,291 6,300-6,500 (RUB bn) 2,545 3,060 4,590 4,645 5,100-5, H (target) H (target) ROE: in line with expectations CIR 10.3% 15.0% 15%-20% 45.7% 43.0% 45.2% (1) Low 40% neg (target) (target) (1) Adjusted for loss from financial instruments. 12

13 An attractive equity story VTB has unique platform that position it strongly in the highly attractive Russian and CEE banking metrics 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 wellorganised segments 13

14 Retail Banking Mikhail Zadornov, President Chairman of VTB24 Management Board 14

15 Continued growth in Russian retail banking Population, mln people Retail loans to GDP % 31% 34% Retail loans to GDP (incl. mortgages) Mortgages to GDP % 21% 21% 16% 10% 15% % 3% 5% Hungary Czech Poland Turkey Russia Brasil Hungary Czech Poland Turkey Russia Brasil Retail loan market Retail deposit market (RUB bn) VTB retail loan market share in Russia 10.2% 12.2% 3,641 4, % 5, % 6,601 (RUB bn) VTB retail deposit market share in Russia 6.0% 7, % 9, % 11, % 12, Dec Dec Dec Jun Dec Dec Dec Jun-12 15

16 Overview of VTB s retail banking Profile 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 Fast developing business with great opportunity to grow Distribution 4th largest branch network in Russia Focus on major cities with leading positions in each of the regions 1,234 branches/outlets 10,300 ATMs Targeted X-sell campaigns We use all possible sources to sell our products Products Loan and deposits for individuals Cards SME lending and services Private Banking Packaged offerings with flexible conditions Investment products for individuals We bring innovative products and services to satisfy all client needs Market position Second largest retail business in Russia Retail loans market share 13.4% Retail deposits market share 9.1% Service quality and client retention are among our main goals Data as of 30-Jun

17 Retail banking key goals and results Key financial targets (2013) Key goals ROE CIR 26% 19% 24% > 20% 8% H' (target) Source: management estimates 48% 47% 51% 51% < 40% 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 Key results as of 1H H' (target) 2.5-3x ROE and loan book growth targets achieved Loans & deposits (RUB bn) 2, x , ,444 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 H' (target) Retail loan portfolio Deposits from individuals 17

18 Retail banking robust growth Retail loan portfolio Retail Deposits Mortgage loans Car loans Consumer loans & other (RUB bn) % (RUB bn) Term deposits Current accounts 1, , % 1, , , Jun Sep Dec Mar Jun Jun Sep Dec Mar Jun-12 VTB Group s revenues breakdown VTB Group s total assets breakdown Retail banking 6% Retail banking 23% 3% 28% 66% 74% 1H H

19 Retail banking solid performance Operating income before provisions Profit before taxation 1H H H H % +68% +52% +300% +21% (RUB bn) (RUB bn) (2.9) (11.6) (23.9)(34.8) Net interest income Net fee and commission income Other operating income Operating income before provisions (1) Operating income before provisions Provision charge Operating income after provisions Staff costs & administative expenses Segment result (PBT) (1) Operating income before provisions is calculated before provisions for impairment of debt financial assets. 19

20 Retail Banking segmented approach and distribution Customers segments Segment-oriented approach in servicing customers Targeted products VIP Affluent 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 PRIME PACKAGE (launched in 2008) VTB24 Mass affluent Dedicated service sectors in all mass branches Exclusive conditions for banking products Non-financial services (e.g. advisory) PRIVILEGE PACKAGE (launched in 2008) Upper mass Mass Strong cost optimisation strategy with focus on delivering high quality service Special pricing on banking products PRIORITY PACKAGE (launched in 2011) Leto Bank Lower mass Customers not using 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 20

21 3, , , , , VTB24 leader in operating efficiency in Russia Branches and ATMs of VTB Retail Banking Branches of key peers Branches ATMs 7,334 10,160 10,300 19,029 1,800 4, ,242 1,234 1, H2012 Sberbank VTB (1) Rosbank Russian Raiffeisenbank standard Retail loan portfolio per branch (1) Retail deposit portfolio per branch (1) Sberbank Rosbank Raiffeisenbank Russian standard VTB24 1, ,117 Sberbank Rosbank Alfa-bank Raiffeisenbank 1,189 VTB ,358 1,400 1,052 (RUB, mln) (RUB, mln) H H2012 (1) Branches attributed to Retail Banking. As of 30-Jun (2) VTB24 data. As of 30-Jun

22 TransCreditBank integration timeline Stages of harmonisation of TCB product range with VTB24 SME, CAR LOANS (REDIRECTION TO VTB24) CASH LOANS, CREDIT CARDS, DEPOSITS, ACCOUNTS AND COMMISSION PRODUCTS, MORTGAGES PACKAGES AND SEGMENT-ORIENTED PRODUCTS PAYROLL PROJECTS 1-Apr Nov Jan Oct Start of VTB24 products sales through TCB distribution network Merger with VTB24 Launch of TCB distribution network transformation Completion of TCB distribution network transformation Completion of IT integration process 22

23 TransCreditBank distribution network Analysis of combined distribution network Utility of TCB distribution network for VTB24 TCB network VTB24 network New markets for VTB24 Branches Regions Cities TransCreditBank (TCB) distribution network TCB branches in cities with VTB24 presence 283 branches TCB branches in cities with no VTB24 presence City population TCB network VTB24 network Moscow region 4% 17% Complementary to VTB24 Overlap with VTB24 Complementary to VTB24 Overlap with VTB24 > 1 mn people 13% 22% 61% K - 1 mn 20% 22% TransCreditBank branches 100K 500K 26% 30% < 100K 37% 9% Complementary to VTB Overlap with VTB % 14% 63% VTB data. As of 30-Sep

24 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 Bank of Moscow (BM) distribution network 296 branches Regions Cities BM branches in cities with VTB24 presence BM branches in cities with no VTB24 presence City population BM network VTB24 network Moscow region 45% 17% BM distribution network strategy 63% > 1 mn people 18% 22% 500K - 1 mn 22% 100K 500K 37% 30% 61% 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 < 100K 9% VTB data. As of 30-Sep

25 Bank of Moscow retail business integration to create synergies Principles of VTB24 and BM interaction Key interaction areas 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 VTB24 is responsible for functional management: Risk Finance Operations IT & HR 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 Key success factors to generate synergy 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) 25

26 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 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 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

27 Leto Bank POS loans build the customer franchise 8.4% 4.5% 14.3% POS loans market (2011) 13.2% 23.2% 22.0% HCFB OTP Bank Alfa Bank Russian Standard Rusfinance Cetelem Other POS loans market CAGR varies from 6% (negative scenario) to 20% (positive scenario) Key parameters of POS loan portfolio: Short average term: months Average loan amount: RUB thsd High rate (up to 70% p.a. w/o insurance) High credit risk (12% p.a.) High operational costs 14.4% POS loans market (RUB bn) Main objective of POS loans customer base accumulation for further cross-sales F

28 Leto Bank cash loans deliver profitable growth 1Q 2012 Cash loans (in RUB bn) Market share (%) Sberbank % VTB % Russian Agricultural Bank % OEB % Trust % HCFB % Rosbank % TCB % Alfa Bank % Raiffeisenbank % Bank of Moscow % Probisnessbank % Other % Total 2, % 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 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 Cash loans market 2,725 2,930 (RUB bn) 1,973 1,620 1,829 Main objective of cash loans to provide highly profitable portfolio Q2012

29 Corporate-Investment Banking Yuri Soloviev, First Deputy President and Chairman of the Management Board 29

30 35,000 30,000 25,000 20,000 15,000 10,000 5, % 17.0% 15.0% 13.0% 11.0% 9.0% 7.0% 5.0% 3.0% 1.0% -1.0% 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % 17.0% 12.0% 7.0% 2.0% -3.0% Russian corporate banking sector GDP, nominal (FY 2011) Corporate loans to GDP (FY 2011) 7,298 86% 77% (USD bn) 1, ,431 3,607 2,778 33% 35% 51% 63% 62% Russia Turkey Malaysia China UK Germany France Russia Turkey Malaysia China UK Germany France Emerging markets Developed countries Emerging markets Developed countries Corporate loan market Corporate deposit market (RUB bn) VTB corporate loan market share in Russia (1) 13.0% 12, % 14, % 17, % 18,806 (RUB bn) VTB corporate deposit market share in Russia (2) 12.7% 15.0% 7,475 7, % 19.8% 10,544 10, Dec Dec Dec Jun Dec Dec Dec 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. 30

31 CIB financial result CIB operating Income CIB profit before taxation 1H H H H (14.1) (20.5) (40.3) 56.8 (RUB bn) (RUB bn) (47.1) 26.8 Net interest income Net fee and commision income Net result from financial instruments Other operating income Operating income before provisions Operating income before provisions Provision charge Operating income after provisions Staff costs & administative expenses Segment result (PBT) CIB contribution to VTB Group s revenues CIB contribution to VTB Group s total assets 6% CIB 23% 3% CIB 28% 66% 74% (1) Represents gains less losses arising from financial instruments and foreign currencies. 1H H

32 Key goals and results: Investment Banking franchise Key financial targets (2013) Total revenues* Top 3 in Russia H' F (target) (*) Revenues from external customers Key goals TOP-3 investment bank in Russia Integration into an leverage CIB platform to boost origination and client franchise International expansion Product diversification ROE* CIR* 36% 31% 31% > 30% Start up H' (target) (*) Excluding management prop book. Source: management estimates < 50% 39% 37% 37% Start up H' target (*) Excluding management prop book Key results as of 1H 2012 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 32

33 VTB Capital global business model and key achievements Global Banking #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 Global Markets Equities #1 All-Russia Trading Team in 2012 #1 Equity Sales Team in Russia in 2011 TOP-3 in Secondary Market Leading private Equity franchise Investment Credit FX & Rates 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 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 Cash Bonds RUR Bonds market share increase from 8% to 11% in 2011 Eurobond market share stable at 15% New EM: CIS, MENA, CEE, Turkey Investment Management 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 Research 2011, 2012 #1 All-Russia Research Team 2011, 2012 #1 Research Team in Russia Country Analysis TOP 3 Research Team by Sectors 33

34 Key goals and results: loans and deposits Key Financial Targets (2013) Key initiatives ROE CIR negative 35% 6% 20% 40% 39% 12% 44% 15% - 20% H' (target) Source: management estimates < 40% 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 H' (target) Key results as of 1H 2012 Loans & deposits (RUB bn) (RUB bn) 2,000 1,958 1,123 ~2x 2-2.5x 3,424 3,338 2,211 2,291 1,999 1,419 New comprehensive client coverage model introduced, strong coverage team in place Loan book and deposits are close to target Regional network reform H (target) Corporate loan portfolio Deposits from legal entities 34

35 Key goals and results: global transaction banking Key goals 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 Key results and strategy implementation as of 1H 2012 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 35

36 Key initiatives: CIB Focus on profits 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 Results expected Increase of large and mid-sized business revenue contribution to group PnL New revenue streams Client base expansion International strategy 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 Boost to balance sheet velocity and ROE Optimal capital utilisation between geographies Industry-specific strategy of client coverage 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 loan growth, with risks kept under control Supporting margins Client and product diversification GTB development Focus on customer accounts as primary funding source Integration of strong GTB sales team Innovation-led products offering Increase customer accounts share in liabilities structure Increase F&C income contribution to group PnL 36

37 International Strategy Alexei Yakovitsky, Global CEO at VTB Capital 37

38 VTB Bank and VTB Capital global presence USA Belarus Ukraine Russia Distribution key developed financial centers United Kingdom Germany Georgia Azerbaijan Origination CIS, Central Europe, Balkans, Africa and Middle East Austria France Cyprus China Hong Kong Follow our clients internationally China, Africa, other Asia Angola Namibia India Vietnam Bulgaria Dubai Armenia Kazakhstan Singapore VTB Bank VTB Capital VTB Bank & VTB Capital 38

39 International strategy Integral part of our IB strategy from day 1 #1 in ECM in 2010, % market share in 2011 in Cash Equity #1 in DCM in 2010, 2011, 1H % in Cash bonds in 2011, 1H 2012 New stage with emphasis on loans and structured products distribution to boost balance sheet velocity and ROE 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 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 Leverage VTB Bank international subsidiaries Business model realignment away from booking entity Extend distribution capabilities From legal entities to global business lines Intra group capital usage optimisation Target to derive 20 % of IB revenues from international clients in 2-3 years 39

40 Client Coverage and Global Banking Riccardo Orcel, Deputy CEO of VTB Group Head of Client Coverage and Global Banking 40

41 Client coverage: overview What is client coverage? 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 How is it organised? 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 Global industrial verticals Client segmentation to avoid an elephant hunt Integration with the regional network in all points of presence Industry Approach Mostly served via extensive VTB Group branch network Demand in simple products that can be provided as quickly as possible 41

42 Global Banking: overview #1 Investment Bank by Fees YTD'12 (1) What is Global Banking? IB Sector Groups M&A ECM DCM Infrastructure Capital & Project Finance Advisory Why have this business? $122bn current deal value of M&A and ECM pipeline 20 significant crossborder transactions completed or in progress since 1 January 2012 in 14 non-cis countries 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 Attraction of business 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 Maximising shareholder value 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 (1) M&A, ECM and DCM fees earned in CIS per Dealogic as at 10 October

43 Global Banking: overview Selected Deals #1 Russian Railways Pending Acquisition of GEFCO Vivacom Pending Acquisition Ukraine USD 2 billion Sovereign Eurobond issue DCM Bookrunner in Eastern Europe DCM (Dealogic) (1) Domestic Bond Bookrunner in Russia (Dealogic / Bloomberg / Cbonds) (1) Joint Financial Advisor 2012 Financial Advisor 2012 Joint Bookrunner 2012 ECM Bookrunner in Eastern Europe ECM (Dealogic) (2) Equity Bookrunner in Russia (Thomson Reuters) (2) Russian Federation USD 7 billion Uralkali ECM Polyus Gold USD 635 million Eurobond Issue Corporate Broker Placement Joint Lead Bookrunner 2012 Joint Corporate Broker 2012 Financial Advisor 2012 M&A Financial advisor to Russian M&A by value (Dealogic) (2) Magnit USD 350 million ABB Global Co-ordinator ALROSA USD 1.3 billion ECP issue Joint Lead Manager and Bookrunner 2012 Northern Capital Highway Construction and operation of a toll motorway (PPP) Advisor, Investor Research Research team in Russia Country Analysis (Thomson Reuters Extel) (1) All-Russia Research team (Institutional Investor) (1) (1) FY 2011, 2012 (2) FY

44 International progress in Global Banking USA Bulgaria China Turkey Closed deals Liberty International, US (M&A) Advised one of the 5 biggest P&C insurers in world Acquired KIT Insurance BulgarTabac, Bulgaria (M&A, IC&PF) 100m acquisition of 80% stake in BulgarTabac Successful co-operation across VTB Capital Polyus Gold $635m Private Placing (M&A) Advised Polyus Gold on sale of stake to Chinese investor CIC Akbank, Turkey (ECM) Citi sold its $1.15bn stake in Turkish lender Akbank through a placing First ECM deal for VTBC to be involved with in Turkey Recently announced deals GEFCO (France) 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 Bulgaria 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 Work-in- Progress Italy Subsidary IPO Czech Buy-side Advisory in Russia Greece Buy-side Advisory Serbia Sell-side Advisory Slovakia Sell-side advisory Various Countries Sell-side Advisory Romania Sell-side Advisory Bulgaria Sell-side Advisory USA/ Brazil Cross-border M&A for Russian client Cyprus Sell-side Advisory Switzerland Stake sale Portugal Sell-side advisory 44

45 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 North America 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 China World s 2nd largest economy 2011 GDP Growth: 9% Selected Partner: TBC Status: Advanced discussions, agreement expected by end of year Latin America 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: %; % 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 India World s 4th largest economy by GDP on PPP basis Growth: 6.5% Selected Partner: TBC Status: Early stages Japan World s 3rd largest economy Growth: Q1 12: 1.2% Selected Partner: TBC Status: Partner to be determined 45

46 Global Transaction Banking Gurinder Nihal, SVP Head of Global Transaction Banking 46

47 GTB business strategy in VTB Group GTB aims to build a top of the class transaction bank to double its revenues every three-four years 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 47

48 GTB performance and key developments in 1H 2012 GTB operating income before provisions Industries share +77% Fees Foreign subsidiaries (3.6%) SME (27.4%) State sector (16.2%) Large business (52.9%) (RUB bn) 1H H 2012 Revenues Foreign subsidiaries (2.9%) SME (30.1%) State sector (28.4%) Large business (38.5%) GTB net interest income GTB net fee and commission income +74% +29% (RUB bn) (RUB bn) 1H H H H

49 GTB business line development within CIB Model GTB business line CIS and European subsidiaries TransCreditBank Bank of Moscow 1 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 49

50 . In..... Innovation led product offerings Current account services Term deposits Cash management Currency control Documentary business Factoring supply chain Main changes: VTB Gazprombank Rosbank Electronic Banking system development and Treasury work continue to outperform market VTB has initiated deposits and letters of credit via E-banking system Uralsib Citibank Promsvyazbank Current account offerings enhanced with minimum balances and average balances products Liquidity management variant products developed and delivered to clients Sberbank Alfa Bank VTB has partnered with Visa International and Seventh Continent to launch the innovative pay Wave contactless payments UniCredit Supply chain and factoring consolidation started Customisation at upper end of client segment and standardisation at lower end accordance with market practice Some gaps exist Some important products are not offered Many products are not offered Product is not implemented 50

51 VTB Group Financial Performance and Outlook Herbert Moos, Deputy President and Chairman of the Management Board, CFO 51

52 Solid and growing core earnings power Net interest income Net fee and commission income +98% +167% (RUB bn) (RUB bn) H 12 annualised H 12 annualised Revenues from trading excluding proprietary book Fixed Income Equities (RUB bn) H 12 annualised 52

53 Scaling down market risk exposure Equity securities (in RUB bn) 31-Dec Mar Jun-12 Equity securities as % of total assets 4.0% 4.1% 3.6% 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) (RUB, bn) 3.0 Securities portfolio breakdown Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Sep-12 Source: management estimates, not audited or reviewed. (1) 95% confidence level, 1 business day holding period; based on market risk in trading activities for JSC VTB Bank and VTB Capital Holding. 53

54 Cost management VTB s cost base was affected by acquisitions (RUB bn) TCB BoM +11% Avr.: 30.2 bn (RUB bn) 27.1 TCB 2010 avr: 24 bn BoM 1Q avr: 30 bn Q 11-2 Q112 avr: 46 bn 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 SC&AE adjusted for BoM and TCB 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 Reported SC&AE VTB Total is costs efficient as % in of terms average pf assets (1) Acquisitions cost base optimisation Q 10 TCB Q Q Q 11 BoM Q Q Q 12 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 (1) Annualised 54

55 Asset quality Сost of risk down 70 bps q-o-q to 1.0% up 30 bps in 1H 12 y-o-y to 1.4% (RUB bn) 1.2% 0.9% % % % (RUB bn) 1.1% % 32.3 Provision charge for loan impairment / Average gross loan portfolio Provision charge for impairment of debt financial assets 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 1H'11 1H'12 NPL Ratio NPL Coverage Ratio 8.6% 6.6% 6.3% 6.6% 6.8% 118.4% 117.0% 7.7% 5.9% 5.4% 5.5% 5.6% 111.8% 110.7% 111.3% 30-Jun Sep Dec Mar Jun Jun Sep Dec Mar Jun-12 Allowance for loan impairment / Total gross loans NPL ratio (1) (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. 55

56 Bank of Moscow adequately reserved, franchise delivering Bank of Moscow legacy loan portfolio (1) Gross loans Provisioning ratio (in RUB bn) FY H 2012 FY H 2012 Corporate loan portfolio % 24% Legacy portfolio Market Portfolio Related Parties Portfolio Lending to SPV Lending to operating companies % 53% % 9% % 87% % 99% 99 62% 70% Legacy portfolio as % of gross corporate loan portfolio 49% 43% - - Retail loan portfolio % 16% Legacy portfolio Legacy portfolio as % of gross retail loan portfolio % 30% 75% 51% - - (1) Source: management estimate. 56

57 VTB balance sheet conservative risk weightings Russia applies higher risk weights of its balance sheet compared to other emerging markets RWA / Assets (1H 2012 (1) ) VTB applies higher risk weights of its balance sheet compared to other emerging markets RWA / Assets (1H 2012 (1) ) Russia 103% VTB 85% Poland South Africa 64% 86% PKO 84% Greece 61% Erste 54% Italy 57% UniCredit 52% Spain UK 54% 52% Standard Chartered 51% Total EMEA 45% HSBC 51% France 40% Santander 48% Ger/Au Benelux 39% 36% BNP Paribas 38% Nordic 36% DB 27% 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 57

58 VTB balance sheet conservative leverage ratio VTB s leverage ratio is more conservative vs peers Total Assets / Total Equity (1H 2012) Avr.: 14.2% Deutsche Bank Santander BNP Paribas UniCredit Erste Bank HSBC Standard Chartered VTB PKO Source: Goldman Sachs excl. Derivatives 58

59 Capital plan Focus on the capital consolidation Perpetual hybrid Tier 1 USD 1 bn Subordinated Lower Tier 2 Notes USD 1.5 bn Perpetual Hybrid Tier 1 issuance Additional share issue 15 % 14.2% 10-11% 12.8% 9.5% 8.9% 30-Jun-2012 pro-forma inc. perpetual and lower tier2 notes pro-forma inc. tier 1 increase Tier I Tier I+II 59

60 VTB Group management targets VTB is well on track to deliver 2013 targets New strategy to be approved in Strategy targets Financial targets Assets: RUB 6,300 6,500 bn Done ROE High-teens Loan portfolio: RUB 5,100-5,500 bn On track to deliver CIR Below 50% Net profit: RUB bn On track to deliver Tier 1 ratio 10-11% ROE: 15-20% On track to deliver Corporate loans In line with the market Retail loans Outperform the market 60

61 VTB is a strong investment opportunity Leading player in Russia National champion 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 Rank Market Share % 17.3% 19.8% 13.4% 9.1% Assets Corporate Loans Corporate Deposits Retail Loans Retail Deposits Successful growth story Strong and rapidly expanding positioning in a growth economy Supported by acquisitions VTB24, Promstroybank, TransCreditBank, Bank of Moscow Strong asset growth Total assets (RUB bn) 6,790 6,858 3,697 3,611 4,291 2, ,057 1, H 12 Well established universal banking model Well diversified revenue mix (1) Superior growth in retail Diversified business model Successful expansion of retail franchise VTB is the leading investment bank in Russia With focused international presence 28% 57% 8% 7% Retail Loans and Deposits & Transaction banking Investment banking Other Retail revenues: 45% CAGR (08-1H12) Strong domestic IB Russia and CIS DCM: #1 (38 deals) Russia and CIS M&A: #5 (8 deals) Globally connected to significant trade flows / interests with Russia Operating in 22 countries, servicing about 16 million customers Well positioned to support Russian businesses abroad Austria Germany UK France Russia Belarus Kazakhstan Ukraine Georgia Italy Kyrgyzstan Azerbaijan Cyprus Armenia India Dubai Singapore China Vietnam New York ~1,700 branches worldwide ~ 10,000+ ATMs in Russia ~ 400 branches in Europe and CIS and Georgia Angola 1) Excluding intersegment eliminations. 61