© VTB 2011 1
VTB Group 1H’2012 Results
Herbert Moos
CFO, Deputy Chairman of the Management Board
Jyrki Talvitie SVP, Head of Financial Institutions and Investor Relations
September 20, 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 1H’2012 Financial Highlights
■ Net profit at RUB 33.6 bn with annualised ROE of 11%
■ Net interest income reached RUB 112.4 bn, up 18% y-o-y
■ Strong net fee and commission income of RUB 21.8 bn, up 22% y-o-y, reflects robust growth of Transaction Banking
■ The Group’s core business segments, Retail Banking and CIB, posted a profit before tax of RUB 21.5 bn and RUB 26.8 bn, versus RUB 17.8 bn and RUB 56.8 bn in 1H’2011, respectively
■ Hybrid Tier I bond issued in July puts total CAR at 13.3%, Tier I ratio at 9.5% (1)
■ Net interest margin was 4.1% in 2Q’12; up 30 bps versus 1Q’12
(1) On pro forma basis.
© VTB 2012 4
Hybrid Tier I Perpetual Bond
In July 2012, VTB Bank issued USD 1 bn 9.5% Hybrid Tier I Perpetual Bond
Key features include:
Full equity treatment under IFRS
Core capital under CBR regulation
Tier I capital under Basel I and II
Non-dilutive capital increase tool
Amendment provisions for future compliance with Tier 1 сapital requirements for possible Basel III transition of Russian regulations
Equity сredit from rating agencies
Coupon payments are tax deductible, effective cost c.7.5%
Coupon payments are not included into Interest Expenses but treated as quasi dividend; hence no impact on NIM
This pioneering transaction represents the first ever Tier 1 capital qualifying Eurobond out of Russia and incorporates an innovative structure designed to maximise impact under all key capital recognition regimes
© VTB 2012 5
VTB Group 1H’2012 Financial Highlights – Results by Segment
Transaction banking PBT
+48%
Investment Banking core revenue Loans & Deposits PBT
15.5
27.4
1H'12 1H'11
-43% -47%
(RU
B b
n)
(RU
B b
n)
(RU
B b
n)
Retail Banking PBT Other PBT
21.5 17.8
1H'12 1H'11
+21%
(RU
B b
n)
(3.9)
(6.0)
1H'12 1H'11
Corporate-Investment Business
(RU
B b
n)
+35%
Operating income
12.8
(9.6)
24.0
1H'12 1H'11
(10.8) (6.9)
19.4 12.7
8.6 5.8
1H'12 1H'11 Staff & admin. expenses Core revenue Result from principal book
© VTB 2012 6
(1) When calculating VaR the following parameters were used: 95% confidence level, 1 business day holding period. (2) Calculated including Financial assets at fair value through profit or loss, Financial assets pledged under repurchase agreements and loaned financial assets, Financial assets available-for-sale. Investment securities
held-to-maturity are NOT included.
Securities portfolio breakdown
(in RUB bn) 31-Mar-12 30-Jun-12 17-Sep-12
Equity securities 265 247 n/a
Principal book gross delta 133 101 67
VaR (1) 2.9 2.0 1.5
Securities Portfolio
Focus on substantial reduction of equity exposure risk level and size
■ Size of Fixed Income portfolio is function of general business dynamics and liquidity levels
■ Moderate risk: bulk of the portfolio consists of Russian corporate and Government bonds with short maturity profile and repoable with the CBR
(in RUB bn) 31-Mar-12 30-Jun-12
Debt securities (2) 378 459
Russian 307 318
- issued by Russian government 48 41
- issued by Russian companies and banks 259 277
Foreign 71 141
Source: management estimates, not audited or reviewed by the auditors.
© VTB 2012 7
Performance of Loans and Deposits Subsegment – Financial Result
(1) Represents gains less losses arising from financial instruments and foreign currencies. (2) Operating income before provisions is calculated before provisions for impairment of debt financial assets.
1H’2011 1H’2012 1H’2011 1H’2012
Loans & Deposits Operating Income Loans and Deposits Profit Before Taxation
(1)
(18.5)
(20.5)
(24.7)
(14.3)
58.7
44.4
27.4
60.7
40.2
15.5
Operating income before
provisions
Provision charge
Operating income after provisions
Staff costs & administative
expenses
Segment result (PBT)
(RU
B b
n)
(5.6)
BoM
a) countercyclical provisioning in 1H’12 b) increase in staff costs and administrative expenses due to BoM consolidation
1H’12 subsegment results impacted
by
50.2
15.4
(6.9)
58.7 50.2
14.9
(4.4)
60.7
Net interest income Net result from financial
instruments
Other operating income
Operating income before provisions
(RU
B b
n)
© VTB 2012 8
Performance of Corporate and Investment Banking Loans & Deposits
(1) Calculated excluding the effect of provision releases at TransCreditBank and the Bank of Moscow. (2) 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). (3) 1Q’12 and 2Q’12 data adjusted for promissory notes (equal to RUB 95.2 bn) that according to management view, can be classified as customer deposits.
Corporate Liabilities Corporate Loan Portfolio
-2%
(RU
B b
n)
Term deposits
Current accounts -13%
(RU
B b
n)
Average Yield and Cost of Funds
Average cost of corporate deposits and current accounts
Average yield on corporate loans
Market Shares and Ranks in Russia
Corporate loan market share (2) 1
Corporate deposit market share (3)
2
1,447 1,403 1,787 1,875
1,232
676 740
649 597
541
2,123 2,143 2,435 2,472
1,772
30-Jun-12 31-Mar-12 31-Dec-11 30-Sep-11 30-Jun-11
4.4% 3.9%
17.3% 18.2% 18.7%
12.0%
19.8% 20.4% 21.1%
15.0% 2
1 1
2
2 2 2
2
30-Jun-12 31-Mar-12 31-Dec-11 31-Dec-10
4.5% 4.6% 3.9% 3.1% 2.8%
8.9% 8.5% 10.1%
8.6% 8.8%
8.5% (1)
2Q'12 1Q'12 4Q'11 3Q'11 2Q'11
3,696 3,690 3,766 3,661
2,668
30-Jun-12 31-Mar-12 31-Dec-11 30-Sep-11 30-Jun-11
© VTB 2012 9
Performance of Corporate and Investment Banking IB and GTB
Rus
sia
&
CIS
DC
M
Investment Banking – Key Developments in 2Q’12
Global Banking DCM: Clear leadership maintained with16 transactions closed in 2Q’12 M&A: Key deals sale of minority stake in Enel OGK-5 by InterRao’s (USD 750 mln) acquisition of LLC Metalloinvesttrans by Globaltrans Investment (USD 540 mln) sale of shares and GDRs of Jenington International (subsidiary of Polyus Gold
International Ltd) to СIC (USD 425 mln)
Global Markets ■ Official launch of business operations in the U.S.
Investment Management ■ VTB Capital Private Equity and Special Situations (PESS) initiated
several prominent deals (a minority stake purchase in Zapadnaya Gold Mining Ltd, a joint venture with Burger King Corporation)
GTB – Key Developments in 2Q’12
Product Developments ■ Enhanced liquidity management capabilities developed (several
minimal balances on one current account introduced, centralised payments control improved)
■ Electronic banking platform functionality broadened for foreign currency letters of credit
■ VTB has partnered with Visa International and Seventh Continent to launch the innovative payWave contactless payments
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
■ Trade finance deals closed with 35 groups of companies (283 legal entities) adding RUB 67 bn to portfolio
Rus
sia
& C
IS D
CM
1H
’201
2
GTB net fee and commission income
+29%
Rus
sia
& C
IS M
&A
1H’2
012
# Lead Manager Amount, (USD mln) # of deals % share
1 Sberbank 10,206 20 26.8
2 Deutsche Bank 7,006 6 18.4
3 Goldman Sachs 6,333 13 16.6
4 UBS 5,143 3 13.5
5 VTB Capital 5,098 8 13.4
# Lead Manager Amount, (USD mln) # of deals % share
1 VTB Capital 6,814 38 20.3
2 Sberbank 4,914 31 14.7
3 Citi 3,840 12 11.5
4 BNP Paribas 2,173 4 6.5
5 Deutsche Bank 2,131 5 6.4
8.0
6.2
1H'12 1H'11
© VTB 2012 10
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 Average Yield and Cost of Funds
Average Yield and Cost of Funds
Term deposits
Current accounts
Retail Deposits
Mortgage loans Car loans
Consumer loans & other
(RU
B b
n)
(RU
B b
n)
+13% +15%
Average cost of retail deposits and current accounts
Average yield on loans to individuals
Market Shares and Ranks in Russia
Retail loan market share
Retail deposit market share
2
2
2 2
2 2
2 2
2 2
2
2
2
2
2
2
2
2
2
2
2
13.4% 13.6% 13.7% 12.2%
9.1% 8.9% 9.0% 7.2%
2 2 2 2
2 2 2 2
30-Jun-12 31-Mar-12 31-Dec-11 31-Dec-10
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
15.7% 15.9% 15.9% 16.6% 16.8%
5.3% 5.0% 5.0% 5.7% 5.9%
2Q'12 1Q'12 4Q'11 3Q'11 2Q'11
© VTB 2012 11
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)
Financial Update
© VTB 2012 13
Operating Income and NIM
(1) Operating income before provisions is calculated before provisions for impairment of debt financial assets and impairment of other assets, contingencies and credit-related commitments. (2) Calculated including Gains less losses arising from financial instruments at fair value through profit or loss, Gains less losses from available-for-sale financial assets, Gains less losses / (losses net of gains) arising from
extinguishment of liability, Gains less losses arising from dealing in foreign currencies and Foreign exchange translation losses net of gains. (3) Net interest income divided by average interest earning assets, which include gross loans and advances to customers, due from other banks (gross), debt securities and correspondent accounts with other banks.
Operating Income before Provisions (1)
Other operating income
Net interest income before provisions
Net fee and commission income
Net result from financial instruments (2)
+6%
Net Interest Margin (3)
- 80 bps
+ 30 bps
3.8% 4.1%
1Q'12 2Q'12
4.8% 4.0%
1H'11 1H'12
19.1 23.1 20.9 5.0
95.1 112.4
17.9 21.8 153.0 162.3
1H'11 1H'12
(RU
B b
n)
15.8 13.2 15.9 8.3 14.8 5.3
(19.5) (29.2)
22.8
(17.8)
49.1 54.0
77.9 54.0 58.4
9.9 9.2
12.1 10.3
11.5
80.1
56.9
76.7 95.4 66.9
2Q'11 3Q'11 4Q'11 1Q'12 2Q'12
(RU
B b
n)
© VTB 2012 14
Staff and Administrative Expenses
Staff Costs and Administrative Expenses
Staff costs (1) Administrative expenses Cost / Income ratio
(1) Including pensions. (2) Staff costs and administrative expenses per average employee (annualized).
Number of Employees
Russia Europe CIS and other
19.4 8.9 26.4 22.7 24.2
14.9 14.6
24.3 19.8 20.4
34.3 23.5
50.7 42.5 44.6
42.8% 41.3%
66.1%
44.5%
66.7%
2Q'11 3Q'11 4Q'11 1Q'12 2Q'12
(RU
B b
n)
39.3 46.9
28.0 40.2
67.3 87.1
44.0% 53.7%
1H'11 1H'12
(RU
B b
n)
45,459 54,570 56,800 58,338 60,381
809
900 941 980 1,007
8,338
10,215 10,171 10,085 10,214 54,606
65,685 67,912 69,403 71,602
30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12
Costs per Average Employee (2)
2.5 2.5
1H'11 1H'12
flat
© VTB 2012 15
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
© VTB 2012 16
Healthy Balance Sheet Structure
Asset quality
Assets Structure
Liabilities Structure
(1) Includes debt and equity securities, assets pledged under REPO, securities classified as due from other banks and loans to customers, and derivatives. (2) Includes investment in associates, premises and equipment, investment property, intangible assets and goodwill, deferred tax assets and others. (3) Other borrowed funds include bilateral and syndicated bank loans, secured and unsecured financing from central banks. (4) 1Q’12 and 1H’12 data adjusted for promissory notes (equal to RUB 95.2 bn) that according to management view, can be classified as customer deposits.
Net Interest Spread
Other assets (2)
Securities portfolio (1)
Loans to customers (net)
Due from other banks
Cash and mandatory reserves
Other liabilities
Subordinated debt
Debt securities issued (4)
Customer deposits (4)
Due to banks and other borrowed funds(3)
Customer Loans / Customer Deposits
3.9%
Average yield on interest earning assets
Average cost of interest bearing liabilities
12% 10% 10% 10% 10%
63% 65% 63% 66% 63%
6%
6% 6% 6% 6%
13%
13% 14% 12% 15%
6%
6% 7%
6% 6%
4,720
6,335 6,790 6,451 6,858
30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12
(RU
B b
n)
5% 4% 4% 4% 4% 4% 4% 4% 4% 4% 13% 12% 11% 13% 12%
64%
62% 58% 59% 57%
14%
18% 23% 20% 23%
4,123
5,711 6,165 5,821 6,229
30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12
(RU
B b
n)
9.0% 9.0%
10.1%
9.0% 9.3%
4.3% 4.2% 4.4% 5.1% 5.1%
9.0%
2Q'11 3Q'11 4Q'11 1Q'12 2Q'12
4.2%
122.5% (4) 124.1% (4) 119.6% 116.4% 113.7%
30-Jun-12 31-Mar-12 31-Dec-11 30-Sep-11 30-Jun-11
© VTB 2012 17
BIS Group Capital
Tier I Development
1Q’12
Tier I before
deductions
513
Retained earnings
+ 16
Other Total Tier I capital
514
2Q’12 1Q’12
RWAs RWAs
5,364 5,773
+8%
Tier I Tier II less deductions Total capital adequacy ratio Tier I ratio
BIS Group Capital
(RU
B b
n)
- 14
Treasury shares
- 1
2Q’12
566 508 509 513 514 547
101 223 224 223 223 223 667 731 733 736 737 770
14.1% 13.1% 13.0% 13.7% 12.8%
12.0% 9.1% 9.0% 9.6% 8.9%
30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12 pro forma
(RU
B b
n)
13.3%
9.5%
Total CAR +60 bps
Tier I ratio +60 bps
(1)
(1) Calculated on pro forma basis including Tier I Hybrid bond.
flat
(RU
B b
n)
© VTB 2012 18
BoM and TCB – 1H’12 Highlights
(1) ROE down due to additional share issue of RUB 7.6 billion finalised in February 2012.
Profile ■ Distribution network 296 offices
with 46% in Moscow and Moscow region ■ c.9 mln retail customers ■ c. 200 thsd corporate customers
■ 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 Change
ROA 2.0% 2.1% 10 bps
ROE 27.7% 24.0%(1) -370 bps
Tier I 9.3% 11.4% 210 bps
BIS CAR 15.2% 15.4% 20 bps
Loan portfolio (net) + 13% YTD
Net profit 5 bn
Total equity + 35% YTD
Loan portfolio (net) + 11% YTD
Net profit 10 bn
Total equity + 3% YTD
31-Dec-11 30-Jun-12 Change
ROA 2.6% 1.9% -70 bps
ROE 24.7% 12.2% -
Tier I 27.0% 23.5% -350 bps
BIS CAR 33.6% 29.0% -460 bps
Bank of Moscow TransCreditBank
Source: Management accounts Source: Management accounts
© VTB 2012 19
Appendix
© VTB 2012 20
VTB Group Public Debt Instruments
Source: VTB’s website (1) Exchange rates published by the CBR are as of September 17, 2012. Note: In addition to international debt, VTB Group currently has RUB 197 bn outstanding domestic bonds. (2) As the result of the reorganisation of JSC Bank VTB North-West and its merger with JSC VTB Bank, March 18, 2011, JSC VTB Bank has assumed the rights and obligations of JSC Bank VTB North-West as the Borrower.
VTB Group Public Debt Instruments Outstanding (1) VTB Group Public Debt Instruments Outstanding
VTB Group Debt Maturity Profile
USD EUR RUR CHF SGD CNY
2,026
3,290 3,375
4,041
251
2,400
750 1,000
1,054
2,206
3,130 3,393
803
321
123 245 158
973
2012 2013 2014 2015 2016 2017 2018 2020
(US
D m
n)
327
Borrower Equivalent amount (USD, mn) Instrument Maturity Date/Put
or Call Option Coupon
2012 VTB 1,054 Series 1 EMTN 2 Oct-12 6.61% VTB 973 Series 3 RUB EMTN 2 Nov-12 6.85% Subtotal 2,027 2013 Bank of Moscow
123 SGD public debt instrument
Feb-13 4.25%
Bank of Moscow
500 Public debt instrument May-13 7.34%
VTB 1,706 Series 4 EMTN 2 (put option)
May-13 6.88%
VTB 428 Series 9 CHF EMTN 2 Aug-13 4.00% Bank of Moscow
375 CHF Public debt instrument
Sep-13 4.50%
VTB 158 Series 11 CNY EMTN 2 Dec-13 2.95% Subtotal 3,290 2014 VTB 245 Series 13 SGD EMTN 2 Jun-14 3.40% VTB 3,130 Loan repayment Jul-14 Subtotal 3,375 2015 Bank of Moscow
750 Public debt instrument Mar-15 6.70%
VTB 1,250 Series 7 EMTN 2 Mar-15 6.47% VTB 693 Series 6 EMTN 1
(put option) Jun-15 6.25%
VTB 327 Series 17 SGD EMTN 2 Jul-15 4.00%
VTB (2) 400 Subordinated Debt Sep-15 5.01% VTB 321 Series 14 CHF EMTN 2 Nov-15 5% Bank of Moscow
300 Public debt instrument Nov-15 5.97%
Subtotal 4,042 2016 VTB 251 Series 9 EUR EMTN 1 Feb-16 4.25% Subtotal 251
2017 VTB 2,000 Series 15 EMTN2 Apr-17 6.00% Bank of Moscow
400 Subordinated debt (call option)
May-17 6.81%
Subtotal 2,400
2018 VTB 750 Series 12 EMTN 2 Feb-18 6.32% Subtotal 750
2020 VTB 1,000 Series 10 EMTN 2 Oct-20 6.55% Subtotal 1,000 Perpetual VTB 1,000 Tier 1 Perpetual
Eurobond (call option) Dec-22
(call option) 9.5%
Subtotal 1,000
Total 18,135
© VTB 2012 21
VTB Group International Public Debt Instruments Issued in 2011-2012
Borrower Date of issue Amount (mn) Instrument Maturity date Coupon / rate
VTB
February 2011 USD 750 Series 12 EMTN 2 February 2018 6.315%
VTB
June 2011 SGD 300 Series 13 EMTN 2 June 2014 3.4%
VTB July 2011 USD 3,130 Syndicated loan July 2014 LIBOR+1.3%
VTB November 2011 CHF 300 Series 14 EMTN 2 November 2015 5.0%
VTB USD 1.5 bn (April 2012)
USD 500 mln tap (August 2012) USD 2,000 Series 15 EMTN 2 April 2017 6.0%
VTB July 2012 SGD 400 Series 17 EMTN2 July 2015 4.0%
VTB August 2012 USD 1,000 Tier 1 Perpetual Eurobond
First call date on December 6th, 2022 and every interest payment date thereafter (every June 6th and December 6th thereafter)
9.5% fixed until the first call date, then reset on 6th of December 2022 and every 10th year thereafter