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9M 2012 IFRS Results
Core business strength fully intact
Conference Call
November 21, 2012
2
Assets up 5.9% YtD to RUB 194,709 mln
Corporate portfolio up 6.3% YtD to RUB 120,109 mln
Retail portfolio up 28.8% YtD to RUB 31,376 mln
Client funds up 4.0% YtD to RUB 150,982 mln
NPLs came to 9.41%
1day+ overdues covered by 101%, 90days+ overdues – by 153%
9M 2012 Highlights
Net income surged to RUB 1,787 mln, up 59,1% YoY
Net interest income was up 27,1% YoY to Rub 6,664 mln,
Net fees up 8,2% from 9М’11 to RUB 3 737,
NIM was up to 4,7% versus 4,0% in 9М’11
Cost to income decreased 876 b.p. to 56,4% for 9M’12
ROE improved to 12,3% up from 8,6% in 9М’11
Capital adequacy (tier 1 + tier 2) increased to14,2%, capital adequacy (tier 1) – 12,1%
3
Macroeconomic tailwinds in Q3
Despite deterioration
of growth trends in
the economy…
…fortress balance
sheet provides
flexibility for decent
performance
GDP growth of just 2.9% YoY in Q3 versus 4% in Q2
Retail trade growth slowed to 4.4% YoY in September from 7.3% in H1’12
Inflation accelerated to 6.7-6.8% in October, but failed to support consumer
spending
Ruble exchange rate appreciated by 6% in Q3
Investments declined 1.3% YoY in September, given 7.2% fall in housing
construction
Capital outflow continued with $58 bln Ytd figure
Refinancing rate up 25 bps to 8.25% to cool down retail growth
Liquid assets maintained above 23%, while their structure shifted to more
profitable one
Corporate portfolio decline (-3% QoQ) offset by retail boost (+11% QoQ)
Balanced currency and maturity structure of assets and liabilities with prevailing
Rouble-nominated instruments
Net interest income flat QoQ at Rub 2.3 bln, but non-interest income up 7.3%
QoQ to Rub 1.6 bln, supporting revenue growth
Operating efficiency improved with expenses down by 4.1% QoQ amid tight
cost management
4
Assets
RUB bln
137 137 144 152 151 138 145 143 152 151
99% 95%
101% 100% 100%
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Gross loans
Customer funds
L/D ratio
RUB bln
5%
55% 16%
6%
0%
18%
Corporate loan
portfolio Retail loan
portfolio
Other assets
Due from other
banks
Cash and
equivalents
Securities
9 10 10 10 10
103 101 106 111 107
21 23 25 27 30
17 9 14
12 12 0 1
27 40 29 34 35
177 184 183 194 195
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Cash andequivalents
Due frombanks
Securities
Retail loans
Corporateloans
Otherassets
6,7% 6,0%
9,5% 11,0%
6,0% 6,1%
22% 23%
Q2 2012 Q3 2012
Cash and Equivalents,
Obligatory Cash
Balances with the CBRF
Correspondent
accounts
Securities
Reliable assets structure…
IEA made up 77% of total assets
…with high level of liquid instruments
LTD ratio at optimal levels
5
27 842
59 801
63 842
Loans
Moscow Oblast
(40%)
Moscow (18%)
Other
regions(42%)
*as of 30.09.2012
Rub bln
RUB
151,485
mln
27%
21%
1%
23%
1%
7%
6%
5% 9%
*as of 30.09.2012
Construction Manufacturing
Agriculture
Wholesale &
retail trade
Administrations
Other Transport
Individuals
RUB
151,485
mln
77,2 78,0 73,6 70,1 72,3
31,4 28,3 25,9 24,4 22,5
1,8 3,4 3,3 2,7 3,9
41,1 42,7 41,2
40,2 38,1
Q3'12Q2'12Q1'12Q4'11Q3'11
SME Individuals Administrations Large corporates
-0,5%
13,6 15,4 17,0 18,5 20,8
6,5 6,8
6,8 7,6
8,4
2,3 2,2
2,2 2,1
2,1
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Mortgages Consumer and auto loans Credit cards
+10,8%
SMEs are key growth driver in corporates…
Balanced presence in all regions of interest
…consumer and mortgages – in retail
Breakdown by industry
+39,8%
+11%
6
1 399 827 827 777 965
5,0% 4,4% 4,3%
3,6% 3,5%
6,2%
3,4% 3,2% 2,7%
3,1%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Retail
8 464 7 769 8 263 8 120 7 841
11,3% 11,5% 11,1% 10,4% 10,5%
11,1% 10,7% 10,8% 10,0% 9,9%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
SMEs
1 625 1 980 3 400 3 400
5 445
7,6% 8,7% 8,9%
10,1% 12,2%
4,3% 4,9%
8,3% 8,0%
13,2%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Large corporates
NPLs, RUB mln Provisions, % of total portfolio NPLs, % of total portfolio
Credit quality management
15
* NPL includes the whole principal of loans at least one day overdue either on
principal or interest as well as not overdue loans with signs of impairment
2,86% 2,24%
1,02%
1,92% 2,14% 2,06%
1,65%
1,02%
1,77%
1,71%
Q3 2012 Q2 2012Q1 2012Q4 2011Q3 2011
Charges to provisions to avggross loans, QoQ
Charges to provisions to avggross loans, YtD
+ Rub 581 mln new NPLs
- Rub 860 mln recoveries + Rub 304 mln new NPLs
- Rub 116 mln recoveries
11 488 10 576 12 490 12 297 14 251
9,26%
9,44% 9,25% 9,09%
9,52%
8,40% 7,70%
8,68% 8,08%
9,41%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
NPLs, RUB mln
Provisions, % of total portfolio
NPLs, % of total portfolio
*
RUB mln
+ Rub 2,156 mln new NPLs
- Rub 111 mln recoveries
NPLs categorization: deterioration in large corps, while absolute improvement in SME
Annualized cost of risk NPLs dynamics
7
Credit quality
as of 30.09.2012 Large
corporates SMEs Mortgages Other
retail Total % of total
loans
Gross loans, including 41,116 78,993 20,807 10,569 151,485 100.0%
Current loans 35,671 71,152 20,363 10,048 137,234 90.6%
Past-due but not impaired, of them - 32 260 105 397 0.3%
Less than 90 days - 32 230 97 359 0.2%
Over 90 days - - 30 8 38 0.1%
Impaired, of them 5,445 7,809 184 416 13,854 9.1%
Less than 90 days 3,726 706 7 36 4,475 2.9%
Over 90 days 1,719 7,103 177 380 9,379 6.2%
Total NPLs 5,445 7,841 444 521 14,251 9.4%
Provisions (5,006) (8,321) (541) (554) (14,422) 9.5%
Net Loans 36,110 70,672 20,266 10,015 137,063
-
Provisions to
NPLs Ratio
NPL -
101%
Rescheduled
Loans
4.6%
the whole amount of loans with principal overdue for more than 1 day as well
as loans with any delay in interest payments.
Provisions to
90 days+
NPLs
153%
8
19 20 22 24 25
71 72 72 77 78
16 20 18 19 18
32 33 31
32 30
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Corporate deposits Retail deposits Retail accounts Corporate accounts
Liabilities and capital
18 18 19 20 20 4 4 4 4 5 9 8 7 7 8 6 7 8 8 8
19 20 22 24 25
32 33 31 32 30 16 20 18 19 18
71 72 72
77 78
177 184 183 194 195
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Retail deposits
Retail accounts
Corp. accounts
Corp. deposits
Securities issued
Due to other banks
Other Liabilities Subordinatedloans Equity
RUB bln
11,6% 11,9% 11,8% 11,6% 12,1% 13,4% 13,8% 13,4% 13,2%
14,2%
11,6%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2013 30.09.12
Tier 1 Tier 1 + Tier 2 CAR under CBR rules
(N1)
11%
MIN RUB 80%
USD 13%
EUR 7%
RUB80%
USD13%
EUR; 7%
Assets Liabilities
Data as of September 30, 2012
RUB bln
32%
… driven mostly by client funds Funding grows in line with assets…
Capital position exceeds the requirements FX structure matched
+9,2% -0,6%
9
Financial highlights
9M’12 9M’11 Q3’12 Q2’12
Interest income 12 150 10 265 4 263 4 118
Interest expense (5 486) (5 022) (2 010) (1 856)
Fee and commission income 4 029 3 746 1 424 1 387
Fee and commission expense (292) (292) (104) (96)
Other operating income 649 433 302 220
Total operating income b.p. 11 050 9 130 3 875 3 773
Operating expenses (6 231) (5 948) (2 051) (2 138)
Provisions (2 271) (1 646) (1 083) (830)
Provisions on non-core assets (316) (133) (2) (1)
Tax (445) (280) (156) (126)
Net profit 1 787 1 123 583 678
10
4,6% 4,9% 4,7% 4,8% 4,6%
Net interest income impacted by growth on both sides of the balance sheet
-1,6 -1,5 -1,6 -1,9 -2,0
3,6 3,7 3,8 4,1 4,3
Interest Expenses
Interest Income
Q2’12 Q3’11 Q4’11 Q1’12
+28.1%
Q3’12
+8.3%
6,38% 7,13% 6,93% 6,72% 6,69%
10,40% 10,74% 10,82% 11,16% 11,37%
4,02% 3,61% 3,88% 4,44% 4,68%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Interest SpreadYield on earning assets (net)Cost of funds
NIM +3 bps
-16 bps
+18.7%
+3.5%
Q2’12 Q3’11 Q4’11 Q1’12 Q3’12
…with NIM slightly down due to higher base… Flat net interest income QoQ…
…amid surging interest rates environment
4,80%
0,30% 0,30% 0,01%
0,14%
4,64%
Q2 NIM Loanseffect
Depositseffect
Other Baseeffect
Q3 NIM
11
25%
12% 13%
31%
42%
0,0% 1,0% 2,0% 3,0% 4,0%Net fee margin
vbank
peer 1
peer 2
peer 3
2,0 2,2 2,1 2,3 2,3
1,3 1,4
1,1 1,3 1,3
0,1 0,2
0,1 0,2 0,3
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Net interest income Net fees Other income
Decent operating results from strong non-interest
revenues
+13.1%
+2.7%
353 414 326 377 391
310 337
256 304 300
245 253
219 250 265
348 364
325 360 364
1 256 1 368
1 126
1 291 1 320
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Settlements Cash transactions Other CardsRUB mln
+2.2% +5.1%
Share of non-interest
income in total operating
income b.p.
* Vbank data as of 3Q’12, Peer1, Peer2, Peer 3, Peer 4 – 2Q’12
RUB bln
55%
18%
23%
4%
55%
17%
24%
4%
Cards
Other
Corporate
business Retail business
Cards
Other Corporate
business
Retail business
Q3 2012 Q2 2012
… supported by well-diversified net fees Solid operating revenues…
Segment breakdown of non-interest income Strongest net fee margin among peers
12
Cost efficiency in focus
RUB mln
1 224 1 352 1 258 1 260 1 236
835
1 053 784 878 815
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Personnel expenses
Non-personnel expenses
-4.1%
-0.4%
24% 28% 23% 23% 21%
36% 36%
37% 34% 32%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Personnel expensesOther expenses
-+7.2 pps
60% 64%
60%
53% 57%
Operating expenses were under strict control
throughout 2012, year-on-year dynamics of 4.6% was
below inflation growth
Decline in Q3’12 was partially attributable to cut in
staff costs and continued optimization of
administrative costs
Personnel expenses remained the key contributor
with the share of 60% in OPEX. Decrease in Q3 was
due to lower average headcount. Earned fees cover
staff costs by 107%
3. Application of new operating model for the whole bank Transfer of supporting processes to the centralized back-office from branches
Testing and launch of automated and centralized support systems
2.Preparative process and pilot project
Amendments to internal documents, launch of pilot
projects
Implementation of IT solutions for automation and
centralization
Staff coaching, KPIs introduction, working groups
of the project
1. Concept development of new operating model
Define format of branches, geography and headcount of
centralized back-office
IT requirements for centralization (systems,
processes, infrastructure)
New motivation system development
Key points Cost efficiency project
Consistent improvement of quarterly CIR Operating expenses breakdown
13
Net profit affected by elevated provisioning
-0,7 -0,7 -0,4 -0,8 -1,1
1,4 1,4 1,4 1,6 1,8
Operating profit before provisions and taxes
Provisions
+33.4%
Q3’11 Q4’11 Q1’12 Q2’12
+11.6%
Q3’12
0,411 0,471 0,526 0,678
0,583
-14%
+41.8%
Q3’11 Q4’11 Q1’12 Q2’12 Q3’12
Net profit
30,8% 29,7% 29,0%
33,9% 36,6%
9,3% 10,4% 11,2% 14,0%
11,7%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Operating profit before provisions and taxation/Average equity
ROE
3,12% 3,00% 2,96%
3,47% 3,75%
0,94% 1,05% 1,15% 1,44%
1,20%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Operating profit before provisions and taxation / Assets
ROA
Net profit development High provisions partially offsets strong operating
performance
ROA, % ROE, %
14
Liquid assets maintained above 23%
Good opportunities for growth in retail and SME
Improving yields across the portfolio
Key takeaways of Q3 2012
Increased funding costs are gradually passing
on to the borrowers
Strong non-interest income supports revenues
Key target – to maintain margins
Strengthened capital position due to
subordination
High share of interest-free funds
Limited exposure to market funding
Particular focus on efficiency improvement
lead to decline of Cost-to-Income ratio
Strict control over operating expenses
Project on operating efficiency is expected to
bring fruits going forward
…on the back of reliable funding Flexible assets structure…
…with all eyes on efficiency Solid core operating results …
15
Questions and answers
[email protected] http://www.vbank.ru/en/investors
Elena Mironova
Deputy Head of IR
+7 495 620 90 71
Andrey Shalimov
Deputy Chairman of the Management
Board
16
Disclaimer
Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the
future financial performance of Bank Vozrozhdenie (the Bank). Such forward-looking statements are based on numerous assumptions
regarding the Bank’s present and future business strategies and the environment in which the Bank will operate in the future.
The Bank cautions 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.
The Bank is not responsible for statements and forward-looking statements including the following information:
- assessment of the Bank’s future operating and financial results as well as forecasts of the present value of future cash flows and related
factors;
- economic outlook and industry trends;
- the Bank’s anticipated capital expenditures and plans relating to expansion of the Bank’s network and development of the new services;
- the Bank’s expectations as to its position on the financial market and plans on development of the market segments within which the
Bank operates;
- the Bank’s expectations as to regulatory changes and assessment of impact of regulatory initiatives on the Bank’s activity.
Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially
from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include:
- risks relating to changes in political, economic and social conditions in Russia as well as changes in global economic conditions;
- risks related to Russian legislation, regulation and taxation;
- risks relating to the Bank’s activity, including the achievement of the anticipated results, levels of profitability and growth, ability to create
and meet demand for the Bank’s services including their promotion, and the ability of the Bank to remain competitive.
Many of these factors are beyond the Bank’s ability to control and predict. Given these and other uncertainties the Bank cautions not to
place undue reliance on any of the forward-looking statements contained herein or otherwise.
The Bank does not undertake any obligations to release publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.
