H1 2009 earnings presentation of Bank Vozrozhdenie

1. H1 2009 IFRS Results
Sound operating results despite challenging environment.
Conference Call
August 26, 2009

2. Agenda
• Macroeconomic overview
• Highlights of financial results
• Risk management
• Recent developments
• Q3 expectations
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3. Macroeconomic Overview
Industry Production, % CPI evolution
Y-o-Y,%
120% M-o-M,% 116 CPI 2008 CPI 2009 Official forecast
110% 104.5 104.7
114
112
100%
110
106% 97.9
90% 108
101% 106
80%
91% 104
90% 89%
70% 87% 88% 102
84% 86%
83% 83% 100
60%
98
50% 96
01.10.08 01.01.09 01.04.09 01.07.09 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Unemployment and Income Operating Environment
Unemployment,% (left axis) - Continued sharp Q2’09 GDP contraction (-10,9%) in Russia and
Real Disposable Income, % Y-o-Y (right axis) the highest inflation comparing to developed countries
11% 105
102,3 103,4
101,4 - Industrial production is still shrinking but at a slower pace.
100,3
99,0 First positive signs of some growth appeared in June (+4,5%
100
9% 9,5% M-o-M)
8,7% 9,2%
8,8%
8,5% 8,3% 95 - Slower then expected recovery of consumption resulted in
7,8%
downward trend in inflation. Ministry of Economic Development
7% 92,2
reviewed its forecast from 13% to 12 – 12-5% by the year end.
90
88,4
- Three refinancing rate cuts (-150 bps) made by the CBR in
5% 85 Q2’09 in order to decrease lending rates are in line with the
01.01.09 01.04.09 01.07.09 slowing inflation
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4. H1 2009 Financial highlights
H1 2009 H1 2008 Change Y-o-Y
Total Deposits 96 146 100 885 -4.6%
Net Loans 90 177 93 449 -3.5%
Loans to Deposits ratio 101.7% 95.8% 5.9 p.p.
Net Profit 642 1 559 -58.8%
Total Operating Income b.p. 6 842 5 825 +17.5%
Total Operating Costs, of them - 2 912 - 3 351 -13.1%
Personnel expenses -1 631 -2 112 -22.8%
Cost to Income ratio 42.6% 57.5% -14.9 p.p.
Capital Adequacy 18.3% 14.4%
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5. Revenues continue to be sound
+30%
- Due to intra-quarter loan portfolio
-4,5% contraction interest income decreased
Interest Income
Interest Interest Expenses by 4,5% Q-o-Q. Portfolio repricing was
completed mainly in Q1’09
Income and 3,9 4,4 4,6 4,3
3,3
Interest - Despite the significant inflow of retail
Expenses, -1,4 -1,7 -1,8 -2,2 -2,2 and corporate deposits
funding costs remained flat due to good
RUB bln 0% growth in non-interest bearing card
+83% accounts and partial repayment of CBR
funding as well as reduction in its
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09
pricing.
-0,4pps
- Due to intra-quarter loan book decrease
net interest margin decreased by 0,7
7,50% pps Q-o-Q pressured by lower interest
6,40% 6,70% 6,70%
6,00% income.
NIM
evolution
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09
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6. Tight control over expenses
Net interest income Net fees
Other income Operating Expenses
- Operating income decline resulted from
0%
-11% lower net interest income in Q2’09.
Notwithstanding slowdown of clients’
Operating 0,2 0,1
1,1
0,3
1,2
0,4
0,9
0,3 business activity net fees remained at
1,0 0,9
Income and 2,0 2,3 2,6 2,3 2,1
the same level as in Q1’09 and
amounted to 29% of total operating
Expenses, -1,4
income .
-1,8 -1,7 -2,0 -1,5
RUB bln - Operating expenses Q-o-Q grew by 7%.
Personnel expenses remained flat.
+7%
-14% Main growth came from fixed-assets
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 related costs.
-7,2pps
- Cost-to-Income ratio reduced by
54,7% 7,5 pps Y-o-Y.
Cost to 47,8% 50,0% 47,2% Q2 growth caused by lower income
38,4% base.
Income Target for 2009 - focus on cost
management with key area of saving –
before stuff costs (0% Q-o-Q).
provisions,%
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09
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7. Net profit declined due to lower income and higher provision
charges
+13,3%
Operating profit before provisions -23%
Operating Provisions
- Operating profit before provisions
declined by 23% Q-o-Q, but still
profit and 1,8 2,0 2,2
1,7
exceeded the result of the previous
1,5 year by 13%.
provisions,
-0,3 -0,6 - We continue to apply conservative
RUB bln -1,2
-1,6
-1,2 policy of provisioning for loan
impairment.
Charges grew 4 times Y-o-Y
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09
-67%
Net profit - Net profit was 34% less than in Q1 2009
due to significant charges to
Net profit, provisions for loan impairment and
-34% lower operating income
RUB bln 0,9 1,0
0,6
0,4
0,3
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09
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8. Credit Quality Management
NPL growth in line with expectations Good diversification by industry
As at June 30,2009
Provisions, % of Total Loans Other
NPL, % of Total Loans * 7,70%
of them impaired, % of Total Loans 7,30% Transport 13%
7% Manufacturing
5,00% 4,79% 6,27% 26%
State
3,59% 3,53% 3,40% organizations 10% RUB
2,50% 80,845
1,40% 1,80% Finance 4% mln.
0,58% 2,20%
12% Construction
24% 4%
2005 2006 2007 2008 H1 2009 Wholesale &
* NPL includes the whole principal of loans at least one day overdue either retail trade Agriculture
on principal or interest
Retail over-due loans* NPL Distribution
6,0% As at June 30,2009
Overdue loans on credit cards Loan portfolio NPLs Provisions
5,0% Overdue car and consumer loans
Overdue mortgages/mortgage portfolio 8,3%
7,2%
4,0% 7,3%
7,3%
6,3%
3,0%
80 845
2,0% 4,3%
1,0% 8 533 8 387
0,0%
Corporates Mortgages Other retail loans
01.01.06 01.07.06 01.01.07 01.07.07 01.01.08 01.07.08 01.01.09 01.07.09
* Over-due includes the whole principal of loans at least 30 day overdue
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9. Credit quality outlook
Large SMEs Mortgages Other Total % of
corporates retail total
as of 30.06.2009 loans
Gross loans, including 25 680 55 165 8 533 8 387 97 765 100.0% Provisions
Coverage
Current loans 25 580 49 368 7 916 7 773 90 637 92.7% Ratio
NPLs, of them 100 5 797 617 614 7 128 7.3%
106%
Past-due less - 359 318 164 841 0.9%
than 30 days
Past-due over - 10 139 3 152 0.2%
30 days Rescheduled
Impaired 100 5 428 160 447 6 135 6.3% Loans
Provisions - 991 - 5 705 -363 - 529 -7 588 7.8%
8.4%
Net Loans 24 689 49 460 8 170 7 858 90 177 -
the whole amount of loans with principal overdue for more than 1 day as well
NPL - as loans with any delay in interest payments.
Rescheduled loans - even if we changed only a term of a loan not altering any others conditions
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10. Currency and capital management
Start of RUB balance recovery Sound capital position
Data as of August 01, 2009
Assets Foreign currency assets Tier 1 Tier 1 + Tier 2
CAR
USD - Correspondent accounts under CBR rules
16% (H1)
Other
- Cash
8% - Eurobonds of best 18,4% 18,45%
Russian corporates 17,7%
RUB
16,5%
76%
15,0%
Reduction in line 14,4% 14,3%
13,7%
with FX liabilities 12,6% MIN
12,0% 11,7% 11%
Liabilities
Foreign currency liabilities (less capital)
- Retail deposits USD
16%
- Corporate funds Other
8%
RUB Equity
64% 12%
Mostly Rub inflow in
Q2 2009
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 01.07.09
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11. Stability in challenging environment
Q-o-Q evolution without significant changes Good inflow of retail and corporate deposits
RUB bln RUB bln
141 141
137 137 138 137
138 137
Cash & Retail deposits
132 equivalents 132
18 Retail accounts
29
16 30 27 40
1 Due from
8 other
43 44 46 Corporate
10 2 41
3 banks accounts
11 0,2
8 20 10 10
Corporate
Securities 12 deposits
18 19 17 16 10
13
13 12
Securities
22 issued
21
Retail loans 26 21 Due to other
27
banks
17
15
83 17 Syndicated
6 5 loans
75 76 76 74 22
Corporate 20
6
loans Other Liabilities
21 19
8 7 12
3 2 2
3 3 3
2 5 5 Subordinated
Other 4 4 loans
assets
13 14 15 15 16
5 7 5 5 7 Equity
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
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12. Strong recovery of retail funds
Retail deposits, 2007-2009 Card accounts, 2007-2009
RUB bn ’000 acc.
RUB bln
50 17 1220
RUB Credit turnovers, rub bln
RUB 46.9 bln 16 1160
Balances, rub bln
43.4 bln
15 Active accounts,'000 1100
14 1040
40
13 980
12 920
11 860
30
10 800
9 740
8 680
Consistent inflow of
20 primarily RUB 7 84,4 620
deposits since May
2009. 6 126 560
5 500
Oct08 Dec08 Jan09 Feb09 4 89 440
10
Vbank -12.9% +9.1% +4.3% +1.9% 3 380
Sector -6.0% +6.9% +3.5% +1.7% 2 320
1 260
0 0 200
2007 2008 2009 2007
2007 2008
2008 2009
2009
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13. Spread evolution in sluggish business environment
Spread analysis Spread
Yield on Loans Yield on Securities Cost of funds
18,2%
16,5% 17,2%
14,5%
13,8%
9,9%
9,0% 9,8% 10,10% 10,10% 9,20%
8,6% 8,60%
8,1%
4,9%
7,2% 7,3%
5,6% 5,8%
3,3%
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
Assets structure Liabilities structure
RUB bln RUB bln
138 138 135 137 138 138 135 137
Cash & accounts
w ith CBR 17 17 12 10 CBR Loans
27 29 25 24
3 5 7 7 Due from banks 33
10 31 33 32 Client demand
10 10 10
accounts
Securities Retail deposits
43 43 43 44
Corp clients deposits
94 88 87 90 Loan book and veksels
20 19 21 22
Other borrow ed
Other assets 12 12 11 11 funds
16 15 16 16 Equity
4 6 6 6
01.04.09 01.05.09 01.06.09 01.07.09 01.04.09 01.05.09 01.06.09 01.07.09
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14. Moderate cost growth due to tight control
Composition of costs Fees & Commissions / Operating costs
Personnel expenses
Fixed assets related 66%
Other
2 022 63%
1 762 61%
1 656 59% 59%
1 522
1 390
52%
61% 60% 54%
59%
12%
17% 18% 16% 21%
36%
22% 22% 26% 25%
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
Great progress in C/I ratio, % Cost summary
76,1% Operating expenses fell by 14% Y-o-Y due to tight cost
72,3% management measures
62,7%
Stuff costs, major part of expenses, were flat Q-o-Q.
52,7%
42,6% Fixed assets related expenses growth resulting from
additional spending on collateral charged on bad loans was
the main driver of costs increase.
Target C/I ratio 40-50%
2005 2006 * 2007 2008 H1 2009
*2006 - less extraordinary items
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15. What we expect in Q3 2009
Tough risk management in environment of
asset quality deterioration
Flat or slightly negative NIM evolution
Strong focus on cost management
Sound operating results
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16. Questions and answers
Julia Vinogradova Andrey Shalimov
Advisor to the Chairman Member of the Management Board
+7 495 620 90 71 Head of Treasury
Yu.Vinogradova@voz.ru A.Shalimov@voz.ru
investor@voz.ru http://www.vbank.ru/en/investors
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