2. 2010 Highlights
Results came slightly above planned: NI of RUB 581 mln
Assets increased by 14.1% YoY to RUB 166 158 mln
Total net loan growth was 22.1% YoY to RUB 104 046 mln
Corporate loan portfolio up by 22.5% YoY to RUB 98 626 mln
Retail loan portfolio up by 17.7 % YoY to RUB 16 610 mln
Increase in retail deposits by 26% YoY to RUB 68 712 mln
Loan/deposit ratio improved by 400 bps YoY to 88.4%
NIM at 3.6% (year average), improved in Q4 by 20 bps QoQ
Spread reached 6.3% for 2010, grew in Q4 by 20 bps QoQ
Net fees and commissions grew by 5.5% reaching RUB 3 935 mln
Cost of risk declined by 310 bps YoY to 1.8%
Sufficient capital base (CAR: 15.2%, core Tier 1: 12.8% ), well above
regulatory requirements.
2
3. Asset structure coming back to normal
Loans’ share expanding More profitable liquid assets structure
RUB bln 166 RUB bln
156 46.0 47.4
146 148 147 Cash and
33 equivalents
34 Due to banks 24% Securities 30%
35 36 28 6
1 14
7 7 19 19 Securities
15
11 11 13 14 Corresponding
13 13 Retail loans accounts and
55% 47%
Corporate loans
mandatory
89 reserves
72 73 79 80
Other assets
21% Cash 23%
8 8 8 8 9
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 2009 2010
IEA represent 75% of total assets Improved efficiency of resources allocation
RUB bln
Cash and Other assets Customer funds Gross loans L/D ratio
equivalents
5%
20%
Due from other
banks 4% 88%
87% 84%
84%
80%
9%
Securities 53%
9% 102
Corporate loan 130
Retail loan 95
portfolio 95 113 119 118 106 125 115
portfolio
Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
3
4. Loans and advances
Sharpening SME focus… …with surpassed growth… Total Loans
RUB mln Large corporates Administrations Individuals SME
115 236 +21.7%
VZRZ Sector
7% +9.2%
94 644 Regional YoY +22.1% +12.6%
authorities 30.7
12% 27%
Large 24.4 25.9 QoQ +10.3% +3.7%
Corporate 20.6 19.1
8.1
22% 8.0 8.4 7.3
11.9 16.6
13.7 14.4 15.2
14.1
51%
52% Corporate Loans
SME
59.8
48.0 54.6 55.4 57.2 VZRZ Sector
15% Individuals 14% YoY +22.6% +12.1%
2009 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 QoQ +10.4% +3.2%
…in key regions… …across the industries
*as of 01.01.2011 *as of 01.01.2011
Other Retail Loans
Moscow Oblast Manufacturing
Transport
(41%) 11% VZRZ Sector
47,932 State 7%
organizations 29%
YoY +18.7% +14.3%
8%
RUB QoQ +10.2% +5.5%
3% 98,626
47,957
mln.
Other 10%
28% Construction
19,347 regions 4%
Moscow (17%) (42%) Wholesale & Agriculture
retail trade
4
5. Credit quality management
NPLs dynamics Annualized cost of risk
NPLs, RUB mln *
Provisions, % of total portfolio Charges to provisions to avg
4.90% gross loans, QoQ
NPLs, % of total portfolio
11.06% 10.98% Charges to provisions to avg
10.55% 10.48% gross loans, YtD
9.89%
10.52% 10.44%
10.68% 2.63%
2.70%
9.97% 9.71% 2.51%
11,592 12,078 2.63% 2.66%
10,555 10,814 1.83%
9,362 2.49% 2.22%
0.01%
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
* NPL includes the whole principal of loans at least one day overdue either on
principal or interest
NPLs categorization: improvements in SME and retail segments
SMEs Large corporate Retail RUB mln
- 359 recoveries
+776 new NPLs - 413 recoveries
+321 new NPLs
9.3% 9.5% +161 new NPLs
13.4% 13.8% 13.9% 9.3% 8.2%
13.4% 12.1% 8.4%
7.3% 8.0% 7.2% 6.4%
12.9% 6.4% 6.4% 6.4%
12.4% 12.3% 12.9% 12.1% 7.2% 7.6%
7.0% 6.2%
4.1% 6.4%
8,426 8,605 8,155 8,117 3.3% 3.2% 2,936 1,279 1,359 1,277
7,355 1,157 1,025
2,160
850 850 850
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
NPLs, RUB mln Provisions, % of total loans NPLs, % of total loans
5
15
6. Credit quality
Large SMEs Mortgages Other Total % of
as of 31.12.2010 corporate retail total
loans Provisions to
NPLs Ratio
Gross loans, including
93%
31,715 66,911 9,806 6,804 115,236 100.0%
Current loans 28,779 58,794 9,327 6,258 103,158 89.52%
Past-due but not 0.67%
impaired, of them 0 454 240 74 768
Less than 90 Provisions to
days - 231 203 61 495 0.43% 90+ days
Over 90 days NPLs
- 223 37 13 273 0.24%
Impaired, of them
Less than 90
days
2,936
2,086
7,663
970
239
-
472
20
11,310
3,076
9.81%
2.67%
132%
Over 90 days 850 6,693 239 452 8,234 7.14%
Total NPLs Rescheduled
2,936 8,117 479 546 12,078 10.48%
Loans
Provisions
9.4%
- 2,014 - 8,112 - 480 - 584 -11,190 9.71%
Net Loans 29,701 58,799 9,326 6,220 104,046 -
the whole amount of loans with principal overdue for more than 1 day as well
NPL - as loans with any delay in interest payments.
6
7. Ongoing efforts on funding costs reduction
Funded by customer accounts Pace of deposit portfolio re-pricing
RUB bln 166
Retail deposits
148 156 Share in retail deposits
146 147 Retail accounts
10.6% 10.4% Average rouble rates
Corporate
accounts
69 Corporate 8.3% 8.5%
55 59 66
63 deposits
Securities
17 issued
14 13 14 Due from other
15 banks 35%
25 25 28
24 26 28% 27%
17 Other Liabilities
20 23 17 18 Subordinated
6 5
5 4
5 4
5
6
4 4
loans 9%
Equity
16 16 16 17 17
Less than 1 month 1-6 months 6-12 months More than 1 year
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
Card accounts High share of interest-free funding sources
RUB bln 000’ acc
Active accounts, 000 1460
Current accounts/
20 Credit turnovers, rub bln
Balances, rub bln 1280 Liabilities
16
12
Credit turnovers a
month, rub bln 1100
920
30.1%
151
740
8 Customer accounts/
137 560
4 126 Liabilities
0
2008
2008 2009
2009 2010
2010
380
200 87.3%
7
8. Currency and gap management, capital adequacy
Strong capital position No mismatches on the balance-sheet*
Tier 1 Tier 1 + Tier 2
CAR
19.0% under CBR rules Assets
18.2%
17.2%
Liabilities
16.3% (H1)***
15.5% 15.0% 15.2%
14.1% 14.4%
13.5% 12.8% USD
MIN USD 12%
11% 13% Other
7%
Other
8% RUB Equity
RUB
70% 10%
80%
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 31.12.10
*** Preliminary estimations * Based on monetary assets and liabilities
Maturity gap** Key points
Rub bln
60 Total assets Total liabilities The bank’s capital position of 15.2 (Tier 1 - 12.8%) of
50
15.2% remains comfortable amid continued business
expansion.
40
30 We stick to strategy of no mismatches on the balance
sheet in terms of currency risk with particular focus on
20
ruble-nominated assets.
10
0 Accumulated long-term resources allow the bank to
On demand and less 30-180 days 180 days -1 year over 1 year satisfy revived demand for loans, credit facilities and
than 30 days
banking guarantees.
** Based on expected expiration date, only monetary assets and liabilities are accounted
8
10. Decline of funding costs started to offset yields contraction in Q4
Quarterly NIM dynamic Cumulative NIM dynamic
-2.4pps
NIM NIM
9.2% Interest Spread 9.6% Interest Spread
7.4% +0.2pps 7.4%
6.5% 6.9%
6.5% 6.3%
5.6% 5.8%
5.4% 6.0%
4.0% 3.7% 3.3% 3.5% 4.0% 3.9% 3.7% 3.6%
Q4’09 Q1’10 Q2’10 Q3’10 Q4’10 2009 3M’10 6M’10 9M’10 2010
5% Key takeaways
+0,44% -0,21% Average NIM 2010 accounted for 3.6%, having
-0,20% increased in Q4 by 20 bps QoQ in line with the interest
+0,18% spread dynamic.
The most significant +44 bps NIM increase was
3,3% 3,5% resulted from deposits re-pricing on the back of
cheaper new funds inflow.
+20 bps
Q4 loan growth has also contributed to NIM
3%
improvement (+0,18 bps) despite continued pressure
Q3 NIM Loans Deposits Other Base Q4 NIM on lending rates.
effect effect effect
10
11. First positive developments in spread dynamics
Corporate loan rates nearly bottomed… …while cost of funds is gradually declining
Corporate term deposits
17.1% 17.3% Retail term deposits
Interest spread
16.0% 16.0% 15.8% Current accounts 2010:
16.9%
15.3%
10.1% 10.1%
6.27%
14.0% 9.6% 9.1%
12.2% 8.2%
10.6% 11.3%
9.8% 9.1% 9.2% 8.5%
7.4%
Yields on corporate loans
5.8% 5.3%
Yields on retail loans 4.4% 4.6%
Yields on securities 0.4% 0.1% 0.1% 0.2% 0.1%
Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
Spread recovery in Q4 Key takeaways
Yield on earning assets (net)
Cost of funds Interest rates on corporate loans were on record lows
16.0% Spread (net) as of the end of 2010.
14.1%
12.9%
11.6% Cost of funding is steadily decreasing in line with
11.0%
9.2% expiration of expensive deposits attracted during the
7.4% crisis.
6.5% 5.8%
6.0%
In Q4 2010 trend has reversed and spread has grown
6.7% 6.7% 6.4% 5.6%
5.2% by 20 b.p., as deposits repricing started to outpace
yields contraction.
Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
11
12. Costs – the issue to be resolved
Operating expenses breakdown 2010 costs summary
RUB mln
15.8% +2.1% The bulk of operating expenses increase resulted from
31.1% 2252 13.5% 7 180 seasonal personnel expenses hike due to annual
7 029
1945 6 325 bonuses payment in Q4.
1718
59% Although cost to income ratio was pretty high at
52% 56% 54% 59%
72.6% level, strong coverage of operating expenses by
50%
fees and commissions (55%) was higher than 42%
average for Emerging markets and 52% for European
41% Union.*
48% 50% 44% 41%
46%
Q4 2009 Q3 2010 Q4 2010 2008 2009 2010 * -source: ECB and DB research
Personnel expenses Other expenses
C/I ratio 2011 cost-saving steps
Step 1 Wider implementation of online auctions
72.3% 72.6%
for administrative purchases
62.7% Further automation of accounting
Step 2
52.7% systems and routine banking procedures
48.7%
Step 3 Complex review of banking products
efficiency
Mid-term project with a one of Big 4
* Step 4 consulting company aimed at operating
2006 2007 2008 2009 2010
*2006 - less extraordinary items efficiency improvement
12
13. Fee income generation
Strong non-interest income based on long-term
relations with customers
Net fee income distribution
Cards Other RUB mln
Cash transactions Settlements
Share of non-interest vbank
+4.3%
income in total operating peer 1
+7.1% 1,089
income b.p. 45% peer 2
peer 3
985
-16.0%
+17.9% 975
1,044
338
827 292 308 335
257
26% 170 190
158 159
18% 15% 138
262 277
274 248
214
Net fee margin 215 276 304 287
218
0.0% 1.0% 2.0% 2,6% 3.0% 4.0%
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
* Vbank and Peer1, Peer2 data for 2010, Peer 2 data for 9M 2010
Non-interest income breakdown by segments Key points
Vbank’s share of net fee income in total operating income b.p.
2010 2009 reached 39% in 2010, that is one of the highest across the
sector and even exceeds average European Union level of
Others Corporate Others 30%*.
Financial Corporate
Financial 1% business 1% business
3% 6% Our developed infrastructure and long-term relations with
clients allows us to support our revenues in low interest rate
25% environment with fee generating products like settlements,
Cards 25% 51%
57% Cards money transfer, payments, cash collections, that are well
diversified across internal businesses and types of banking
14% products.
17%
Retail business Retail business 4% fee growth QoQ was mainly driven by card business, cash
transactions and servicing settlements of the customers.
* -source: ECB and DB research
13
14. Well-positioned for future success
Economic We’ll benefit from shorter duration of loan portfolio as IT efficiency improvements, centralization, less costly
Growth compared to deposit one clients transactions, joint project with BIG4 partner
Timeframe for “return to normal” is
NIM to improve as a result of continued re-pricing of
shortening, additional reserves for loan
retail deposits
growth, implementation of Risk-Calc by Moody’s
Highest
Earning growth driven by “normalized” charges to
interest provisions, provision releases
rates Operating
efficiency Electronic auctions, business-oriented
motivation system
improvement
Further penetration to existing
Credit Tight clientele, higher than average growth in core
niches, goal-oriented programs with
quality expense EBRD, RosBR, regional funds
improvement control
Lower IT-transformation, start of internet-
provisioning banking, clients communication via
charges electronic channels
Deposits Higher Technology-
Re-pricing lending driven
growth growth
Timescale
14
15. 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.
15
