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  • 1. 9M 2011 IFRS ResultsImproved performance in turbulent timesConference CallNovember 22, 2011
  • 2. Key takeaways  USA rating downgrade to AA+ coupled with insurgent European debt crisis caused meltdown on global financial markets  13.5% Russian ruble depreciation vs USD for the quarter on the back of Even in turbulent increased demand for FX amid strong oil prices market environment…  Liquidity in banking system shrank due to capital outflow, heightened liquidity needs of European banks subsidiaries and tight budget execution. Interbank rates reached 4.9% in October, overnight repo rates hiked to 5.7% with record volumes of CBR repos of Rub 520 bln.  Liquid assets stood at 24%, while their structure shifted to more profitable one with increased share of security portfolio (+17.5% QoQ) …sound balance Share of IEA grew to 80%, up 225 bps QoQ on the back of growth of sheet… security and loan portfolio (+2.8% QoQ)  Balanced currency structure of assets and liabilities with prevailing Ruble-nominated instruments  Interest expenses contracted by 6% QoQ following expensive deposits’ repricing, cost of funds touched the lows with the reduction from 4.3% to 4.0% …delivers resilient Despite significant market drop losses on trading were just Rub 28 mln, performance gains on foreign currency up 6% QoQ Operating income up 8.9% QoQ on the back of stronger NIM of 4.6% and sound non-interest revenues 2
  • 3. Financial highlights Q3’11 Q2’11 Q3’10 QoQ YoYNIM 4.6% 4.3% 3.3% +0.3 pps +1.3 ppsNet interest income 2,022 1,857 1,251 +8.9% +61.6%Net fee income 1,256 1,192 1,044 +5.4% +20.3%Operating expenses (2,059) (2,091) (1,718) -1.5% +19.8%Net income 411 395 179 +4.1% +130%ROE 9.3% 9.1% 4.3% +0.2 pps 5.0 ppsGross loan portfolio 136,691 132,729 105,542 +3.0% +29.5%Customer accounts 138,235 135,288 125,064 +2.2% +10.5%L/D 98.9% 98.1% 84.4% +0.8 pps +14.5 ppsNPLs 11,488 11,030 11,592 +4.2% -0.9%NPLs as % of loan portfolio 8.4% 8.3% 11.0% +0.1 pps -2.6 ppsCapital adequacy 13.4% 13.6% 16.3% -0.2 pps -2.9 pps 3
  • 4. NIM steadily recovers 10.7% - Interest income keeps rebounding on the back +1.8% of increasing volume of portfolio and higher Interest Expenses Interest Interest Income share of more profitable retail lending. In Q3 2011 it stood at Rub 3.6 bln, up 1.8% QoQ. Income and Interest 3,2 3,3 3,1 3,5 3,6 Expenses, - In Q3 interest expenses hit record lows -1,8 -1,7 -1,6 following expensive deposits’ expiration that RUB bln -2,0 -1,9 finished only in May’11. Thus, cost of funding declined to 4% for the quarter on the back of -6.1% interest expenses decrease of 6.1% for the -21.2% quarter. Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 +130 bps NIM +35 bps - Net interest margin on total average assets NIM inched up by 35 bps QoQ mostly driven by contraction of interest expenses on the back evolution 4,3% 4,6% of healthy interest income. 3,3% 3,5% 3,2% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 4
  • 5. Reliable sources of non-interest income Net interest income Net fees Other income Operating Expenses +38.5% - The bank managed to maintain its non-interest +8.2% income in Q3, that is normally characterized by 0,1 0,1 Operating 0,2 0,1 0,2 1,3 subdued economic activity. Net commission income grew by 5% mostly driven by cash 1,2 Income and 1,0 1,1 1,0 collection, commissions on currency and cash 1,9 2,0 transactions. Despite substantial meltdown on 1,4 Expenses, 1,3 1,4 financial markets, trading income was 30% up RUB bln -1,7 -2,3 -1,8 -2,1 -2,1 QoQ on the back of gains from currency operations. Supported by healthy interest and -1.5% non-interest revenues total operating income +19.8% before provisions was 8% QoQ. Q3’10 Q4’11 Q1’11 Q2’11 Q3’11 - The bank managed to restrain growth of -9.3 pps operating expenses, that were down 1.5% QoQ. Personnel expenses Other expenses 86% Cost to 69% 71% 66% Income 51% 60% - Cost to income ratio declined by 5.97 pps QoQ 37% 42% before 40% 36% and improved to 60% due to stronger operating income and control over operating expenses. provisions,% 32% 35% 29% 26% 24% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 5
  • 6. Solid operating profit despite conservative provisioning +80.8% +27.3% - Operating profit for the third quarter was up Operating Operating profit before provisions Provisions 27% QoQ due to positive dynamics of all revenue sources coupled with control over profit and operating expenses. 1,4 provisions, 0,8 0,7 1,1 0,4 RUB bln -0,6 -0,003 -0,4 -0,6 -0,7 - The bank enhanced charges to provisions to Rub 720 mln for the quarter on the background of increased uncertainty. Thus cost of risk grew to 2.1% in Q3 2011 and 1.7% for 9M 2011. Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 +130% +4.1% Net profit - Bottom-line is gradually expanding for the 6th Net profit, quarter in a row. Thus, net profit for Q3 2011 surged by 2.3 times YoY. Effective tax rate was RUB bln 0,395 0,411 20%. 0,317 0,179 0,184 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 6
  • 7. Assets High-yielding balance sheet maintained… …with high share of liquid assetsRUB bln * % of total assets 177 24% 24% 174 174 166 Cash and 156 27 equivalents 34 30 33 17 Due from 8,1% Securities 34 6 17 14 banks 9,4% 1 14 19 21 19 16 Securities 16 14 Retail 10,3% Correspondent loans account 7,6% 98 102 103 Corporate 79 88 loans Cash and equivalents, Other 6,1% CBR accounts 6,5% assets 9 9 9 9 9 Q310 Q410 Q111 Q211 Q311 Q2 2011 Q3 2011IEA share increased to 80% of total assets LTD ratio improving to optimal RUB bln Other assets Gross loans Customer funds Cash and L/D ratio equivalents 15% 5% 98% 99% 0% 88% 92% 84% Due from other 10% banks Securities 12% 58% Corporate loan 125 Retail loan 106 115 130 126 137 133 135 137 138 portfolio portfolio Q310 Q410 Q111 Q211 Q311 7
  • 8. LoansPortfolio growth in line with expectations Breakdown by industry Rub bln *as of 30.09.2011 Other SME Individuals Administrations Large corporates Transport 12% +29.5% Agriculture 2% 5% +3.0% 25% Manufacturing Construction 9% 38,1 RUB 34,2 35,1 5% 136,691 25,9 30,7 3,9 5,5 22,5 mln 7,3 8,1 8,5 20,1 15,2 16,6 17,5 72,0 24% 16% 57,2 57,2 59,8 65,9 3% Individuals Wholesale & Q310 Q410 Q111 Q211 Q311 retail trade AdministrationsMoscow oblast remains the key region Conservative collateral policy *as of 30.09.2011 Moscow Oblast Unsecured Guarantees (39%) 16% 11% Government Other assets 53 297 guarantees 8% 2% RUB RUB Other 8% Residential property 136,691 136,691 59 122 regions(43%) 18% mln Equipment and mln vehicles Real estate 24 272 Moscow (18%) 37% 8
  • 9. Credit quality managementNPLs dynamics Annualized cost of risk NPLs, RUB mln * Provisions, % of total portfolio Charges to provisions to NPLs, % of total portfolio avg gross loans, QoQ Charges to provisions to 10,98% 10,48% avg gross loans, YtD 9,26% 2,22% 9,15% 9,09% 1,78% 2,14% 10,68% 1,83% 9,71% 8,78% 2,51% 1,16% 8,40% 1,71% 12 078 8,31% 11 592 11 488 11 061 11 030 1,48% 0,01% 1,16% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011* NPL includes the whole principal of loans at least one day overdue either onprincipal or interest as well as not overdue loans with signs of impairmentNPLs categorization: stabilized levels excluding one-off SMEs Large corporate Retail RUB mln +1,028* new NPLs +386 new NPLs -589 recoveries - 406 recoveries13,4% 9,3% 8,4% 12,1% 7,1% 8,0% 7,6% 6,4% 11,6% 11,3% 11,0% 6,4% 7,0% 6,9% 6,2%12,9% 6,2% 12,1% 11,2% 11,1% 6,4% 7,0% 5,3% 10,4% 5,6% 5,0% 4,6% 4,3% 6,2% 8 155 8 117 8 195 8 025 8 464 2 936 1 277 1 379 1 399 4,6% 1 025 1 242 2 160 1 624 1 626 1 625Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 NPLs, RUB mln Provisions, % of total loans NPLs, % of total loans*including a one-off: one loan of 502 mln moved to impaired 915
  • 10. Credit quality as of 30.09.2011 Large SMEs Mortgages Other Total % of total corporate retail loansGross loans, including 38,134 76,107 13,639 8,811 136,691 100.0% Provisions to Current loans 36,509 67,643 12,891 8,160 125,203 91.6% NPLs Ratio Provisions (1,603) (1,407) (172) (149) (3,331) 110% Past-due but not 0.62% impaired, of them 0 181 517 157 855 Less than 90 days - 170 486 138 794 0.58% Over 90 days - 11 31 19 61 0.04% Provisions to Provisions (0) (4) (91) (22) (117) 90 days+ NPLs Impaired, of them 1,625 8,283 231 494 10,633 7.78% 144% Less than 90 days 775 1,122 1 34 1,932 1.41% Over 90 days 850 7,161 230 460 8,701 6.37% Provisions (1,304) (7,222) (229) (455) (9,210)Total NPLs 1,625 8,464 748 651 11,488 8.4% Rescheduled Loans Provisions (2,907) (8,633) (492) (626) (12,658) 9.26% 5.8%Net Loans 35,227 67,474 13,147 8,185 124,033 - the whole amount of loans with principal overdue for more than 1 day as well NPL - as loans with any delay in interest payments. 10
  • 11. Liabilities and capital Stable funding base Moderate FX exposureRUB bln Data as of September 30, 2011 174 174 177 Retail deposits 156 166 Assets Liabilities Retail accounts 70 69 71 69 Corporate 66 deposits Securities issued USD USD 15 17 16 13% 17 13% 14 Due from other 31 30 32 RUB EUR 26 28 banks EUR 79% RUB 9% 21 20 19 Subordinated 8% 18 17 6 loans 78% 6 7 Other 5 8 8 9 Other 4 4 4 48 4 Equity 0% 17 17 17 18 18 0% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Maturity gap Capital position in line with requirements Rub bln Total assets Tier 1 Tier 1 + Tier 2 CAR60 Total liabilities under CBR rules 16,3% (N1)50 15,2% 13,5% 14,1% 13,6% 13,4% 12,8% 12,0%40 11,8% 11,6% 11,9%30 11%20 MIN10 0 Demand and less From 1 to 6 From 6 to 12 Over 12 months Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 30.09.11 than 1 month months months 11
  • 12. NIM development NIM keeps recovering … …supporting cumulative NIM dynamic NIM +41bps Interest Spread NIM Interest Spread 6,3% 6,4% 5,6% 5,8% 6,3% 5,7% 5,9% 5,1% 5,1% +35bps 4,3% 4,6% 3,5% 3,6% 3,7% 4,0% 3,3% 3,2% 3,2% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 2010 3M’11 6M’11 9M’11 Spread is gradually expanding -0,13% Interest Spread -0,03% Yield on earning assets (net) 0,24% Cost of funds 0,27% 11,6% 11,0% 10,57% 10,40% 9,8% 4,61% 5,79% 6,27% 6,38% 5,59% 5,14% 4,26% +35 bps 6,00% 5,21% 4,30% 4,69% 4,02% Q2 NIM Loans Deposits Other Base Q3 NIM Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 effect effect effect 12
  • 13. Fees and commissions Strong non-interest income based on long-term relations with customers Net fee income distribution Settlements Cash transactions Other Cards RUB mln Share of non-interest income in total operating vbank +20.3% income b.p. +5.4% peer 1 1 256 37% 41% 1 089 1 192 1 044 1 006 348 peer 2 335 335 308 292 26% 27% 26% peer 3 226 245 170 190 196 291 310 262 277 230 2,9% Net fee margin 304 287 288 340 353 0,0% 1,0% 2,0% 3,0% 4,0% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 * Vbank data as of 3Q’11, Peer1, Peer2, Peer 3, Peer 4 – 2Q’11 Non-interest income breakdown by segments Key points Vbank’s share of net fee income in total operating income Q2 2011 Q3 2011 before provisions remained one of the highest among Russian Corporate banks and stood at 37% in Q3 2011 even on the back of Financial Corporate Others business healthy interest income. business Financial 1% 3%1% 3% Despite subdued business activity due to seasonality, in Q3 net fees and commissions demonstrated 5.4% growth mostly 23% 25% from settlements, card business and cash transactions. Fee Cards margin improved to 2.9% which is also higher than for our Cards 56% 57% peers. 17% 14% Corporate business contributed 57% to fee income, bankingRetail business Retail business cards business delivered 25% and 14% came from retail segment. 13
  • 14. Costs Operating expenses breakdown Earned fees fully cover personnel expensesRUB mln Net fee income / Personnel expenses +19.8% 2 091 -1.5% 2 059 115% 1 718 Non- HR 103% 41% 94% 95% 820 835 82% 814 1 271 1 224 904 HR 59% Q3 2010 Q2 2011 Q3 2011 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Cost-to-Income ratio Costs summary Operating expenses remained under control and 72,3% 72,6% declined by 1.5% in the third quarter. Administrative 62,70% 65,10% expenses were down by 4.9% due to implementation of 52,7% several optimization measures. 48,7% Strong fee income fully covered all the personnel expenses in Q3 2011. Cost to income ratio for 9M 2011 declined to 65.1% 2006 * 2007 2008 2009 2010 9M 2011 from 72.6% for FY 2010. *2006 - less extraordinary items 14
  • 15. Earnings generation capabilityROE, % ROA, % 9,1% 9,3% 7,5% 0,91% 0,94% 0,74% 4,3% 4,4% 0,47% 0,46% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011Value generation Key points * % of average assets Value generation was gradually improving throughout 3,2% -2,0% the year. Our adherence to conservative policies -2,8% defend us from negative impact of turbulent environment and provides base for bottom-line growth 4,6% in the long-term perspective. -1,9% Profitability gradually improving with all components -0,2% demonstrating resilience, our mid-term target for ROE 0,9% remains 20%. NIM Non-interest Provisions HR costs Non-HR Tax Net profit income costs 15
  • 16. Questions and answers Elena Mironova Andrey Shalimov IR manager Deputy Chairman of the Management +7 495 620 90 71 Board E.Mironova@voz.ru A.Shalimov@voz.ru investor@voz.ru http://www.vbank.ru/en/investors 16
  • 17. DisclaimerSome of the information in this presentation may contain projections or other forward-looking statements regarding future events or thefuture financial performance of Bank Vozrozhdenie (the Bank). Such forward-looking statements are based on numerous assumptionsregarding 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 importantfactors that we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we haveexpressed or forecasted in the forward-looking statements. These forward-looking statements speak only as at the date of this presentationand 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 relatedfactors;- 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 theBank 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 materiallyfrom 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 createand 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 toplace 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 orcircumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws. 17