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H1 2011 IFRS Results

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H1 2011 IFRS Results

  1. 1. H1 2011 IFRS ResultsFrom volumes to returnsConference CallAugust 18, 2011
  2. 2. Key takeaways Inflationary environment was steady in Q2 – just 0.0-0.1% weekly level with distinct downward trend from 9.4% YoY by the end of June  CBR kept refinancing rate at 8.25% in May managing liquidity in the Despite low interest system with deposit (+25bps to 3.5%) and repo rates (5.5%). Excessive rate environment… liquidity in banking system is gradually shrinking  Average corporate loan rates continued to fall in April (to 8,3%) and May (to 8.0%) hiking in June to 8.7%  LTD ratio stood at solid 98.1% with interest earning assets comprising …solid and high- 77% of total assets profitable balance Loan portfolio share increased from 62% a year ago to 69% driven by sheet structure… loans expansion in retail (40% YoY) and SME (30% YoY)  Though IEA grew, the bank kept adequate liquidity cushion of 24%  Interest income grew by 12% QoQ on the back of reasonable interest rate policy and healthy lending growth Interest expenses contracted by 6% QoQ driven by eliminating “sticky…results into material deposits” effect following next 39bps cost of funds reduction from 4.69% to margin growth 4.3% NII boosted by 36% resulted in long-awaited NIM rebound by 106 bps from 3.2% in Q1 to 4.3% in Q2 2
  3. 3. Financial highlights Q2’11 Q1’11 Q2’10 QoQ YoYNIM 4.3% 3.2% 3.7% +1.1 pps +0.6 ppsNet interest income 1,857 1,364 1,379 +36.1% +34.7%Net fee income 1,192 1,006 975 +18.5% +22.3%Operating expenses (2,091) (1,798) (1,679) +16.3% +24.5%Net income 395 317 121 +24.6% +226%ROE 9.1% 7.5% 2.9% +1.6 pps 6.2 ppsGross loan portfolio 132,729 126,036 102,474 +5.3% +29.5%Customer accounts 135,288 136,874 118,075 -1.2% +14.6%L/D 98.1% 92.1% 86.8% +6.0 pps +11.3 ppsNPLs 11,030 11,061 10,814 -0.3% +2%NPLs as % of loan portfolio 8.3% 8.8% 10.5% -0.5 pps -2.2 ppsCapital adequacy 13.6% 14.1% 17.2% -0.5 pps -3.6 pps 3
  4. 4. Impressive NIM rebound +0.4% - Interest income grew +0.4% on a year-on-year +12.1% basis first time since the beginning of the Interest Expenses Interest Interest Income crisis as a result of yields stabilization and loan growth. During the quarter interest Income and income gained 12.1% versus 5% QoQ growth Interest 3,5 3,2 3,3 3,1 3,5 of the loan book. Expenses, - Efforts on funding costs optimization resulted -1,8 -1,7 in interest expenses decline for the 4th quarter RUB bln -2,1 -2,0 -1,9 in a row (-6.2% QoQ) due to retail deposits re- pricing. -6.2% -19.4% Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 +52 bps NIM - Net interest margin on total average assets NIM hiked by 106 bps QoQ driven by loan book growth and contraction of interest expenses evolution 4,3% 3,7% 3,3% 3,5% 3,2% Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 4
  5. 5. Sizeable fee-income supports revenue expansion Net interest income Net fees - Fee-generating products demonstrated +28.3% excellent performance, net fees grew by 22% +24.6% Operating 0,1 0,2 0,1 0,2 0,1 YoY while total non-interest income increased by 20% YoY. This resulted in solid 41% share 1,2 Income and 1,0 1,0 1,1 1,0 of non-interest income in total operating 1,4 1,4 1,4 1,9 income before provisions. Total revenue was Expenses, 1,3 up 24.6% QoQ driven by stronger fees from -1,7 -1,7 RUB bln -2,3 -1,8 -2,1 settlements and cash transactions coupled with healthy loan growth. +16.3% - Operating expenses increased by 16.3% QoQ +24.5% primarily resulted from to the growth of Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 personnel expenses as we accrued provisions for payment of annual bonuses for 2011 across -2.16 pps 2-4th quarters in equal parts. Personnel expenses - Cost to income ratio declined by 4.75 pps QoQ Other expenses 86% Cost to 69% 71% due to accelerated revenue growth in the second quarter. 68% 66% Income 50,9% 36,2% 36,5% 41,9% before 40,2% provisions,% 31,9% 32,9% 35,3% 28,9% 25,9% Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 5
  6. 6. Provisioning policy in line with expectations +36.3% +44.9% - Cost of risk accounted for 1.8% in the second Operating Operating profit before provisions Provisions quarter compared to 1.2% in Q1 2011 and 2.7% in Q2 2010, the level that implied by the profit and financial plan for 2011. Charges to provisions 1,1 amounted to Rub 576 mln in Q2 and this provisions, 0,8 2,3 0,7 allowed to improve total NPL coverage ratio to 0,4 RUB bln -0,003 -0,4 109%. For the NPLs with overdue more than 90 days coverage ratio was at the level of 142% -0,7 -0,6 -0,6 - Revenue boost resulted in operating profit growth of 44.9% QoQ Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 +226% - Bottom-line growth of 24.6% was supported by +24.6% solid NII increase coupled with robust net fees Net profit dynamic. Net profit, RUB bln 0,4 0,3 0,2 0,2 0,1 Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 6
  7. 7. Assets Balance sheet remains stable… …while loan portfolio gains momentumRUB bln SME Individuals Administrations Large corporates 174 +29.5% 166 174 Cash and 147 156 equivalents +5.3% 34 30 33 Due from 28 34 14 banks 35,1 6 17 34,2 1 14 16 19 Securities 30,7 18 19 16 24,4 25,9 5,5 14 8,5 20,1 13 8,4 7,3 8,1 17,5 Retail 16,6 loans 14,4 15,2 88 98 102 Corporate 79 79 72,0 loans 55,4 59,8 65,9 57,2 Other assets 9 9 9 8 9 Q210 Q310 Q410 Q111 Q211 Q210 Q310 Q410 Q111 Q211IEA share increased to 77% of total assets LTD ratio improving RUB bln Other assets Cash and Gross loans Customer funds equivalents 5% 18% 98% 87% 88% 92% 0% 84% Due from other 8% banks Securities 11% 58% Corporate loan 106 125 115 130 126 137 Retail loan 102 118 133 135 portfolio portfolio Q210 Q310 Q410 Q111 Q211 7
  8. 8. LoansSMEs drive growth in corporate… …and mortgages in retail segment Total Loans Rub bln Rub bln VZRZ Sector 108,6 112,6 Administrations 5,5 -35.2% 20,1 YoY +31.5% +17.8% 8,5 17,5 +3.9% 35,1 +2.6% Cards 2,2 QoQ +5.4% +6.0% 34,2 Large clients 2,1 Consumer and 5,8 +20.1% 4,8 auto loans Corporate Loans 65,9 SME 72,0 +9.3% 12,1 +15.2% VZRZ Sector 10,5 Mortgages YoY +29.5% +16.0% QoQ +3.6% +5.2% КВ1 2011 КВ2 2011 КВ1 2011 КВ2 2011Moscow oblast remains the key region Breakdown by industry Retail Loans *as of 30.06.2011 Other *as of 30.06.2011Moscow Oblast Transport VZRZ Sector(41%) Agriculture 3% 11% YoY +43.0% +24.0% 4% Manufacturing 53 521 25% Construction 8% QoQ +16.2% +8.6% RUB RUB 132,729 6% 132,729 56 382 mln mln Other 24% 15% 22 826 regions 4% IndividualsMoscow (17%) (42%) Wholesale & retail trade Administrations 8
  9. 9. Credit quality managementNPLs dynamics Annualized cost of risk NPLs, RUB mln * Charges to provisions to Provisions, % of total portfolio avg gross loans, QoQ NPLs, % of total portfolio Charges to provisions to 10,98% 2,70% 2,51% avg gross loans, YtD 10,48% 10,55% 10,44% 9,15% 9,09% 2,66% 1,83% 1,80% 10,68% 9,71% 2,22% 1,16% 12078 8,78% 8,31% 1,50% 11592 10 814 11061 11030 1,16% 0,01% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 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: improvements in SMEs SMEs Large corporate Retail RUB mln - 857 recoveries - 332 recoveries +657 new NPLs +2 new NPLs 9,5% +469 new NPLs 13,9% 9,3% 8,4% 12,9% 12,1% 8,0% 11,6% 7,0% 7,1% 6,9% 11,0% 6,4% 6,4% 6,2% 6,4% 12,9% 13,4% 7,2% 12,1% 11,2% 6,4% 5,6% 7,0% 5,3% 10,4% 6,2% 8 605 4,6% 1 359 8 155 8 117 8 195 8 025 3,2% 2 936 4,6% 1 277 1 242 1 379 2 160 1 025 1 624 1 626 850Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 NPLs, RUB mln Provisions, % of total loans NPLs, % of total loans 915
  10. 10. Credit quality Large SMEs Mortgages Other Total % of as of 30.06.2011 corporate retail total loans Provisions to NPLs RatioGross loans, including 109% 35,109 77,491 12,138 7,991 132,729 100.0% Current loans 33,483 69,466 11,428 7,322 121,699 91.69% Past-due but not 0.60% impaired, of them 0 112 504 187 803 Less than 90 Provisions to days - 112 444 172 728 0.55% 90 days+ NPLs Over 90 days - - 60 15 75 0.5% Impaired, of them Less than 90 days 1,626 776 7,913 995 206 - 482 34 10,227 1,805 7.71% 1.36% 142% Over 90 days 850 6,918 206 448 8,422 6.35%Total NPLs Rescheduled 1,626 8,025 710 669 11,030 8.31% LoansProvisions 6.1% - 2,455 - 8,540 - 476 - 599 -12,070 9.09%Net Loans 32,654 68,951 11,662 7,391 120, 658 - 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. 11. Liabilities and capital Stable funding base… …with strengthening long-term retail resourcesRUB bln Less than 1 month 166 174 174 Retail deposits Q1 2011 1-6 months Q2 2011 147 156 Retail accounts 6-12 months 70 69 Over 12 months 69 Corporate 28% 24% 24% 66 deposits 63 34% Securities issued 15 17 17 15 14 Due from other 31 30 26 28 banks 24 17 21 20 Subordinated 17 18 6 6 7 loans 27% 23% 4 5 8 8 21% 5 4 4 4 4 Equity 19% 16 17 17 17 18 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011Maturity gap not higher than 5% of the balance Capital position reflects business development 60 Rub bln Total assets Tier 1 Tier 1 + Tier 2 CAR 50 Total libilities under CBR rules 17,2% (N1) 16,3% 40 15,2% 14,1% 13,5% 14,1% 13,6% 12,8% 12,0% 12,7% 11,8% 30 20 11% MIN 10 0 On demand and From 1 to 6 From 6 to 12 More than Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 30.06.11 less than 1 months months 1 year month 11
  12. 12. Key factors of NIM recovery Quarterly NIM rebound… …resulted in cumulative NIM recovery NIM +12bps Interest Spread NIM Interest Spread 6,5% 6,3% 5,6% 5,8% 6,3% 5,7% 5,1% 5,1% +106bps 3,7% 4,3% 3,3% 3,5% 3,2% 3,6% 3,2% 3,7% Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 2010 3M’11 6M’11 … and upward spread development Interest Spread Yield on earning assets (net) 0,00% 0,07% Cost of funds 0,30% 12,9% 0,82% 11,6% 11,0% 10,60% 9,8% 4,26% 6,49% 6,30% 5,59% 5,79% 5,14% 3,20% +106 bps 6,42% 6,00% 5,21% 4,69% 4,30% Q1 NIM Loans Deposits Other Base Q2 NIM Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 effect effect effect 12
  13. 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 vbank +22.3% income in total operating income b.p. peer 1 +18.5% 41% peer 2 1 192 37% 1 044 1 089 1 006 peer 3 975 335 335 308 292 25% 23% 292 226 170 190 196 159 262 291 248 277 230 Net fee margin 276 304 287 288 340 2,7% 0,0% 1,0% 2,0% 3,0% 4,0% * Vbank data as of 2Q’11, Peer1, Peer2, Peer 3 - FY2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Non-interest income breakdown by segments Key points Vbank’s share of net fee income in total operating income Q1 2011 Q2 2011 before provisions remained one of the highest among Russian Corporate banks and stood at 38% in Q2 2011 while fee margin was 2,7% Financial Corporate Others business which is also higher than for our peers. business Financial 3% 3%1% Fees and commissions demonstrated robust growth of 22% YoY and remained well-diversified across different 26% banking products with main contribution from settlements 25% Cards and banking cards. Cards 57% 57% Corporate business continued to be the driver of fee income 14% 14% with 57% of fees generated followed by 25% from bankingRetail business Retail business cards business and 14% from retail segment. 13
  14. 14. Costs Operating expenses breakdown Staff evolutionRUB mln Average headcount per quarter (people) 80,0 24.5% Staff costs per average employee (000 RUB) 70,0 +16.3% 2 091 1 798 60,0 Non- HR 1 679 39% 50,0 820 735 40,0 786 6 146 6 146 6 164 6 164 6 211 30,0 1 271 20,0 893 1 063 HR 10,0 53% 0,0 Q2 2010 Q1 2011 Q2 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Cost-to-Income ratio Costs summary Since Q2 the bank started to accrue provisions for 2011 bonuses scheduled to be paid at year-end that 72,3% 72,6% 68,20% resulted into higher personnel costs. 62,70% 52,7% Given new accruals overall cost growth was 24.5% 48,7% YoY. However notwithstanding of adverse impact on cost growth stemming from social tax changes in 2011, overall cost growth on the same basis was only 14.2% YoY and moderate 6.7% QoQ Cost to income ratio for H1 2011 declined to 68.2% 2006 * 2007 2008 2009 2010 H1 2011 from 72.6% for FY 2010 *2006 - less extraordinary items 14
  15. 15. Earnings generation capabilityROE, % ROA, % 9,1% 7,5% 0,91% 0,74% 4,3% 4,4% 0,47% 0,46% 2,9% 0,33% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011Value generation Key points * % of average assets We kept improving our value generation capacity even 3,0% -1,3% in the environment of low interest rates supporting the -2,9% revenues with non-interest income. In Q2 core revenues recovered contributing to healthy bottom- 4,3% line. -1,9% Profitability is on track with all the components -0,2% demonstrating robust dynamic, though going forward 0,9% our mid-term target for ROE of 20% is still to be achieved. NIM Non-interest Provisions HR costs Non-HR Tax Net profit income costs 15
  16. 16. Questions and answers Elena Mironova Andrey Shalimov IR manager Member of the Management Board +7 495 620 90 71 Head of Treasury E.Mironova@voz.ru A.Shalimov@voz.ru investor@voz.ru http://www.vbank.ru/en/investors 16
  17. 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

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