FY 2009 IFRS earnings presentation of Bank Vozrozhdenie

1. 2009 IFRS Results
Preparing for economy recovery
Conference Call
March 31, 2010

2. Agenda
• Highlights of financial results
• Risk management
• Recent developments
• 2010 initiatives
2

3. 2009 Financial highlights
Interest Cost to Capital
Net Income ROE
Spread Income Adequacy
RUB 1,2 bln 8.4% 7.8% 48.7% 19.0%
Strengths Risk-factors
- Measures taken during the crisis - Ongoing downward pressure on NIM
provide potential benefit from economy resulting in 2010 key challenge –
recovery: maintaining interest margin
a. Conservative provisioning with NPLs
- Subdued demand for loans at least for
(1 day+) coverage higher than 100%
the first half of the year
b. Strong capital ratio and liquidity position
which provides the basis for the loan - Sluggish recovery of client’s business
portfolio growth
- No dependence on market funding - Wage pressure and tightening of
- Traditional “defended” market niche – competition creates a threat for further
high margin lending to SMEs efficiency improvements
3

4. 2009 Financial highlights
2009 2008 Change Y-o-Y
Total Deposits, of them 113,129 90,336 +25.2%
Retail deposits 68,564 51,837 +32.3%
Net Loans 85,205 94,575 -9.9%
Loans to Deposits ratio 83.7% 110.0% -26.3 p.p.
Net Profit 1,217 3,137 -61.2%
Total Operating Income b.p. 12,996 13,344 -2.6%
Total Operating Costs, of them - 6,325 - 7,043 -10.2%
Personnel expenses -3,431 -4,144 -17.2%
Cost to Income ratio 48.7% 52.7% -4.0 p.p.
Capital Adequacy 19.0% 16.4%
4

5. Resilient margins despite limited pick up in lending
+16.8% -9.4%
17,0 -5.0%
Interest 14,5 Interest Income
Interest Expenses
Income and
Interest 4,4 4,6 4,2 4,2 4,0
Expenses, -1,8 -2,2 -2,2 -2,1 -2,1
RUB bln -6,0
-8,6 -3.2%
+15.7%
+43.4%
2008 2009 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09
-0.6pps -2.1pps
NIM
Interest Spread
9,6%
10,1% 10,1%
9,1% 9,2% 9,6% 9,2%
NIM and 6,6%
7,5%
6,7%
6,0% 6,0% 6,0%
Spread 5,4%
evolution
2008 2009 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09
5

6. Efficiency improved despite slight seasonal costs increase in Q4
-2.6% Net interest income Net fees
Other income Operating Expenses
0,7 0,9
-23.8%
4,1 3,7
Operating 0,3
+0.2%
0,4 0,2 0,1 0,2
Income and 8,5 8,3
1,2
0,9 0,9 0,9 1,0
Expenses, 2,6 2,3 2,1 2,0 1,9
RUB bln 1 2
-6,3
-2,0 -1,4 -1,5 -1,5 -1,9
-7,0
+32.7%
-10.2% -3.8%
2008 2009 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09
+13.2 pps
-4.0pps Personnel expenses
Other expenses
63,2%
52,7%
Cost to 48,7% 50,0%
47,2% 47,7%
33%
Income 31% 26% 26%
38,4%
25% 25%
before 23%
provisions,% 22% 22% 24% 22% 22%
30%
16%
2008 2009 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09
6

7. Cost of risk declined in Q4 on the back of slowed NPL formation
+5.9% -43.9%
Operating profit before provisions
Provisions
-29.4%
6,3 6,7
Operating
profit and 2,0 2,3
1,7 1,6
1,1
provisions, -0,6
-2,2 -1,2 -1,2 -1,3
RUB bln -1,7
-4,8
+116.1%
2008 2009 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09
-61.2%
-38.7%
Net profit +87.5%
Net profit,
RUB bln 3,1
0,6
1,2 0,4 0,4
0,2 0,2
2008 2009 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09
7

8. NIM 2010 – key positive and negative drivers
Downward pressure on yields… …is being mitigated by deposits revaluation
Interest spread
18,7% 17,5%
17,8% Corporate term deposits 2009:
Retail term deposits
17,0%
16,7%
17,3%
16,8%
16,8%
Current accounts
Cost of funds
9.55%
14,8% 16,5%
15,5%
14,6% 14,7% 16,1% 16,0%
15,5% 11,9%
15,9% 15,2% 9,8% 10,3% 10,3% 10,3% 10,1%
13,9% 8,8%
14,1% 6,7% 9,2% 9,7% 9,8%
Yields on corporate loans 9,1%
13,0% 7,7% 8,2%
Yields on retail loans 7,2% 7,3% 7,2% 6,7%
5,6% 5,8%
Yields on average IEA 4,9%
0,4% 0,1% 0,1% 0,1% 0,2% 0,2% 0,2%
01.07.08 01.10.08 01.01.09 01.04.09 01.07.09 01.10.09 01.01.10 01.07.08 01.10.08 01.01.09 01.04.09 01.07.09 01.10.09 01.01.10
Pace of portfolios repricing Interest-free funds inflow
As of December 31, 2009 Rub, bln Rub, bln
28
Loans to customers
Term deposits (retail+corporate) Corporate current accounts
Retail current accounts
21
17 17
15 24,6
13 22,0 20,9 21,0
12 20,7
11 10
8 8
5
11,9 11,5 14,1
12,0 10,2
1-30 days 30-90 days 90-180 days 180-270 270 days-1 Over 1 year Q2’09
Q4’08 Q1’09 Q3’09 Q4’09
days year
8

9. Fees and commissions
Strong non-interest income based on long- Fee income in line with business activity
term relations with customers RUB bln revival
RUB mln
Settlements Cards
Non-interest income Cash transactions Other
Net interest income 1 196
201
925 941 985
878
36% 109 119
105
35% 385 112
36% 34% 38% 306 323
327
266
298
245 262 262 313
64% 65% 64% 66% 62%
312 255 248 240
237
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009
Fee income breakdown by segments Key points
Others Nearly 40% of operating income falls on fees and
Financial
commissions – one of the highest shares in our
6%1% universe which allows us to remain profitable on any
size of the loan book
Corporate
Cards 25% 51% business Fees and commissions are well diversified across
businesses and type of banking product with core
inflows come from servicing day-to-day transactions
of our Corporate and SMEs clients.
17%
Well-developed cross-sales program with payroll clients
Retail business
9

10. Tight cost management
…personnel expenses are almost covered
Despite one-time seasonal hike in costs…
by earned fees & commissions
Personnel expenses Other RUB mln
2 022 1 946
121%
1 522 1 467 114% 113%
48% 1 390
48% 108%
41% 46% 47% 96%
52% 59% 52%
54% 53%
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009
Significant progress in C/I ratio, % Costs summary
Operating expenses fell by 10% Y-o-Y due to cost reduction
efforts with cuts in Personnel expenses being the key driver
76,1%
for strong progress in C/I ratio decline
72,3%
62,7% Some increase in operating expenses is possible as a result
52,7% of wage inflation and started competition for employees
48,7%
Mid-term target for cost-to-income ratio - below 50%, but in
a near run some rise is possible given that lending activity
is still subdued and rates are coming down.
2005 2006* 2007 2008 2009
*2006 - less extraordinary items
10

11. Assets: Loan portfolio stagnation
No major changes in loan volumes Composition of Assets
RUB bln
141 146 Cash & Cash &
Other assets
138 137 equivalents equivalents
135 24%
5%
Due from other
29 35 4% 50%
banks
28 8%
30 Due from
9%
32 other
2 banks Securities
11 0,2 3 6
10 1 Corporate loans
10
10 11 Securities
Retail loans
19 17 16
15 13
No liquidity pressure as LTD down at 84%
Retail loans RUB bln
Customer funds Gross loans L/D ratio
110% 110%
103%
102% 99%
76 76 74 70 72 Corporate
loans
84%
Other
assets 113
107 99 99 98 96
8 104 90 90 94 95 95
5 5 7 7
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09
11

12. Liabilities: Focus on reduction of funding costs
Well-managed funding mix No dependence on wholesale funding
RUB bln 2%
CBR Funds 14% 10% CBR funds
and bonds
146 Whole-sale 11% issue were
141
138 137 Retail deposits fully repaid in
135 Q1 2010
Retail accounts Customers 64% 78%
40
54 Corporate
44 46
48 accounts
Corporate Equity 11% 11%
12 deposits
2008 2009
10 Securities
12 14
11 issued Continued inflow despite several rate cuts
22
21 Due to other
21 Retail term deposits Retail current accounts
21 banks Corporate term deposits Corporate current accounts 54,5
25
17 Syndicated 48,0
15 44,3 45,9
loans
17 14 40,0
6 5
20 Other Liabilities
6 6
21 19 24,6
12 11 6 22,0 20,7 20,9 21,0
Subordinated
2 2 2 4
3 loans 20,0
4 5 5 5 5 17,0 17,5 14,3
14,8
Equity
15 15 16 16 16 14,1
12,0 10,2 11,9 11,5
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09
12

13. Credit quality management
NPLs growth has nearly stopped in Q4 Good diversification by industry
bln RUB Other As of December 31,2009
NPLs Gross loans +nn NPL increase
Transport
8%
99,3 99,4 97,8 6%
93,6 94,6 Manufacturing
24%
State 15%
RUB
organizations
80,534
+2.5 8% mln. 10%
+1.7
+1.2
5%
Construction
+0.5
8,8 9,4 24%
3,4 5,9 7,1
Wholesale &
Agriculture
retail trade
Q4'08 Q1'09 Q2'09 Q3'09 Q4'09
NPL Coverage ratio above 100% Accrued income received in full
Provisions, % of Total Loans Net fees & commissions income
NPL, % of Total Loans * 9,97% Net interest income
of them impaired, % of Total Loans 9,89%
8,96% 99,4%
3 729 of income accrued 3 716
5,00% 4,79% through P& L
3,59% 3,53% was received in
3,40%
8 326
2009 8 266
2,50%
1,40% 1,80% 2,20%
0,58%
2005 2006 2007 2008 2009 Accrued Received
* NPL includes the whole principal of loans at least one day overdue either
on principal or interest
13
15

14. Credit quality
Large SMEs Mortgages Other Total % of
as of 31.12.2009 corporate retail total
loans
Gross loans, including 25,657 54,877 7,914 6,196 94,644 100.0%
Provisions
Current loans 24,807 47,522 7,428 5,525 85,282 90.11% Coverage
Past-due but not 0 355 339 186 880 0.93% Ratio
101%
impaired, of them
Less than 90 - 355 192 186 733 0.77%
days
Over 90 days - - 147 - 147 0.16%
Impaired, of them 850 7,000 147 485 8,482 8.96%
Less than 90 - 1,750 - 23 1,773 1.87% Rescheduled
days
Over 90 days 7.09% Loans
850 5,250 147 462 6,709
4.8%
Total NPLs 850 7,355 486 671 9,362 9.89%
Provisions - 1,631 - 6,789 -449 - 570 -9,439 9.97%
Net Loans 24,026 48,088 7,465 5,626 85,205 -
the whole amount of loans with principal overdue for more than 1 day as well
NPL - as loans with any delay in interest payments.
14

15. Credit Policy changes – boost growth but….
How did we change credit policy after crisis Sale strategy
- Requirements for collateral were eased – now 20% discount
Corporate
- Return to overdrafts with reduced rates, which were Proactive sales using database of
suspended during the crisis potential clients (SMEs) with focus
on offering complex clients’ service:
- Changes in decision-making process – authorities returned to loans, factoring, cash-collection,
branches with acceptable credit quality payrolls, settlements and payments
- Back to factoring w/o collateral for first-grade debtors
- Easing standards in retail underwriting model
Retail
Targeting on core segments:
- Interest rates and fees were lowered “transparent” clients, active sales
driven by SMS-delivery and
- Centralizing work with over-due loans contact-center outcoming calls.
Credit card is a tool for obtaining
- Stick to strategy of working with existing client base non-interest income, incentives for
Cards
self-service operation with ATMs.
- Grace-period made maturity shorter with key target – Key target – technological and
increase fees & commissions organizational efficiency – new
platform for SMS-service and
- Improvement efficiency of client’s applications analysis
remote banking service
15
15

16. Credit Policy changes – boost growth but keep quality
- Enhanced monitoring system
Reorganization and larger involving of Legal Department on every stage of the business
process from loan applications to problem loans
Branches incentives for effective foreclosure procedures – arrest, settlement agreements,
assignments
- Enhanced collateral management
Department for managing restructured and overtaken assets was organized in May 2009 to work out non-
core assets:
Cost efficiency assessment
Rent
Evaluations and charges to
Sale without discount
provisions
Regular monitoring
and reporting
Assets overtaking
16
15

17. Currency and gap management, capital adequacy
Start of RUB balance recovery Sound capital position
*as of 01.02.2010 CAR
Tier 1 under CBR rules
(H1)
Assets Liabilities Tier 1 + Tier 2
18,4% 18,6% 19,0% 18,8%
17,7%
USD USD 16,4% 15,5%
14,3% 14,9% MIN
13% 13% Other 13,7%
12,6%
Other 9% 11%
13% Equity
RUB RUB
11%
67%
74%
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 01.03.10
Maturity gap Key points
Rub bln *as of 01.01.2010
40 Total assets Total liabilities Equity
Strong capital position reflecting large share of cash
implies no need for any capital injections in the near-run
30 Reliable policy of currency risk management - no
mismatches on the balance sheet:
20 FX-assets are mostly represented by corresponding
accounts (>50%), loans to customers and securities.
10 FX-liabilities are mostly represented by customer
deposits (>80%).
0
On demand 1-30 days 30-60 days 60-90 days 90-180 180 days - over 1 year Balanced maturity structure - the largest gap reflects
days 1 year 40% of cumulative gap not exceeding 4.5% of total assets
17

18. Earnings generation capability
ROE, % ROA, %
Operating profit before provisions and taxes/ Equity ROE Operating profit before provisions and taxes / Avg assets (gross) ROA
4,8% 4,6%
46,8%
42,5%
36,0% 37,6% 3,6%
33,0%
2,4% 2,5% 2,45%
21,0% 23,3% 2,07%
18,5% 19,1%
1,39% 1,37%
7,8% 0,88%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Value generation Key points
* % of average assets
10% 3,4% 3,4%
Providing sustainable business model which allowed
8%
generating value for shareholders even in crisis we are
6,0% 2,5% still comfortable despite short-term profitability
6% pressure
2,1% The main driver reducing key efficiency indicators is
4%
provisioning reflecting our conservative and responsible
2% 0,5% policy
0,9%
0% As the demand recover we’ll make efforts to boost
NIM Net non- Provisions Personnel Other Tax Net lending growth, cut provisions and plan to get back to
interest costs operating income
our targets 20%+ ROE and 2-2.5% ROA in mid-term
income costs margin
18

19. Strategic initiatives 2009-2010
Priorities 2009 2010
1. Clean up the loan book – close
monitoring of restructured loans and
1. Tough requirements for collateral
Asset quality 2. Centralizing decision-making process
efficient foreclosure procedures
2. Maximizing value and sale of the non-
core assets
1. Focus on core client segment – SMEs
Loan book 1. Less risky segments – large clients and
2. Aggressive growth of the client’s base
regional governments
using proactive sales of various banking
management 2. Cautious approach for a new lending
products: loans, factoring, trade finance.
Deposits 1. Recover the outflow of autumn 2008
2. Increase deposit per capita ratio in the
1. Cost of funding reduction
2. Retaining the market position among top-
management region of presence 15 banks by individual deposits
Liquidity and 1. Liquidity cushion piled up to be prepared 1. Increase the share of ruble assets as well
for any kind of economy evolution as liabilities
currency 2. Balanced book in terms of currency 2. Stick to the “no mismatches” policy both
in currency and maturity management
management despite the market volatility
19

20. Expectations for Q1 2010
Slow economic growth
Tighter competition
Continued NIM pressure
Deceleration of NPLs formation
20

21. Questions and answers
Sergey Klinkov Andrey Shalimov
Head of IR Member of the Management Board
+7 495 620 90 71 Head of Treasury
S.Klinkov@voz.ru A.Shalimov@voz.ru
investor@voz.ru http://www.vbank.ru/en/investors
21

22. 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.
22