Annual report 2011 - VTB

VTB Annual Report 20114. Management report30contracts, guarantees of reimbursement of ValueAdded Tax, etc.)During the reporting period, a number of measureswere implemented to develop cross-selling within theVTB Group on the basis of documentary business.In particular, client service models were developedand introduced with the participation of the Bank’sforeign branches in India and China, as well as withother subsidiary banks of the Group.In 2011, intensive efforts were made to introducea system for the sale of letters of credit through theremote banking service. The practice of selling bankguarantees and letters of credit under the frameworkof general agreements was also actively promoted.Working with clientsIn order to improve the quality of client service,the Bank adopted new approaches to customersegmentation in 2011. In particular, the criteria fordefining large and medium-sized corporate clientshave been revised, and the model for servicing largecorporate clients has been modified.During the reporting period, VTB formed two clientservice divisions to deal with large corporate clients.One of them is focused on servicing the state anddefence sectors of the economy, and the otherdivision focuses on providing services to clientsin market-based sectors of the economy (metalsand mining, oil and gas, power generation, trade,information technology and communications,mechanical engineering, the chemical industry, etc.).The new servicing model is based on the creation ofsector directorates within the client divisions thathave responsibility for developing business withclients in each sector of the economy. This approachto client servicing enables the quality of sectorexpertise to be improved and banking services to becustomised to each client’s needs.The medium-sized corporate client segment iscrucial to the development and diversification ofVTB Group’s business. The model for servicingmedium-sized businesses focuses on developing astandard line of banking products and services, andso maintaining an integrated offering. Medium-sizedand regional corporate clients are serviced bya separate client division.4.3.2. Retail bankingIn 2011, VTB Group’s retail banking businessdeveloped in a dynamic fashion and grewsignificantly faster than both the market and VTB’smajor competitors, as a result of organic growth andthe successful completion of acquisitions. As thesecond largest bank in Russia serving individualcustomers, VTB24 continues to form a core part ofthe Group’s retail business. VTB Group retail bankingservices in Russia are also provided by the Bank ofMoscow and TransCreditBank.At the end of 2011, VTB24’s active customer basetotalled 5.9 million, compared to 4.9 million at theend of 2010. As at the end of the reporting period,VTB Group’s total active Russian retail customerbase totalled around 15 million active customers,including the Bank of Moscow and TransCreditBankactive customer base. At the end of the reportingperiod, the number of small businesses working withVTB Group amounted to more than 250,000.By the end of 2011, VTB Group banks in CIS countries(Ukraine, Armenia, Azerbaijan, Kazakhstan andBelarus) and Georgia were providing services toapproximately 1 million individuals. The Group’sretail business in Europe is also developingsuccessfully in France and Germany, where Groupactivities are mainly focused on attracting retailcustomer funds at present.The Group continued to implement its retail bankingstrategy during 2011. The strategy centres on acustomer-oriented approach to business development,which aims to improve customer service qualitywithout losing sight of the Group’s commitmentto delivering greater profitability. In addition toexpanding VTB’s retail banking scale and marketshare, the Group’s medium-term retail business plan isto intensively develop its customer relations, as well asexpand and grow remote sales channels.The most significant market factors that influencedVTB Group’s retail business performance during2011 included the recovery of the Russian economyagainst the backdrop of the European debt crisisand the reduction of the US credit rating, increasedcompetition in the retail lending market as well asthe stabilisation of the level of non-performing loans.The savings-oriented consumer behaviour model thatestablished itself during the credit crunch, changedto a consumer growth model over the course of theyear. This trend was confirmed by a growth in loansamidst falling growth in savings.In the context of a dynamic and growing retaillending market in 2011, VTB24 not only focusedon the extensive development of its network andthe growth of its loan portfolio, it also focused onthe improvement of customer services and theintroduction of innovative approaches to workingwith key customer segments. VTB24’s maincompetitive advantages are not restricted to therange and attractiveness of its retail product offering,as the high level of technological development ofits banking and its segmented approach to differentgroups of customers are also key. All these factorsVTB Group retail lending market share, %10.212.213.72009 2010 2011Source: VTB estimates based on RAS financial results of VTB Bank, VTB24,the Bank of Moscow and TransCreditBank.combined contributed to record levels of profit beingregained by VTB retail business-line in 2011.The improved economic situation in Russiacontributed to the dynamic growth of VTB Group’sretail loan portfolio, which grew by 52.2% toRUB 824.1 billion as at the year-end, compared toRUB 541.5 billion in 2010. In addition to organicgrowth driven by VTB24’s positive lending activity,the expansion of its portfolio was greatly enhancedby the consolidation of the Bank of Moscow in 2011.The high rate of growth in lending to individualsenabled VTB Group to increase its market share inthe Russian retail lending sector to 13.7% (versus12.2% in 2010). For the past five years, the Grouphas consistently been second-largest player in thissegment of the Russian market.In 2011, the Group managed to maintain growth ratesin retail deposits, far outpacing the market average.At the end of the reporting period, VTB Group’sportfolio of retail deposits reached RUB 1,161.4 billion,an increase of 55.3% compared to 2010. In anincreasingly competitive environment, VTB was ableto capitalise on its brand reputation and secure asignificant organic influx of customer funds. Theconsolidation of the Bank of Moscow contributedsignificantly to the growth in customer funds.VTB Group retail deposit market share, %6.07.29.02009 2010 2011Source: VTB estimates based on RAS financial results of VTB Bank, VTB24,the Bank of Moscow and TransCreditBank.31