Annual report 2011 - VTB

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VTB Annual Report 20114. Management report44RA Rating Agency raised the company’s rating from“A+” to “A++” (“Exceptionally high level of reliability”).FactoringVTB Factoring was launched at the end of 2008, andbegan active market operations in the second halfof 2009. The authorised capital of the company wasRUB 670 million as at the end of the reporting period.During 2011, VTB Factoring significantly increasedits business volumes. At the end of the year,VTB Factoring’s turnover amounted to RUB 125 billion,while the portfolio of accounts receivable grew toRUB 36 billion. The company’s operations in 2011led to it being ranked in first position among thelargest Russian factoring companies in termsof portfolio size. The company’s market share,measured on the same basis, totalled 22%.In 2011, VTB Factoring financed approximately650,000 deliveries of goods and services.The company’s portfolio includes 423 activecustomers and 667 debtors. In 2011, VTB Factoringsigned more than 300 new agreements to providefactoring services.During the reporting period, apart from its traditionalintensive work with companies in the FMCG sector,VTB Factoring actively cooperated with companiesfrom the industrial sector, including those involved inmetallurgy, automobile and equipment manufacturing.The size of the regional segment of VTB Factoring’sbusiness grew rapidly in 2011, and amounted toapproximately RUB 8 billion at the end of the year.The company’s regional network of sales outletsincreased to 16, covering Russia’s largest cities byyear-end. VTB Factoring worked actively with theVTB Bank branch network to attract new customers.NPF VTB Pension FundNPF VTB Pension Fund is a dynamically developingnon-state pension fund, which provides a full range1 In April 2012, the official opening of VTB Capital’s office in New York took place.of services for mandatory pension insurance and nonstateretirement benefits to individuals and corporateclients.In 2011, the fund’s assets grew by more than eighttimes, reaching RUB 16.6 billion.By the end of the reporting year, more than 600,000people had signed contracts with VTB PensionFund for mandatory pension insurance. The fundactively cooperated with the Group’s banks in orderto attract new clients. In 2011, VTB launched theselling of mandatory pension insurance policiesin the branches of the Bank of Moscow andTransCreditBank.As at the end of 2011, VTB Pension Fund had movedup from tenth to seventh position in the rankingcompiled by the Pension Fund of the RussianFederation, which is based on the number ofcontracts signed for mandatory pension insuranceduring the year. It also moved up 20 positions to 15thin the rating of the Federal Financial Markets Service,which is based on the total pension assets undermanagement. The Expert RA Rating Agency upgradedthe Fund’s rating to “A+” (“High level of reliability”)with a “stable” outlook, while the National RatingAgency raised its rating to “AA+” (“Very highreliability and the highest level of responsibility”).4.3.4. Business outside of RussiaToday, VTB is the only Russian banking group that hasa significant presence outside of the country.The Group’s international network enables it toprovide banking services in Europe, Asia, NorthAmerica 1 and Africa. VTB’s international presencealso assists businesses from Russia and the CISto cooperate with and expand their presence intointernational markets. VTB’s international operationsalso enable the Group to diversify its business andincrease its profitability by providing access to highmarginmarkets.VTB Group has 12 subsidiary banks with operationsoutside of Russia. In the CIS, the Group is present inArmenia, Ukraine, Belarus, Kazakhstan, Azerbaijanand Georgia. VTB banks in Austria, Germany andFrance operate as part of the European sub-holdingheaded by VTB Bank (Austria). The Group also hassubsidiary banks in Cyprus and Angola, and branchesin China and India. In addition, VRB bank operates inVietnam, which was jointly established by VTB and theBank for Investment and Development of Vietnam.Business in the CIS and GeorgiaThe development of VTB’s business in CIS countries isthe key priority of the Group’s international strategy.The Bank’s active presence in the financial marketsof the former Soviet Union states facilitates thestrengthening of economic relations between thecountries and enables VTB to provide a broader rangeof services to its corporate clients. Ukraine is themain priority for VTB in the region. As at the end of2011, VTB had 386 sales points in CIS countries andGeorgia.PJSC VTB Bank (Ukraine) performed well in 2011and strengthened its market position in Ukraine,increasing VTB’s brand awareness and raisingcustomer trust.In 2011, net assets of VTB Bank (Ukraine) increasedby 11.5% and totalled UAH 36 billion(USD 4.5 billion 1 ). The corporate loan portfolio,excluding reserves, grew by 9.3% in 2011 to reachUAH 29.7 billion (USD 3.7 billion 1 ). In the reportingyear, the bank issued loans to a number of strategiccompanies, a significant proportion of whichincluded state enterprises. A balanced approachand a focus on active development securedVTB Bank (Ukraine)’s position among the top-fivelargest lenders in the corporate segment of Ukraine’seconomy. As at the end of 2011, the bank held a4.8% share of the market, making it the fourth largestplayer in the segment.In 2011, the bank’s corporate liabilities portfolioincreased by 110%, moving the bank from 13thplace to 9th place among Ukraine’s largest financialinstitutions, in terms of corporate deposits, givingit a 3% share of the market. Furthermore, the bankbecame the fourth largest bank by commissionbasedincome from trade finance transactions, whichtotalled UAH 31.1 million or USD 3.9 million 2 , ascommission-based income grew by 58%.VTB Bank (Ukraine)’s total corporate customerbase increased by 13% to 4,300 during the year.The growth in corporate banking was mainly driven bythe introduction of new banking products as well asby the upgrade of existing ones, and by the changesin tariffs for settlement and cash services.Growth in the bank’s lending to retail customers wasjust as prominent, with the bank’s position in thissegment rising from 17th place to 14th place in 2011.As at the end of the year, VTB Bank (Ukraine) wasservicing 474,700 individuals and small businesses.Despite all the difficulties faced by the Belarusianeconomy and its financial sector in 2011,CJSC VTB Bank (Belarus) reported excellent resultsin 2011, across all main business performanceindicators. The bank’s profit for the reporting yearwas 2.9 times higher than in 2010 and totalledBYR 93.2 billion (USD 17.9 million 3 ). The bankattracted 2.6 times more resources during 2011 toequal more than BYR 5.7 trillion (USD 679.0 million 4 ).The bank’s assets grew 2.5 times to BYR 6.2 trillion(USD 738.5 million 4 ). The volume of customer depositsincreased to BYR 2.0 trillion (USD 238.2 million 4 ),2.1 times more than what was achieved in 2010. Thecustomer loan portfolio doubled year-on-year to reachBYR 3.1 trillion (USD 369.3 million 4 ).1 The USD equivalent is calculated on the basis of USD/UAH spot rate as of 30 December 2011. Source: Bloomberg.2 The USD equivalent is calculated on the basis of average USD/UAH exchange rate for 2011. Source: Bloomberg.3 The USD equivalent is calculated on the basis of average USD/BYR exchange rate for 2011. Source: Bloomberg.4 The USD equivalent is calculated on the basis of USD/BYR spot rate as of 30 December 2011. Source: Bloomberg.45
VTB Annual Report 20114. Management report46VTB Bank (Belarus) successfully managed to growits corporate customer base in 2011. The bankexpanded its presence in the food, trade andconstruction industries, which resulted in a 23.1%increase in the number of corporate clients andentrepreneurs using the bank’s services, to total10,152 as at the end of 2011. During 2011, thebank actively cooperated with resource-intensivecompanies, engaged in R&D in engineering sciences,transportation of oil products, engineering servicesand design.The bank’s small business customer segment alsodelivered good growth dynamics. During the reportingperiod, the volume of loans provided by the bank tothis customer segment rose by more than seven times,while the volume of non-performing loans decreasedby more than 50%. The account balances of smallbusiness customers increased by 70% in 2011.In 2011, VTB Bank (Belarus) also strengthened itsmarket position in the retail banking segment. Thebank opened new offices in Minsk, Vitebsk and Pinskduring the year and the development of its retailnetwork, as well as its new and upgraded offeringof banking products contributed to a 66% growth inthe bank’s retail deposit portfolio. The bank’s retailloan portfolio increased by 71%, the highest growthrecorded for the last three years.CJSC VTB Bank (Armenia) delivered another year ofsuccess and growth by significantly strengthening itsleading market positions in 2011. The bank’s assetsincreased by 39.2% to AMD 177.5 billion(USD 459.8 million 1 ) as at the year-end, mainly dueto an increase in lending volume to individuals.The bank’s total loan portfolio grew by 41.8% toAMD 122.7 billion (USD 317.8 million 1 ) in 2011.VTB Bank (Armenia) increased its share of the lendingsegment to 9.6% during the year.Customers account balances were up byAMD 21.0 billion, reaching a total of AMD 79.5 billion(USD 205.9 million 1 ) as at the end of the reportingperiod. Individual customers’ funds increased by28.9% compared to the 2010 figure, and equalledAMD 47 billion (USD 121.7 million 1 ). Funds beingheld by corporate customers amounted toAMD 32.4 billion (USD 83.9 million 1 ). Overall,the bank’s deposit market share expanded to7.5% during the year.As at the end of 2011, the bank’s customer basecomprised of 286,400 individuals and over 5,300companies – small, medium- and large-sizedbusinesses.In 2011, VTB Bank (Armenia) continued to finance keysectors of the Armenian economy, contributing to thedevelopment of large and medium-sized businesses,financial institutions and state companies. Thebank’s corporate client portfolio includes marketleaders and promising medium-sized businessesfrom a broad spectrum of sectors, such as insurance,construction, trade, power, transportation, small- andlarge-scale industry, IT and telecommunications.During the reporting period, JSC VTB Bank(Kazakhstan), which started its operations in 2009,delivered high growth rates that exceeded theforecasts set out in the bank’s business plan.In 2011, the bank completed the formation of itsbranch network, which comprised 24 sales points,covering 17 Kazakh regions as at the year-end.Due to the expansion of its regional branch network,the bank managed to nearly double its customer baseto 14,200 in 2011.VTB Bank (Kazakhstan) rapidly attracted newcustomers and further developed its relations withcurrent clients, which enabled the bank to increasethe volume of its active operations. In 2011, thebank’s loan portfolio grew by 269.4% and itsproportion of total assets increased by 25.4 p.p.In May 2011, VTB Bank (Kazakhstan) signed anagreement with the European Bank for Reconstructionand Development (EBRD) for a USD 20 million tradefinance guarantee facility, as part of the EBRD TradeFacilitation Programme. In June 2011, the bankwas admitted to JSC Kazakhstan Stock Exchange totrade in the Forex market category, gaining a rightto participate in the trading of foreign currencies. InOctober 2011, the bank issued international bankcards for its customers on a large scale. By the end ofthe year, more than 4,000 cards had been issued.In 2011, Fitch Ratings assigned VTB Bank(Kazakhstan) with a “BBB-“ long-term issuer defaultrating (Outlook: “Stable”), which is evidence of thebank’s stable financial position.JSC VTB Bank (Georgia) continued its activedevelopment during 2011. Today, the bank is amongthe ten largest banks in the country and has beenassigned with the highest long-term issuer defaultrating among Georgian banks, which is “BB”.The bank’s activities were focused on attractingfunding from international financial institutionsduring 2011. For example, the bank obtained aUSD 11.4 million credit facility from the EBRD tofinance the country’s agriculture and small andmedium-sized businesses.In 2011, VTB Bank (Georgia)’s assets rose by24.4% to GEL 423.7 million (USD 254.4 million 1 ).The bank’s loan portfolio increased by 30.1%totalling GEL 304.8 million (USD 183.0 million 1 ) as atthe year-end. In 2011, the bank mostly developed itscooperation with individuals and as a result, the loanportfolio of this customer segment grew by 42.8%.OJSC VTB Bank (Azerbaijan) is a universal bankproviding corporate as well as retail bankingservices in the Republic of Azerbaijan. In 2011, thebank started the formation of its new managementteam with the appointment of a new Chairman ofthe Management Board. The bank plans to recruitnew managers for the retail banking and riskmanagement divisions. The bank’s organisationalstructure and the internal documents regulating VTBBank (Azerbaijan) were also started to be updated.Automated processes are employed within the keybank’s business lines. The bank also initiated acomprehensive development programme for itsstrategy for the coming years.With the help of VTB Group, the bank set plans toconduct large-scale investment banking transactionsin Azerbaijan. In October 2011, the bank opened itsfirst branch in Baku to help the expansion of its retailbusiness. As at the year-end, the loan portfolio ofthe bank’s retail business increased by more than2.5 times. VTB Bank (Azerbaijan), which started itsoperations in 2009, has been demonstrating highgrowth rates, exceeding the forecasts set out in thebank’s business plan.Business in EuropeIn 2011, the Bank’s European sub-holding continuedto strengthen its positions in servicing the exportand import operations of the largest Russian and CISexporters. Overall, 2011 saw a rapid growth in thecorporate lending sector. For example, the Europeansub-holding’s loan portfolio grew by 190.3% year-onyearto EUR 5.9 billion (USD 7.6 billion). More thanhalf of these funds were lent to Russian borrowers.One of the main areas of activity of VTB’s Europeansub-holding in 2011 were transactions of pre-exportand trade financing. During the year, large transactionswere arranged for companies such as Acron, RMKGroup, Belorusneft, Panrusgas Gas Trading, for a totalamount of approximately EUR 1.0 billion.In 2011, VTB’s European sub-holding developedtwo main areas of its business with local corporatecustomers. These included growing its lendingoperations to European companies and implementingthe VTB Direct project. As at the end of 2011,European corporate clients accounted for 55%of the total corporate customer base of VTB Bank(Deutschland) AG and VTB Bank (France).471 The USD equivalent is calculated on the basis of USD/AMD spot rate as of 30 December 2011. Source: Bloomberg. 1 The USD equivalent is calculated on the basis of USD/GEL spot rate as of 30 December 2011. Source: Bloomberg.
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