Annual report 2011 - VTB

VTB Annual Report 2011Statement of the President and Chairman of the Management Board4Statement of the President andChairman of the Management BoardDear Shareholders, Clients and Partners,2011 was another successful year for VTB Group.Despite the difficult situation in the global economy,VTB has demonstrated strong financial performanceby increasing operational efficiency and businessvolumes across all of its business lines, as wellas expanding its geographical footprint. Duringthe year, we conducted a number of importanttransactions which, along with the first positiveresults of the implementation of our efficientgrowth strategy, created the potential for furthershareholder value increase.During the reporting period, we made a big stepforward in achieving our strategic objectives, whichare revenue growth and the sustained increase inreturns on capital. In 2011, we generated a recordnet profit of RUB 90.5 billion, an increase of 65%when compared to 2010. The level of return onequity increased to 15.0%, compared to 10.3%in the previous year. I would like to highlightthat these results were achieved in conditions ofconsiderable uncertainty in the global economy andvolatility on the financial markets, which once againendorses our development strategy.One of the most significant events of 2011 wasthe acquisition of an almost 95% shareholding inthe Bank of Moscow. This transaction enabled VTBto strengthen its position in the Moscow regionand expand its client base. We believe that theconsolidation of the Bank of Moscow is in linewith VTB’s long-term strategy and will support thefurther business growth of VTB Group in this highlyprofitable region of Russia. We also increased ourstake in TransCreditBank to almost 78%. In 2011,both banks adopted new development strategies.The Bank of Moscow will continue operatingas a universal bank with a particular focus onpartnership with the Moscow City Government, andwill work with small and medium-sized businesses,while TransCreditBank will be fully consolidated intoVTB Group by the end of 2014. We are presentlyfocusing on the seamless integration of these newmembers into our Group.Our solid financial performance in 2011 is theresult of our systematic efforts to grow our businessorganically, as well as evidence of our successfulM&A activities. The reporting period was alsosignificant for the steps we took to change VTB’srevenue structure and to increase our operatingefficiency.In 2011 we completed the setting up of the CorporateInvestment Banking (CIB) unit of VTB Group. The unitoffers a wide range of banking services on a globalbasis. The CIB unit comprises three business lines –credit services, investment banking and transactionbanking – and three customer service units, thusre-defining our sales efficiency and customer service.In the reporting period, we concentrated on theoptimisation of our business processes. We improvedlending procedures for small and medium-sizedbusinesses, which significantly rationalised thedecision-making process. We also focused on thedevelopment of the Group’s corporate transactionbusiness in 2011, building a highly professionalteam, introducing a range of advanced new productsfor clients’ management of settlements and accountbalances, and developing packaged offers fortransaction banking.All these developments had a positive impact on theCIB unit’s performance. Its profit before taxation in2011 amounted to RUB 84 billion, compared toRUB 59 billion in 2010. Credit services madethe most substantial contribution to the Group’stotal profits. The Group’s corporate loan portfolioincreased by 49.6% year-on-year, and as a resultVTB’s market share for corporate lending grew to18.7%. We reached the number one position inRussia for our corporate deposit portfolio, with amarket share of 21.1% at the end of 2011.Our retail banking business, one of the contributorsto growth in 2011, also demonstrated successfulresults. Profitable growth continued due to the highqualityVTB24 product line, its solid customer baseand our extensive geographical presence. As atthe end of 2011, VTB’s retail segment profit beforetaxation increased to RUB 39 billion, compared toRUB 21 billion in 2010. During the year, the Grouphas been actively increasing its market share in theretail lending market (13.7% as at 31 December2011), mainly through high-margin lendingproducts. In addition, VTB continued strengtheningits funding activities and increased its share in theretail deposit market to 9.0%.Following the consolidation of the Bank of Moscowand TransCreditBank, our retail client base wasincreased by eight million new active clients and ourretail network by more than 600 branches and salesoffices. This provides the Group with significant newopportunities for mass segment growth.The Group was also an active player in thecapital markets in 2011. In February, the RussianGovernment sold 10% of the share capital ofVTB Bank to a wide range of institutional investors.Demand for VTB shares exceeded the offer by oneand a half times, which enabled shares to be soldwith minimal discount to their market value, andalso enabled the Bank to diversify its shareholderbase by attracting long-term investors, includingsovereign wealth funds. VTB was also active inthe debt capital market. In July 2011, the Groupreceived a syndicated loan in the total amountof USD 3.1 billion with a record low floatinginterest rate of LIBOR +1.3%, which has becomea benchmark in the Russian market. Thirty banksparticipated in this transaction. Furthermore, weplaced two Eurobond issues for SGD 300 billion andCHF 225 million. This enabled us to strengthen theGroup’s funding base, and therefore to increase ourlending activities.5