Annual report 2011 - VTB

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VTB Annual Report 20115. Corporate governance96Printed publications for individual shareholdersThe SCC’s activities are extensively covered in VTB’squarterly newspaper for its shareholders called“The Controlling Interest”. The newspaper alsocovers other important and interesting topics forshareholders, including the performance ofVTB Group and recent news on its activities,overviews of the global markets and expertcommentary, interviews with senior managers andshareholders, announcements of workshops andprogress reports, and special offers to shareholders.In 2011, “The Controlling Interest” newspaper wasalso distributed to shareholders in Russia’s regionsand its circulation increased from 2,000 to 15,000copies during the reporting year.VTB also distributes various brochures forshareholders through its regional network. Thesecontain information about VTB shares, dividends andthe AGM, as well as contact information. By the endof 2011, information stands for shareholders hadbeen placed in VTB24 offices across 37 regions, andmore than 60% of the VTB24 branches in Moscowand St. Petersburg have supplies of shareholderinformation materials.VTB Bank websiteVTB shareholders can access up-to-date and in-depthinformation on the Bank’s official website www.vtb.ru. The Investor Relations section of the websitecontains information on share price performance,financial results and the dividend policy, corporategovernance and key upcoming events. VTB Bankdiscloses information as required by the applicablelaws, as well as additional data. The structure ofthe IR section has undergone significant changes inorder to meet shareholders’ needs. New sub-sectionshave been created and the menu has been mademore user-friendly, which enables shareholders tofind information easily and to navigate the site morequickly.In 2012, VTB Bank plans to continue to communicateactively with individual shareholders. In additionto Moscow and St. Petersburg, Open Days will takeplace in Ekaterinburg, the third largest city by numberof VTB shareholders. Workshops are scheduledin nine cities, including Kaliningrad, Khabarovsk,Ekaterinburg, Kazan, Moscow, Ufa, Nizhny Novgorod,Rostov-on-Don and St. Petersburg. The Bank is alsoplanning to change the format of “The ControllingInterest” newspaper, as well as to make furtherimprovements to its corporate website.5.9. Relations with institutionalinvestorsIn 2011, VTB Bank continued to communicateactively with the international investment community.Regular communications were particularly importantas financial markets were very volatile due to theEuropean debt crisis, and as a result there was asignificant outflow of funds from emerging markets inthe second half of 2011.Much attention was paid in the reporting period topersonal meetings with investors. In 2011, VTB helda total of 374 meetings with investment funds andparticipated in 18 conferences with investors fromEurope, North and South America, Asia and the Pacificregion. A number of meetings were held as part of theBank’s traditional roadshows to major global financialcentres, including Moscow, London, Frankfurtand New York, in which top management activelyparticipated. Andrey Kostin, President and Chairmanof the Management Board, held meetings with178 investment funds; Herbert Moos, CFO, with197 funds; Yuri Soloviev, First Deputy President andChairman of the Management Board, with 183 funds;Ekaterina Petelina, Member of the Management Board,with 112 funds; and Mikhail Zadornov, President ofVTB24, with 154 funds, including meetings held aspart of VTB Group’s first Investor Day.One of the most important results of activecollaboration with the international investmentcommunity in 2011 was the sale of a 10% stakein VTB Bank by the Russian Federation, the Bank’smajority shareholder as represented by the FederalState Property Agency, to Russian and foreigninvestors. The transaction was beneficial for allstakeholders. The State raised funds from the saleof its stake at the market price; VTB Bank increasedthe number of shares outstanding from 14.5% to24.5% and improved its shareholder structure; andinvestors acquired VTB shares at a 12% discount tothe maximum transaction price. Long-term investorsdemonstrated the greatest interest in VTB shares,representing 75% of the total placement. Existingshareholders accounted for 41% of orders and for49% of shares placed.In 2011, VTB continued borrowing, both on thetraditional debt market and the local currency debtmarket. During the reporting year, the Bank has beenactively developing relationships with credit analysts,it arranged three roadshows with debt investors andparticipated in three investment conferences.As a result, in 2011 VTB attracted a total ofUSD 4.4 billion in financing on the internationalcapital markets, including in such currencies as theSingapore Dollar and the Swiss Franc. In addition,VTB attracted a record-sized syndicated loan ofUSD 3.13 billion, the largest in the history of theCentral and Eastern European financial sector.Despite the market volatility, the Bank managed toarrange the financing on favourable terms.During the reporting year VTB Bank also developeda special programme to keep shareholders andinvestors informed about the Bank’s objectivesregarding the acquisition of the Bank of Moscow,as well as on progress made on the transaction.In addition, the Bank has developed and introducedeffective mechanisms to communicate theinvestment community’s perceptions of the Bank toVTB management. VTB conducted a comparativeanalysis on its interaction with investors, similarto that carried out by other issuers. The results ofthis exercise showed that VTB’s interaction withthe investment community in 2011 complied withgenerally accepted international practices.For the third consecutive year, VTB is preparing thebest possible annual report in the Russian financialsector for its shareholders and investors. In 2011,VTB Group’s Annual Report was recognised as the“Best Annual Report in the Financial Sector” categoryin two separate competitions. The first was organisedby the RTS and MICEX stock exchanges, and thesecond was arranged by the Expert RA rating agency.VTB Group’s Annual Report received the highestmarks from the jury, which was composed of expertsfrom the Russian Federal Financial Markets Service,the Ministry of Finance of the Russian Federation,the Ministry of Economic Development of the RussianFederation, leading professional organisations andthe financial media.5.10. Management of VTB GroupVTB Bank has a management system based onthe “strategic holding” model, which means thereis a common single development strategy forall companies within the Group, a single brand,centralised management of financial performanceand risk, unified control systems, and a focus oninteraction in order to disseminate best practices andcreate common standards.In accordance with VTB’s current management model,the Group is governed along two key lines:1. Administrative management – this relates tomanaging subsidiary companies within the Group’sorganisational structure. This is done by using themechanism of corporate governance, wherebyVTB participates in the management bodies of itssubsidiaries as a major shareholder.2. Functional management – this relates to managingthe Group’s business areas and other functionaldivisions within the Group as a whole. Functional97
VTB Annual Report 20115. Corporate governance98coordination is a supplementary governancemechanism that enables cooperation andconsultation between various parts of the Group inthe early stages of the decision-making process.At a Group level, the main coordination and advisorybody is the VTB Group Management Committee(VTB GMC), which analyses the developmentstrategies of various business areas, the businessplans for the Group and its subsidiaries, examinesreports on their implementation, assesses liquidityand risks, oversees the implementation of priorityprojects, and approves the standards, approachesand principles of the Group’s operations.As of 31 December 2011, the VTB Group ManagementCommittee consisted of the following members:Andrey L. Kostin – Chairman of the GMC, Presidentand Chairman of VTB Bank Management Board;Yuri A. Soloviev – member of the GMC, First DeputyChairman of VTB Bank Management Board;Vasily N. Titov – member of the GMC, First DeputyChairman of VTB Bank Management Board;Herbert Moos – member of the GMC, DeputyChairman of VTB Bank Management Board;Andrei S. Puchkov – member of the GMC, DeputyChairman of VTB Bank Management Board;Victoria G. Vanurina – member of the GMC,member of VTB Bank Management Board;Olga K. Dergunova – member of the GMC,member of VTB Bank Management Board;Valery V. Lukyanenko – member of the GMC,member of VTB Bank Management Board;Erkin R. Norov – member of the GMC,member of VTB Bank Management Board;Ekaterina V. Petelina – member of the GMC,member of VTB Bank Management Board;Denis A. Bortnikov – member of the GMC,member of VTB Bank Management Board;Riccardo Orcel – member of the GMC, Head of theClient Coverage Department, Senior Vice-President ofVTB Bank;David Brawn – member of the GMC, Advisor tothe Deputy Chairman, Senior Vice-President of theFinance Department at VTB Bank;Mikhail M. Zadornov – member of the GMC,President and Chairman of VTB24 Management Board;Mikhail V. Kuzovlev – member of the GMC,President of the Bank of Moscow;Yuri V. Novozhilov – member of the GMC,President of OJSC TransCreditBank;Dmitry Y. Olyunin – member of the GMC,First Vice-President of OJSC TransCreditBank;Alexei A. Yakovitsky – member of the GMC,Chief Executive Officer of CJSC VTB Capital Holding;Vadim V. Pushkarev – member of the GMC,Chairman of VTB Ukraine Management Board;Dmitry V. Rudenko – member of the GMC, First DeputyPresident and Chairman of VTB24 ManagementBoard;Alexander G. Yastrib – member of the GMC,First Deputy Chairman of the Bank of MoscowManagement Board.GMC meetings are held regularly on the basis ofquarterly work plans. In 2011, the GMC of VTB held20 meetings.In order to provide a platform for discussionand analysis of VTB Group’s performance, theManagement Committee has set up 13 CoordinationCommissions within the Bank’s main businesslines (corporate and investment business, businesswith financial institutions, risks, planning andreporting, assets and liabilities, internal controland audit, internal control for the prevention ofmoney laundering and the financing of terrorism,branding and marketing/external communications,personnel, property management, IT and security).The Commissions are managed by the heads ofthe relevant divisions of the Bank. Members of theCommissions are experts drawn from all of the banksand companies in the Group. The Commissions areresponsible for identifying best practices and findingways to implement them, prior to their final approvalby the Management Committee.In addition to the Commissions, the Group CreditCommittee, which oversees the management andcontrol of credit risk, also functions as an element ofthe Management Committee.In September 2011, the Group’s ManagementCommittee approved a decision to reform the Group’smanagement system. The main objective of thisreform is to improve coordination and cooperationbetween the Group’s companies in various keybusiness and support functions.Three key directions of reform were established toachieve this:1. To create a major business line known as Corporateand Investment Banking, which is responsible for thefinancial results of VTB Group’s corporate bankingbusiness in all the geographical areas in which it ispresent;2. To create a major business line known as RetailBanking, which is responsible for the financial resultsof the retail banking services provided byVTB Group to individuals and small businesses in allthe geographical areas in which it is present;3. To increase the centralisation of responsibility andthe integration of management of the key functionsof support and control, primarily the management ofrisks, finance, IT and operational activities.Developments in the management system willnot lead to any changes in the Bank’s strategyand policies. On the contrary, this developmentmerely provides a different approach to theirimplementation. The new system will enable theBank to reduce risks, develop a major global modelfor corporate banking, closely coordinate the work ofevery business line in all geographic locations, andto increase profitability through synergies betweenbusiness lines and best practices. It will also enablethe Group to cut costs by sharing infrastructureand resources more extensively among VTB’ssubsidiaries. Furthermore, the new system will bea platform for the effective integration of assetsacquired by VTB.VTB Group’s governance system is designed to complyfully with the corporate and antimonopoly legislationof the countries in which the Group’s companiesoperate, and undergoes continual review andimprovement in order that it remains in compliance.In particular, the regulations of the VTB GroupManagement Committee ensure that no decisions canbe made that would limit competition in the marketsin which VTB Group companies operate or wouldviolate legislative norms or the statutory documentsof those companies. Also, in accordance with Civillaw requirements, VTB Group’s governance system isbased on the principle of the independence of each ofthe legal entities within the Group.99
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