2016 VTB Group Investor Day London / May 17, 2016 Some of the - - PowerPoint PPT Presentation

2016 VTB Group Investor Day

London / May 17, 2016

Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of JSC VTB Bank ("VTB") and its subsidiaries (together with VTB, the "Group"). Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. We caution 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.

Andrey Kostin President and Chairman of VTB Bank Management Board

VTB Group Overview

4

IMPRESSIVE GROWTH STORY AND STRONG COMPETITIVE POSITIONS IN ALL KEY SEGMENTS

2013 1.1 13.6 2005 2014 2015 8.8 12.2 7.4 2012 Legal entities Individuals 2015 18% 2005 2% 2015 11% 2005 5% 17% 13% 19% 7% Customer loans Customer deposits

Total assets RUB trln VTB market share in Russia

• Leading player in Russia

− 2nd largest banking group in Russia

− 18% market share in Russia

• Successful growth story

− 12-fold asset growth for the past ten years

• Well-established universal banking

model − leading Russian banking group with strong positioning in all key segments: CIB, Retail banking, Insurance, Leasing, Factoring, etc.

• Extensive branch network

− over 1,900 branches in Russia − presence in 22 countries

• Solid client base

– over 20 mln active retail and corporate customers 2015 2005 2015 2005

+29% y-o-y vs market +24% y-o-y

today

5

VTB GROUP CORPORATE DEVELOPMENTS: MIX OF MERGERS AND ORGANIC GROWTH

2016

2004 2005 2008 2010 2011 2013 Launch of Post Bank, a joint venture between VTB and Russian Post

• A wide network of outlets and an

extensive client base

• Access to pensioners base
• VTB Group expertise and infrastructure

Completion of the BoM integration:

• Optimisation of costs
• Strengthening of internal control and risk

management system

• Revenue synergies: increased cross-sales and

strengthening of VTB Bank’s competitive positions

Organic growth M&A deals

6

Retail Business global business line Corporate – Investment Banking global business line

IT Risk management Audit and Compliance Finance Admin HR Legal PR Security

VTB GROUP FLEXIBLE OPERATING MODEL

Assets (1)

RUB trln

7.6 44% 3.8 22% 0.8 5%

Large corporate clients (revenue > RUB 10 bn)

• Broad corporate client base with

long term relationships with leading Russian companies across all economic sectors

• #2 Corporate bank in Russia
• #1 Investment bank in Russia

Mid-corporate clients (revenue RUB 0.3 – RUB 10 bn)

• Separate global business line and

profit centre since 2014

• Wide regional franchise

Small corporate clients and individuals (revenue <RUB 0.3 bn)

• #2 Retail bank in Russia
• Network: 1,648 outlets and

13 thousand ATMs

• Post bank

Mid-Corporate Banking global business line Corporate Centre

(1) Second number represents share of each global business line in VTB Group’s total assets, %

7

SUMMARY

2017 – 2019 New development strategy 2014 – 2016 Strategy of quality growth

Maintaining position of Сorporate-Investment banking while further improving its efficiency Outperforming the market growth in Retail banking, and further increasing the share of Retail in the Group’s business mix Prioritising Mid-Corporate banking as a separate operating segment and profit centre while further increasing the market share in Russia Focusing on operating efficiency and stringent cost control Enhancement of Group level risk management and controls Transitioning the Group to unified functional and technological platforms Outperforming the market growth in Retail banking, and further increasing the share of Retail in the Group’s business mix Outperforming the market growth in Mid-Corporate banking in loans and transaction fee income while further growing customer base Maintaining position of Сorporate-Investment banking while further diversifying CIB business mix Prioritising investments in technological platform development and innovations Further consolidation of VTB Group governance structure and enhancement of Group level risk management and controls Focusing on operating efficiency and stringent cost control 1 2 3 4 5 6 1 2 3 4 5 6

Yuri Soloviev First Deputy President and Chairman of VTB Bank Management Board

VTB Group Corporate-Investment Banking

9

In 2015 CIB managed to achieve

• Four-fold year-on-year increase in NOI driven

by strong revenue growth, tight cost control and a reduction in provisions vs high 2014 base

• CIB increased / maintained its leading market

position in loans (~23%), deposits (~14%), current accounts (~15%) and across all investment banking products

• Improved portfolio mix: increase share of Oil

and Gas, Metals and Mining, Retail, Telecom, Chemicals and lower exposure to Construction, Utilities, Public Sector

• Year-on-year 30% increase of fees and

commissions driven by cross-sell and new product development

CIB: 2015 KEY ACHIEVEMENTS

76% 9% 15% 45% 10% 45%

NII NCI Other Income

CIB net income and costs dynamics RUB bn CIB structure of net operating income before provisions

2014 2015

24.2 101.6

• 34.2

29.9

2014 2015 Net operating income Net profit Other income

10 13.6 19.7 23.8 23-24 30-31

2013 2014 2015 2016 (F) 2019 (F)

13.2 19.6 22.8 23-24 29-30

2013 2014 2015 2016 (F) 2019 (F)

CIB: 2013-2019 MARKET IN RUSSIA

CIB loans RUB trln CIB deposits and current accounts RUB trln

• Significant banking market growth in 2013-2016 driven by currency impact, closed international capital market and

low risk appetite of foreign banks to Russia;

• We expect slower market growth in 2016-2019 both in lending and deposit / current accounts markets in Russia due

to low investment demand and high interest rates.

~22%

CAGR

~8%

CAGR

~23% ~7%

CAGR CAGR

2016F 2019F 2016F 2019F

11

• Managed to increase CIB segment loan portfolio by 18% and

ensure strong revenue growth

• Maintained strong positions in corporate lending; worked with

more than 400 active client groups

• Kept leading position: VTB market share of CIB Russian

credit portfolio rose from 19.3% in 2013 to 23% in 2015

• International franchise development: VTB Group established

itself as one of the leading lenders and arrangers of private financings in Sub-Saharan Africa and arranged some strategic financing transactions in CEEMEA and Asia (including debt restructurings, holding company financings and event driven transactions)

Key 2015 achievements

CIB CREDIT BUSINESS(1): 2014-2015 HIGHLIGHTS

Loan portfolio RUB bn

• VTB has extended its presence in infrastructure finance by moving forward with the financing of a landmark toll road

construction project and several new deals in mining, airport and shipping finance

• VTB has taken the leading position in terms of volume of deals approved under the Government investment projects

support program (P-1044)

• Development of Trade Finance franchise and further build-up relations with counterparties from 55 countries
• Since 2013 Trade Finance business volume has been increased by 7.0x
• Became one of the key partner banks for Russian Export Credit Agency (EXIAR)

(1) Key products in L&D segment are Credit, Leveraged Finance and Investments, Infrastructure credits and project finance, Trade finance, Leasing 6,748 7,671 5,186 6,139 2014 2015 +18%

CIB loans and advances (net) Loans and advances to legal entities (net)

+14%

12

CIB GTB segment financial results RUB bn

Deposits and current accounts RUB bn

• Overall GTB revenue increase: net operating income grew by 117%,

fees and commissions – by 44%, net interest income – by 121%

• Current account volumes grew by 51% significantly higher than

market growth

• Significant market share: current accounts – 15%, deposits – 15%;

factoring – 33%

• Leading Custodian in Russia with 6% increase in assets under

custody

• VTB provided new cash management solutions for 80+ large groups
• f companies which included more than 600 legal entities
• VTB is recognised to be the top solution and product provider in

Cash Management in the Russian Market. Launched multiple products around Liquidity Management, Channels and Cash & Settlements

• Implemented centralised treasury solutions for 18 government

controlled companies, including Rostelecom, Transneft, Rostech and Alrosa

• Capital consuming transactions were priced with intense focus on

ROE hurdle rates

• VTB Factoring completed the largest ever global factoring transaction

between InterRao and Gazprom EnergoHolding for RUB 13 bn

• Servicing 24 Depositary Receipts Programs of The Bank of New

York Mellon and Deutsche Bank Trust Company Americas

2015 Key achievements

CIB TRANSACTIONAL BUSINESS: 2014-2015 HIGHLIGHTS

13.4 29.1 8.8 12.7 4.3 16.2 2014 2015 3,520 3,940 2,152 3,212 2014 2015 Net profit Net operating income Fees and comissions CIB deposits Deposits of legal entities

13

CIB INVESTMENT BUSINESS: MARKET SHARE

Securitisation FX Derivatives FX Spot1 Market Share Product Line Fixed Income Equities Global Banking2 42% 49% 26% 75% 30% 22% 2015 Δ from 2013 +22% 52% 1% 33% 4%

• 4%

+7% +1% +24% +28% +7% Portfolio management Investment Management 5% +8% 0%

1) Estimation of Client FX Market for CIB and MidCap clients 2) 2013 estimation done based on Dealogic database, 2015 – Thomson Reuters “Deal Making in Russia 2015” publication by deal value 3) In net profit (IFRS) Source: VTB Analytical Center

+7% +8%

• Significantly strengthen the positions in all product

lines in low Russian Market

• Strengthened international positions in DCM and

M&A segments

• Offset slow Russian IB market by significantly

increasing market share in all products and winning more international business

• Strengthen the position in Structured REPO –

the most significant part of Equities business in Russia

• Development of product lines with Direct Market

Access

• Hold current positions

Comments DCM ECM M&A Cash equities Structured repo DMA Infrastructure capital Position3 #1 #1 #1 #1 #1 #1-2 #1-2 #10 #1-2 No data #3

• Significantly strengthen the positions in Client

FX market

14

• FX and Rates:
• VTB has been recognised as the best Russian Foreign Exchange Provider every year by Global

Finance magazine

• 2014 VTB Started trading African and Asian currencies
• 2015 VTB prints record-high volumes in trading RUBCNY in the onshore interdealer market in China
• Local RUB Spot market share in 2015 reaches about 25%, derivatives are over 30%
• Technological advances in FX allow VTB to enter into strategic partnerships with Alibaba Group and

Ant Financial Group

• Credit Trading:
• Over the course of the past year in response to rising capital requirements and secondary liquidity

adjustments Credit trading has significantly reduced balance sheet use for linear/non-linear risk and has increased the velocity of position turnover

• VTB has won 10 CBonds awards, including Best Bond Market Sales and Best Bond Market Trading
• Commodities business:
• Launch of physical trading and financing in VTBCT Zug. Zug became operating entity and completed

first physical deals in crude oil, oil products and base metals

• First official member on Shanghai Gold Exchange
• Physical Commodity financing set up in VTB Austria

Fixed Income

IB: 2014-2015 HIGHLIGHTS (1/2)

15

• The establishment of a ‘true’, integrated Global Equities Product which encompasses Cash Equities,

Equity Derivatives Volatility Trading, Repo, Private Equity & Special Situations (PESS) and Infrastructure Capital & Project Finance (IC&PF)

• Completed the re-organisation of our client franchise ‘flow’ businesses to reflect the prevailing market
• pportunity / dynamics while maintaining the scope of our product offering and geographical coverage;
• VTBC Broker: develop a robust, scalable, secure, multi-asset class electronic trading platform which is

being pro-actively marketed to clients as we continue to add functionality and new market connectivity;

• Market-leading MOEX Repo business combined with our core client-facing strategic EQ financing

business

• The PESS portfolio continues to generate significant returns while the team retained their “#1 Private

Equity Firm in Russia” from Private Equity International (#2 in CEE since the category was expanded);

• IC&PF are the clear leader in their field within the Russia market. The official opening (in February 2014)
• f the new terminal at Pulkovo International Airport in St Petersburg attracted global acclaim
• Revenue growth of almost 50% in 2015 vs 2014 despite a highly subdued domestic IB market and

without increasing headcount

• Increased market share in the Russian IB market - which hit record levels in 2015 - with clear leadership

across M&A, ECM and DCM activity (verified by ThomsonReuters independent research)

• A good balance of domestic and international business (~50% of revenues generated on internationally

related deals)

• Development of several profitable niches where VTB has established unique specialist knowledge such

as in taking private London Stock Exchange companies and in running domestic Russian IPOs

Equities Global Banking

IB: 2014-2015 HIGHLIGHTS (2/2)

16

2015 GLOBAL BANKING KEY DEALS

17

CIB market position Product development Operational efficiency

• Maintain market share in lending and deposits / current accounts Russian banking markets
• TOP positions in key IB markets (GB, FX, Infrastructure finance)
• Leverage domestic dominant position in advisory
• Bespoke approach to international markets focusing on high-yield financing solutions and

advisory

• Key strategic international regions: Asia (China, India), Africa (Southern and Eastern parts),

Southern Europe

• Special focus on growing Russia-China links

d CIB 2016 KEY PRIORITIES

▪

Focus on new product development: commodities, trade finance, project finance, structured financing solutions

▪

New solutions in Cash management techniques

▪

Direct market Access platform development

▪

Further growth of cross-sell opportunities: increase number of products per one client

▪

Operating platform realignment to decrease share of hard currency CIB denominated costs

Mikhail Zadornov President and Chairman of VTB24 Management Board

VTB Group Retail Banking

19

RETAIL BANKING MARKET IN RUSSIA

10% 38% 46%

10.9 10.7

10% 40% 45% 5% 27% 10% 10%

7.7

6% 8% 50% 10% 9% 28%

10.0

53%

11.3

54% 9% 42%

15 - 15.5

43% 10% 6% 32%

Retail loans RUB trln

18.6

82% 18% 19% 19%

14.3

15%

23.2

83%

26.0

85% 17% 81%

17.0

81% 16%

34 - 35

84%

Retail deposits RUB trln

Car loans Credit cards Cash loans Mortgage

Small business loans RUB trln

Small business RUB trln

2.4 2.7 2.9 2.7 2.6 3.1-3.3

2013 2012 2014 2016F 2015 2019F

3.1 3.0

30% 2015 70% 2016F 81% 19% 21% 79%

2.6

2014 69% 31% 31% 69% 2013 2012

2.1 2.4

69% 31% 2019F

3.3-3.5

CAGR

+11% +10% +18% +11%

CAGR CAGR CAGR

+4%

CAGR

+6%

CAGR

2013 2012 2014 2016F 2015 2019F 2013 2012 2014 2016F 2015 2019F

+13%

CAGR

+3%

CAGR

Current accounts Term deposits Current accounts Term deposits

20

VTB GROUP MARKET POSITION IN RETAIL BUSINESS IN RUSSIA

12.7% 14.4% 15.0% 1.2% 2.7% 2.9% 0.6% 0.9%

18.8% 17.8% 13.9%

7.5% 8.7% 9.2% 1.2% 1.8% 1.8%

11.2% 10.7% 8.7%

5.0% 5.6% 6.7% 0.6% 1.2% 1.2% 5.2% 10.0% 11.3% 1.4% 1.3% 1.7%

Retail loans Retail deposits and current accounts Small business loans Small business deposits and current accounts

VTB24 Ex-Bank of Moscow 2012 2015 2016F 2012 2015 2016F

+3.9 p.p. +1.0 p.p. +2.0 p.p. +0.5 p.p.

2012 2015 2016F

7.9% 6.9% 5.6% +1.3 p.p. +1.0 p.p.

2012 2015 2016F

13.1% 11.4% 6.6% +4.8 p.p. +1.7 p.p.

0.1% 0.2% 0.2%

VTB24 Ex-Bank of Moscow VTB24 Ex-Bank of Moscow Leto / Post Bank VTB24 Ex-Bank of Moscow Leto / Post Bank & VTB Bank

21 50.8 37.6 16.9

RETAIL BUSINESS CONTINUES TO BE THE KEY CONTRIBUTOR TO VTB GROUP P&L AND EFFICIENCY

2013 2014 2015

Profitability of VTB Group’s Retail business RUB bn

48% 46% 56%

CIR

136.2 157.6

Net operating income Net profit

166.0

22

VTB Group customer base (active customers) in 2015 mln

9.0 1.1 1.9 11.5 10.4 1.3 19.9 Total customer base VTB Pension Fund VTB Insurance Banking customers, total BoM Post Bank (ex-Leto Bank) VTB24 De-duplication

• 0.5
• 3.3

VTB GROUP CUSTOMER BASE IN RUSSIA BY ENTITY

De-duplication

23 2,544 (29%) 1,679 (19%) 2,526 (29%) 2,290 (25%) 2,466 (28%) 3,133 (35%) 1,253 (14%) 1,932 (21%)

VTB24 CUSTOMER BASE BY SEGMENT

8,789 9,033

VTB24 customer segments (active customers) thsd

2013 2015

Affluent + HNWI Upper mass Mass Lower mass

+7 p.p. +7 p.p.

• 4 p.p.
• 10 p.p.

24

VTB24 LOAN PORTFOLIO STRUCTURE AND RISK PROFILE

Average loan portfolio RUB bn / % and cost of risk %

596 748 826 109 95 81 436 445 445 68 73 78 204 174 148 8 41 63 2015 2016F 2014

1,422 1,577 1,641

Small business Mortgage Car loans Cash loans Credit cards Other

+11% +4%

42% 8% 30% 5% 14% 1% 47% 6% 28% 5% 11% 3% 50% 5% 27% 5% 9% 4% 100% 100% 100% Cost of risk

4.4% 3.6% 3.2%

25 10.1 11.0 17.0 2.0 2.0

VTB GROUP BRANCH AND ATM NETWORKS IN RUSSIA

378 530 576 627 646 603 630 2,600

4,312

455 (42%) 2016F

+52%

1,713

309 (45%)

687

2012 537 (50%) 2014 470 (45%)

1,649

2015 Standard offices Offices with affluent zones Leto/Post Bank and ex-BoM Post-office branches 2014

12.1 13.4

2017F 2015

0.4

VTB24 Ex-BoM Leto/Post Bank

Branch network ATM thsd

+11% +27%

• 4%

+161%

26

VTB24 INTERNET AND MOBILE BANKING PENETRATION: STRONG GROWTH TO BE CONTINUED IN 2016

Active users of online & mobile banking % of active clients

50.6% 16.6% 27.1% 21.2% 7.0% 9.1% 4.4% 4.4% 5.5% 3.4% 18.5% 28.9% 42.2% 49.3% 12.8% 2.6% 9.8% 3.6% 2.5% 2.2% 3.5% 4.4% 3.0%

8.3% 45.2% 33.3% 22.0% BoM 5.6% 6.3%

0.8%

VTB24 15.2% 8.0% 10.6%

Global Leaders

50.8%

1.5% CEE Avg 1.5%

16.8% 23.8% 28.1%

1.1%

29.4% 51.6%

1.0%

х1.4

Active users of online & mobile banking as of 1H’2014 Input of 1H’2014-1H’2015 Input of 2H’2015 “Online&mobile” benchmarking study by Finalta among Russian banks Russia Avg 2015 Russia Avg Top 3

27

CRM ACTIVITIES PLAY INCREASINGLY IMPORTANT ROLE IN SUPPORTING DYNAMIC GROWTH OF RETAIL BUSINESS

2015 2016F

151,969

49%

316,091

54% +129%

Sales of consumer loans RUB mln

2016F 41%

364,256 449,144

27% 2015 +87%

Sales of credit cards No. of cards

49% 2016F

418,956

2015

195,724

56% +87%

Sales of affluent bundles (“Privilege”) No. of bundles

Share of CRM

VTB24 business plans for selected products and CRM

+108% +23% +114%

28

SHARE OF CLIENTS WITH SALARY ACCOUNTS

Share of clients with salary accounts, 2014 % of active clients

47.0% 42.0% 36.0% 35.0% 32.0% 32.0% 22.0% 19.0% 12.0% 3.0% 29.0% Russia Average BoM VTB24

“Branch productivity” benchmarking study by Finalta among Russian banks

29

VTB GROUP RETAIL BUSINESS KEY STRATEGIC INITIATIVES FOR THE NEXT 3 YEARS

Market share and financial performance

• Increase market share (as a Group) both in loans and deposits
• + 5% in loans
• + 5% in deposits and CA
• Maintain high level of financial efficiency / profitability (ROE ~18%)

Customers

▪

Increase number of active customers through new customers acquisition and current customers reactivation

▪

Continue developing as a multi-brand model to target different client segments (e.g. focus VTB24 on mass-affluent and affluent segments and Post Bank

• n mass segment and retirees)

▪

X-sell: increase number of products per customer

▪

Customer experience: improve customer satisfaction (NPS)

Multi-channel

▪

Continue developing multi-channel model:

• Increase sales network - mainly by Post Bank
• Increase penetration of Internet and Mobile bank
• Increase share of sales in alternative channels (CRM, Internet)

Operational efficiency

▪

Achieve high-level of operational efficiency: number of customers per branch employee, sales per branch employee

▪

Continue further centralisation of back-office functions

Post bank

▪

Successfully realise a joint project with Russian Post

IT

▪

Mid 2017 – completion of VTB24 IT overhaul

▪

YE’2019 – harmonisation of VTB Group retail IT landscape

30

Customers

POST BANK OFFICIALLY LAUNCHED IN APRIL 2016

Post Bank logo and branch format Key numbers (2023): Branches in Post offices Top-3 retail bank in Russia 15,000 >17 mln Top-3 Key numbers (2023)

31 6.7 15.6 52% 60%

1 20 2 5

3 25

POST BANK 2016 BUSINESS PLAN

Loan portfolio (gross) RUB bn Customer deposits RUB bn Net operating income RUB bn

60 103 14 15 4 8

78 126

2015 2016F Credit cards POS

Net profit RUB bn

• 1.7

0.1 CIR +62%

2015 2016F

х8.6

Term deposits Current accounts

+131%

Cash loans 2015 2016F 2015 2016F

Herbert Moos Deputy President and Chairman of VTB Bank Management Board

VTB Group Financial Performance and Outlook

33 5.5% 7.9% 12.6% 108.0 98.0 52.0

2013 2014 2015

31.8 38.0 61.2

MACRO ENVIRONMENT SIGNIFICANTLY DETERIORATED

Oil price USD and exchange rate RUB Inflation and CBR key rate Russian macroeconomic indicators

USD/RUB (avg) Oil price (Urals, avg) Investments in fixed capital GDP Industrial production Retail turnover

1.3% 0.6%

• 3.7%

0.8%

• 1.5%
• 8.4%

0.4% 1.7%

• 3.4%

3.9% 2.7%

• 10.0%

2013 2014 2015

6.8% 7.8% 15.6%

2013 2014 2015

(1) In its current form key rate was introduced by the Bank of Russia in September 2013. Average figure for 2013 is calculated based on the period from September 13, 2013 till December 31, 2013.

• 47%
• 9%

CPI inflation (avg) CBR key rate (avg) (1)

+7.8 p.p. +1 p.p.

34 313 534 635

2013 2014 2015

4.7% 5.8% 6.3% 10.9% 9.8% 12.4% 14.7% 12.0% 14.3% 807 998 1,316 1,516 1,217 1,093

2013 2014 2015

VTB SIGNIFICANTLY IMPROVED BALANCE SHEET METRICS AND CAPITAL

Total assets RUB bn Customer funding RUB bn

8,769 12,191 13,642

2013 2014 2015

4,383 5,669 7,267

2013 2014 2015

BIS Group capital RUB bn NPLs (90+) RUB bn

115.5% 114.8% 105.8%

Total CAR Tier I ratio Tier I capital Total capital NPL coverage ratio

151% 157% 139%

LDR

+12% +39% +28% +29% +25% +11%

NPL ratio NPL

35 99.2 275.4 178.1

2013 2014 2015

1.6% 3.4% 1.8%

PROFITABILITY HIT BY LOWER NIM AND RISE IN CREDIT COSTS PARTLY OFFSET BY SOLID FEES GROWTH

Net interest income RUB bn Provisions charge (1) RUB bn Net fee and commission income (NFCI) RUB bn Net profit RUB bn

316.9 347.3 289.1

2013 2014 2015

4.4% 4.0% 2.6% 100.5 0.8 1.7

2013 2014 2015

11.8% 0.1% 0.1% 55.4 63.1 76.2

2013 2014 2015 NIM Share of NFCI in operating income before provisions

13% 12% 19%

• 17%

+10% +21% +14%

CoR ROE

• 35%

+178% +113%

• 99%

(1) Including provision charge for impairment of debt financial assets and provision charge for impairment of other assets, credit related commitments and legal claims.

36

2016 MANAGEMENT EXPECTATIONS

Indicator Measurement Optimistic scenario Conservative scenario Marco

GDP, nominal % YoY 0.5

• 1.2

CPI inflation % YoY 7.0 7.6 Oil price (Urals), average USD/bbl 50 40 CBR key rate, average % 9.1 10.0

Banking sector

Loans to legal entities % YoY 5-10 0-5 Loans to individuals % YoY 5-10 0-5

VTB Group

Loans to legal entities % YoY In line with the market In line with the market Loans to individuals % YoY Above the market Above the market NIM % ≈4.0 >3.0 CoR % ≈2.0 >2.0 Cost growth % YoY In line with inflation In line with inflation Net profit RUB bn ≈50 >0 NPL coverage ratio % Above 100 Above 100

37

VTB GROUP MACRO EXPECTATIONS TILL 2019

GDP growth Y-o-Y Oil price (Urals), average USD/bbl CPI inflation Dec / Dec CBR key policy rate EOP

≈2% ≈2.0-2.5% ≈2.0-2.5%

2017F 2018F 2019F

55 60 60

2017F 2018F 2019F

5.5 – 6.5% 4.5 – 5.5% 4.0 – 5.0%

2017F 2018F 2019F

6.5 – 7.5% 5.5 – 6.5% 5.5 – 6.5%

2017F 2018F 2019F

38 12.0 - 12.5 13.0 - 13.5 15.0 - 15.5

2017F 2018F 2019F

RUSSIAN BANKING SECTOR TILL 2019

Loans to legal entities RUB trln Loans to individuals RUB trln Deposits of legal entities RUB trln Deposits of individuals RUB trln

36 - 37 40 - 41 44 - 45

2017F 2018F 2019F +10-12%

Y-o-Y avg growth rate

VTB market share +10-15%

Y-o-Y avg growth rate

VTB market share

32 - 33 36 - 37 40 - 41

2017F 2018F 2019F

28 - 29 31 - 32 34 - 35

2017F 2018F 2019F VTB market share VTB market share +10-12%

Y-o-Y avg growth rate

+9-11%

Y-o-Y avg growth rate 2015 2019 2015 2019 2015 2019 2015 2019

18% 23% 11% 16% 14% 11% 13% 11%

39

VTB GROUP KEY FINANCIAL TARGETS TILL 2019

Indicator Measurement 2017 – 2019 Loans to legal entities % YoY In line with the market Loans to individuals % YoY Above the market NIM % ≈4.0 CoR % ≈2.0 CIR % 2019: low 40th ROE % 2017-2018: >5.0 2019: ≈11.0 NPL coverage ratio % Above 100

40

IT AND INFRASTRUCTURE DEVELOPMENT

Key objectives

• Productivity increase
• Reduced maintenance

cost

• Overall improvement of

IT reliability and security

• Reduced time-to-

market Consolidation and virtualisation of IT infrastructure Product and channel innovation

• New data processing center,

integrated infrastructure of data processing centers in Russia

• Private cloud

and dynamic capacity management

• Virtualisation of

workstations

• Workplace

mobility

• Broadening the list of products and

services available through mobile and internet banking

• Omnichannel and seamless customer

experience

• New customer interaction channels
• Market place (integrated group-wide

product platform)

• Organisational setup to support

innovation cycle Simplification of IT landscape

• Unification of corporate support

applications

• Centralised IT architecture management

Data analytics

• Enhancement of data quality and

granularity through introduction of CDO function and methodology

• MIS improvement through visualisation

tools and mobile analytics

• Centralised risk modelling

Cyber security

• Development of authentication tools (including biometric authentication)
• Introduction of adaptive anti-fraud systems

41 10% 3% 6% 10% 9% 62% 222

Future projections 2015

CONSISTENT IMPROVEMENT OF COSTS STRUCTURE

Key initiatives Staff costs and administrative expense RUB bn Realignment of costs structure RUB bn

Staff costs Administrative expenses Cost / Avg. assets

62% 56% 60% 38% 44% 40% 222 223 198

2015 2014 2013

• 0.3%

1.8% 2.2% 2.4%

1

Completion of integration of the Bank of Moscow

2 3 4 5

Further consolidation of support and control functions Deeper penetration of remote channel client servicing Streamlining of business processes / lean practices Optimisation of international footprint

Other expenses Taxes Leasing and rent expenses IT expenses Depreciation and other expenses related to premises and equipment Staff costs Other expenses Taxes Leasing and rent expenses IT expenses Depreciation and other expenses related to premises and equipment Staff costs FLAT DOWN UP DOWN FLAT FLAT

2017 – 2019 Trends

42

VTB GROUP RISK MANAGEMENT FUNCTION

• Loan monitoring and pre-work out functions

were integrated into centralised risk management system

• Risk appetite concept was cascaded from the

Group level down to subsidiaries and global business lines

• Internal models for credit risk assessment

(corporate & retail) were fine‐tuned in accordance with the Basel II requirements

• Measures aiming at business continuity were

implemented, Crisis management body was established

Global CRO Deputy CRO Corporate credit Deputy CRO Integrated risks Deputy CRO Retail

Credit risk management Credit application analysis Consolidated risks Head of Risks CIB International

Loan monitoring and pre-workout Operational risks Head of risks in subsidiaries

VTB Group risk management competence centers

Risk management departments in subsidiaries

Market & Liquidity risks Subsidiaries

Centralised risk management

Risk management coordination

Key developments in 2014–2015 Key priorities for 2016 and beyond

• Further implementation of risk-adjusted metrics

(such as ECaP and RAROC) in business decision process and business-planning

• Further development of IT platform to ensure the

availability of up-to-date detailed data on VTB risk profile

• Further development of VTB Group Retail risk

management competence center

Management board

Risk appetite statement, risk management policies

Credit committees

Corporate credit and investment decisions

Loan monitoring committee

Monitoring exposures and loan workout, control of risk mitigation procedures

Retail risk committee

Managing risks in the Retail segment Credit risks methodology

Risk committee

Risk methodology, portfolio risk management

43

FUNDING STRUCTURE

Total liabilities structure RUB bn Customer deposits structure RUB bn Comfortable wholesale debt repayment schedule (1) USD mln

1,937 1,761 25 283 160 312 2,220 1,921 827 1,339 236

2016 2017 2018 2020 2022 2024 2035

CHF AUD USD 60% 69% 12,188 ≈16,000

2015 2019F

Customer deposits

20% 22% 7,267 ≈11,000

2015 2019F

Current accounts

(1) Net of bought back public debt. Exchange rates published by the CBR as of April 14, 2016. In addition to international debt, VTB Group currently has RUB 61 bn domestic bonds.

+ 9 pp + 2 pp

International debt repaid and bought back since mid-2014:

USD 11.6 bn

44 6.1 9.2 15.0 15.0 15.2 15.2 2.8 17.9 6.1 9.2 15.0 15.0 18.0 33.1

2010 2011 2012 2013 2014 2015*

CAPITAL MANAGEMENT

Tier I CAR (Basel I)

13% 12% 11%

2017F 2018F 2019F 10.5% comfort zone threshold

Dividend payout 2016 – 2019 ≥ 25% of the Group’s net profit under IFRS Dividend payout RUB bn

14% 13% 13%

2017F 2018F 2019F

Total CAR (Basel I)

Dividend payout ratio

2010 2011 2012 2013 2014 2015(1) % of net profit in accordance with RAS 14 38 83 44 91 67 % of net profit in accordance with IFRS 11 10 17 15 2,250 1,947

Dividend payout for preference shares Dividend payout for

• rdinary shares

(1) VTB Bank Supervisory Council recommendation on 2015 dividend payment.

(1)