/m.kozhokin-davos-2011

N ew oppor tuni ti es of communi ca ti ons i n r eta i l ba nki ng pr omoti on

Deputy CEO, VTB24 Mikhail Kozhokin

1

Overview of VTB24



Leading Russian retail bank with full range of banking products and services for individuals and SME

Profile

Market Position

Business Lines

   

Second largest retail bank in Russia Fifth largest bank in Russia by assets Retail loans market share – 10,6% Retail deposits market share – 6,4%

    

Loan and deposits for individuals SME lending and services Private Banking Cards Investment products for individuals

Distribution Network

Regions

  

531 branches/outlets Approx. 5000 ATMs Nationwide branch network that is significantly larger than those of most competitors



Very strong position in all Russia’s regions: 69 regions – 86% coverage Focus on major cities

 

Clients



Over 7.8M individuals clients with 6.9M active clients Approx. 200 000 SME clients with 49 500 active

Net Income Growth (in RUB mln)*

Total Asset Growth (in RUB mln)* CAGR = 42%

CAGR = 100%

17 514

904 011 712 973 596 481 319 387 159 045

2006

2007

2008

2009

*IAS, standalone VTB24. 2010 data preliminary, non-audited

2010

545

937

2006

2007

4 237

4 898

2008

2009

2

2010

Retail Banking – History of VTB24

2004 – 2006

2007 – 2008

 SET UP

 ACCELERATED EXPANSION

 Acquisition of Guta Bank in Russia  Based on Guta Bank, a specialized retail bank, VTB24, was created, focusing on serving and providing loans for retail customers and small businesses as a part of VTB.  Product lines and sales process were set and launched

 Significant growth of VTB24’s business volumes and market share evidenced by branch network expansion across the country and creating new office forms and bank products sales modules.  Retail customers’ migration from VTB and VTB North-West

2009 – 2011  ACNOWLEDGED LEADER  The second largest retail bank in Russia  Wide branch network throughout Russia  Developed retail infrastructure, including front office, processing center and internet banking  Significant retail client base  Leader in customer service*  VTB24 actively develops its retail business and product line, leading banking service technologies and cross-selling, and steadily grows its share on the retail market.

The strategic focus is further leading growth with client-oriented and segment-based approach to ensure profitability and high efficiency * Awards granted in 2010 presented on next slides

3

Business Growth Supported and Customer Loyalty

by Efficiency Improvement

Number of clients

Average time of operation

Branches and ATMs

Structure of client-flow by time in queue

4

Rising Customer Satisfaction Contribute to Stable Growth

-

EPSI (Quality assessment to meet European standards) – Annual research «Customer saticfaction’2010» – VTB24 is recognized as absolute leader for customer satisfaction and loyalty

VTB24

Sberbank

Alfa-Bank

Other banks

VTB24

-

-

«The Retail Finance» magazine – 1st place by results of 2010: «The best retail bank», «The best service quality»

SPEAR’S Russia Wealth Management Awards - in 2010 VTB24 Private Banking is recognized as the best Russian bank, providing private banking services and wealth management

Alfa-Bank

Raiffeisen Bank

#1 Private Banking 5

1st place

2nd

3rd

Industry average

Segment-oriented approach and the Internet

 VTB24 implemented a segment-oriented approach in client attraction. Key target segments are High/Ultra High Net-Worth’s, mass affluent and the upper mass segment. The upper mass segment is characterized by high level of activity in the Internet, especially in social networks: 52% of the respondents access the Internet every day, 81% - no less than once a week. In comparison national average is 40% and 61% respectively.  The marketing policy of VTB24 rests on following features:  Internet Advertising (high share in the advertising budget, emphasis on contextual advertising)  General creative concept (celebrities)  Presence in social networks

The share of the Internet users in different income groups

85%

92%

The share of Internet in the sources of information about the bank

32% search for information on the Internet users' advice on the Internet

72%

22%

60%

19% 19% 16%

39%

10% 10%

300-500

501-800

801-1600

Family Income, per person, per month, $

1601-2500

>2500

300-500

11%

501-800

801-1600

Family Income, per person, per month, $

6

1601-2500

Internet audience in Russia

Dynamics of Internet Usage in Russia 70

42,8%

40%

60

35%

32,3% 50

30%

mln.

27,0% 40

25%

20,8%

30

38,0

45,3

59,7

20% 15%

20 10

45%

29,4

10%

2,1%

5% 3,1

0

2000

0%

2007 Users (left scale)

2008

2009

2010

% of Population (right scale)

ďƒź The number of the Internet users in the Russian Federation increased by 31,8% in 2010 and amounted to 59,7 million people. It’s about 42,8% of the total population of the country.

Source: Internet World Stats

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Internet Advertising in Russia

Internet Advertising in Russia 25

120% 21,9

100%

97%

20 87%

14,7

mln

15

80%

15,6

60% 55% 9,5

10

40%

40%

The Internet is the only segment of the advertising market that has been continuously increasing even during the crisis in 2008-09 years.

5,1

5

20%

6%

0 2006

2007

2008

advertising expenses (left scale)

2009

0% 2001

growth, % (right scale)

ďƒź Except for the post-crisis 2009, the growth rate of internet advertising in Russia in 2006-2010 didn’t descend below 40%. In 2010 the internet advertising market capacity in Russia according to MindShare Interaction amounted to 21,9 billion rubles.

8

Website Attendance Dynamics – www.vtb24.ru

Website visitors 18 000 000 16 000 000

 T he a mount of websi te vi si tor s i s conti nuousl y r i si ng wi th a 25% i ncr ea se i n 2010. For 4 yea r s i n a r ow (2007-2010) the VT B24 si te a ttenda nce ha s gr own by 7.5 ti mes.

14 000 000 12 000 000 10 000 000 8 000 000

 About 50% of vi si tor s a r e i nter ested i n ca sh l oa ns a nd cr edi t ca r ds.

6 000 000 4 000 000 2 000 000 0 2006

2007

2008

2009

2010

VT B24 si te r ea ch i s l ess tha n the a mount of I nter net user s i n M oscow or St. Peter sbur g, but exceeds tha t of Eka ter i nbur g a nd the other Russi a n ci ti es.

The product structure of site attendance in 2010 Mortgages 19%

Microcredit Auto Lending 1% 12%

Monthly site reach, mln. visitors 7 6 5

Savings 19%

4 3 2 1 0

Cash loans 38%

Credit cards 11%

Moscow

St. Peterburg

VTB24

9

Ekaterinburg

VTB24 Expands Its Communications Via the Internet

Internet Advertising Costs, $mln 4,3  

3,4

Internet Advertising costs increased by 80% in 2010.

The share of Internet Advertising coats in the advertising budget is rising from year to year. In 2010 it reached 26,1%.

Website is a Generator of Sales

2,4

2008



2009

The amount of cash loans applications via www.vtb24.ru increased by 28% in 2010, which is three times more than in 2009 (9%).

2010

The Structure of Advertising Costs 100% 80% 60% 40% 20% 0% 2008

Internet

TV

Radio

2009

Press

Outdoor

2010

Metro

Collateral materials

10

The Effectiveness of Internet Advertising Increases: The Example of Cash Loans

Internet Advertising Costs and Conversion Ratio (Number of Visitors-Number of Applications) Internet advertising costs

7,4

conversion ratio

7,9 -21%

6,3 4,3

3,4 2,4

2008

2009

2010

ďƒź Wi th the i ncr ea se of I nter net a dver ti si ng costs by 80% i n 2010 the conver si on r a ti o of the number of VT B24 si te vi si tor s i nto the number of i nter net a ppl i ca ti ons for ca sh l oa ns decr ea sed by 21%. So the effecti veness of I nter net a dver ti si ng ha s r i sen.

11

VTB24 in Social Networks

TB24 is represented in Facebook, Twitter, on Banki.ru (leading Russian site on banking), LiveJournal and Blogspot.

12

VTB24 Internet Banking In 2009-2010 the number of internet banking clients of VTB24 has grown by 4,6 times. At present every eighth client of VTB24 uses internet banking.

Number of clients VTB24 internet banking 1200

14% 12.5% 974

1000

12%

thousands of people

10% 800 7.8%

8%

600 505

400

6%

4.6%

5.2%

4.5%

4% 211

200

2%

103 52.2 0

0%

01.01.2007

01.01.2008

01.01.2009

number of VTB24 internet banking users

01.01.2010

01.01.2011

share of VTB24 cliens, % (right scale)

13

Specifics of Russian financial internet development

 Banking technologies development can’t catch up with the Internet technologies  Russians don’t have enough trust in the Internet for financial transactions.  In general in Russia the Internet is yet a communication environment and information search engine, rather than a tool for business matters and for solving personal financial questions.  The core of financial internet audience are young successful professionals, a new and attractive generation of clients  This is yet narrow but fast growing segment with a high potential for both financial internet and client base of retail banks development

They would open new opportunities for the banking sector

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