World Without Barriers. VTB Group Content

Mission and values 4 5.3. The General Shareholders Meeting of JSC VTB Bank 80 5.4. The Supervisory Council of JSC VTB Bank 82 Statement of the Chairman of the Supervisory Council 6 5.5. The Management Board of JSC VTB Bank 98 Statement of the President and Chairman of the Management Board 8 5.6. Remuneration of the members of the Supervisory Council 1. Financial highlights 10 and the Management Board of JSC VTB Bank 103 5.7. Internal control and audit 103 2. VTB’s market position 14 5.8. Investor relations 110 3. The economy and banking sector 17 5.9. VTB Group governance system 115

4. Management report 22 6. Corporate social responsibility 118 4.1. Key events in 2013 22 6.1. Personnel 118 4.2. VTB Group strategy 23 6.2. Responsible resource management 122 4.3. Review of operating performance 30 6.3. Social programmes 123 4.3.1. Corporate and investment banking 30 7. Management responsibility statement 126 4.3.2. Retail banking 39 4.3.3. Other businesses 52 8. Summary consolidated financial statements in accordance with IFRS 127 4.3.4. Business outside of Russia 54 9. Other information 138 4.4. Review of financial performance 58 9.1. Details of JSC VTB Bank 138 4.5. Risk management 66 9.2. Contact information 139 5. Corporate governance 78 10. Shareholders information 142 5.1. Overview of the corporate governance system 78 5.2. Development of the corporate governance system in 2013 79 

Mission and values

Mission Versatility. Our expertise in different financial areas allows us to offer all customers comprehensive and To provide world-class financial services for sophisticated solutions. a sustainably better future for our customers, our shareholders and our society. Team Spirit. Our dedicated team of professionals has the advantage of the synergy of knowledge, potential, energy and creative insight of each team member. Values

Customer confidence. Our customers’ confidence is Identity our most important value. VTB Group is the leading Russian financial institution Reliability. Our prominent position in financial markets, with global presence and scale. our international expertise and our global scale guarantee our strength and reliability. Vision Transparency. Our business is open and transparent with a focus on partnership and cooperation. VTB will be a champion in all our target markets. VTB Annual Report 2013 Statement of the Chairman of the Supervisory Council

6 7 we monitor its performance closely. We use and vision for the strategy. This was the first time Statement of the Chairman assessment procedures based on the Bank of that a large Russian company invited its minority Russia’s recommendations to review the corporate shareholders to share their views on the strategy. of the Supervisory Council governance. In 2013, the corporate governance Over 130 various proposals were received, some of system was assessed in accordance to nine key which were reflected in the strategy. parameters, eight of which demonstrated a positive trend. The average assessment rating increased In April 2014, the Supervisory Council approved Capital raising to 3.8, representing 95% of the maximum score. In the new strategy, “Quality growth”, which focuses The second stage of VTB privatisation was addition, the Supervisory Council conducted a self- on improving business performance, reducing costs undoubtedly the key event of 2013. We managed to assessment, which also showed improvements in and enhancing risk management systems at the convince the Government of the Russian Federation its efficiency, including a reduction in the number Group level. The strategy places emphasis on these of the benefits of issuing new shares compared to of extraordinary Council meetings and members key areas largely due to the significant slowdown in selling the existing state-owned shares. As a result participating more regularly in Supervisory Council Russia’s economic growth and the expected decline of placing 2.5 trillion new shares on the Moscow meetings. in the pace of the banking sector’s development. Exchange, VTB authorised capital grew by All that creates additional risks for the Group and RUB 102.5 billion. This enabled the Group to not In 2013, we continued developing anti-corruption compels it to pay more attention to responsible cost only increase its capital adequacy ratio, but also to and compliance procedures. The Supervisory management. In the coming years, VTB will not be continue to further develop its business. Prominent Council approved a new edition of the Ethics Code, able to maintain the growth rates it has demonstrated large sovereign wealth funds, including Norges Bank which contains provisions on anti-corruption over the recent years. That is why it will be important Investment Management, Qatar Holding and the measures, conflict of interest mitigation measures for us to use our entire internal capacity to provide State Oil Fund of the Republic of Azerbaijan, became and procedures to prevent market manipulation our shareholders with an acceptable level of income. our shareholders. They acquired more than half of and misuse of insider information. In addition, we We will still bet on faster growth in the retail business the new share issue. In addition, many of VTB current approved the concept for VTB Group consolidated and an increase of its share in the Group’s total shareholders exercised their pre-emptive right and compliance function management, as well as assets and income. purchased shares for more than RUB 14.4 billion. regulations for interaction across the companies We believe that attracting new strategic investors of the Group in this field. At the same time, the Group intends to inject while maintaining established relationships with fresh impetus into developing the medium-sized existing shareholders will further enhance the quality As a result of these measures, the Bank maintained business segment, the potential of which is far from Dear Shareholders, Clients and Partners, of VTB corporate governance. its high position in the National Corporate being exhausted. Mid-corporate businesses will be Governance Rating (level “7+”), which is compiled separated in a standalone operating segment and In 2013, the Russian economy followed the same Development of corporate governance from the results of the Russian Institute of Directors profit centre in our new strategy, and the necessary trends that emerged in 2012. Economic growth We continued to improve the Group’s corporate annual independent monitoring. conditions for its rapid growth will be created. continued to lose momentum and reached its lowest governance system throughout 2013. We have taken We expect that the Group’s new development level since 2009. All of this suppressed growth of the a number of important initiatives to strengthen The new strategy priorities and carefully selected tools will allow banking sector, which experienced reduced demand for the role of minority shareholders in the decision- In the beginning of 2013, we began to develop VTB it to react promptly to external factors and to ensure loans, and was also impacted by measures introduced making process of the Supervisory Council. Elena Group’s new three-year strategy for 2014–2016, the continued growth of VTB business. by the Bank of Russia to curb the pace of retail lending. Popova, a representative of the VTB Shareholder superseding the outgoing 2010–2013 strategy. It was Consultative Council, was elected to the Supervisory important to properly assess the macro-economic Despite the unfavourable market environment, VTB Council in June 2013 in response to numerous situation and the medium-term prospects of Russia’s Group demonstrated excellent results. Net profit requests from minority shareholders. This initiative banking business in order to establish priorities and reached RUB 100.5 billion, a new record for the proved to be a success as it allowed us to further to set ambitious, yet achievable goals. The strategy Group. This corresponds to a ROE of approximately improve communications with minority shareholders. was developed by the Group Management Board and 12%. Although this is lower than the figure for 2012, Supervisory Council. VTB minority shareholders also Chairman the Group’s ROE in 2013 is comparable to the figure The Group is committed to ensuring that its corporate participated in developing the strategic objectives. of the Supervisory for 2012 due to the increase in the Group’s equity. governance meets best practice standards, and We asked our shareholders to send their proposals Council of JSC VTB Bank Sergey Dubinin VTB Annual Report 2013 Statement of the President and Chairman of the Management Board

VTB net commission income grew by 15% in 2013, reducing spending. More details on our new strategy Statement of the President which fully meets our expectations. can be found on page 23 of this report, but I would 8 9 like to highlight the following key initiatives: and Chairman of the Management Board In 2013, TransCreditBank became fully integrated into VTB Group. Its corporate unit became part of VTB Maintaining the Corporate and Investment Banking Group Corporate and Investment Banking business, Business market position while further improving exposed to. New world-class investors became our while its retail line was integrated into VTB24. its efficiency; shareholders, who believe in VTB long-term growth The acquisition of TransCreditBank allowed us to story. It is important to highlight that all the additional significantly expand the Group business. We gained Outperforming the market in the retail segment, and shares were placed on the Moscow Exchange, access to more than two million retail customers further increasing the retail business share of the demonstrating how Moscow is becoming increasingly and 900 high-quality corporate clients, and our loan Group’s total income streams; important in the international financial markets. portfolio grew by RUB 425 billion. Prioritising medium-sized businesses as a separate Raising this new capital provided substantial support In the uncertain external environment, cost control operating segment; to the growth of the Group’s balance sheet. In 2013, is becoming a major priority for VTB. In 2013, we the loan portfolio grew by 24%; retail loans increased dedicated significant resources to reducing our Focusing on operating efficiency and stringent cost by 36%, and the corporate loan portfolio was up 21%. costs. Our costs rose less than operating income, control, establishing the Group corporate centre; Such performance is fully in line with our strategy to while almost all our growth came from the retail achieve faster growth of our retail lending business segment, which we rely on for accelerated revenue Continuing to enhance the Group risk management and to increase its share in the Group portfolio as a growth. Expenses in the Corporate and Investment function; more marginal type of business. The loan portfolio Banking business increased by only 0.8%, which grew despite strict control over loan quality, and the demonstrates our ability to control costs. As a Achieving further synergies from Group integration, share of non-performing loans (90 days +) in the loan result, the cost-effectiveness ratio (CIR) for the year and preparing the ground for future merger of the portfolio decreased to 4.7% in 2013. decreased from 50.5% to 49.1%. Group’s major banks.

2013 was the first fully operational year for our retail Over the past four years, as part of the 2010–2013 These initiatives, combined with our clear operational bank, Leto Bank. The bank has become perhaps one of strategic period, we have created a unique business and financial objectives, will help us to successfully the most successful new brands in the Russian market. model, which is based on combining Russia’s complete all phases of the economic cycle and to Leto Bank provided VTB Group with quick access to the leading corporate and investment bank with one of ensure that we generate growth in the interests of our very promising and profitable mass lending segment. the country’s most efficient retail banks. During this shareholders. Dear Shareholders, Clients and Partners, Launching this project enabled us to increase our period, the Group increased its assets by 2.4 times to customer base by 500,000 customers. Today, Leto RUB 8.8 trillion, the loan portfolio grew by 2.6 times I would like to thank each and every member We are pleased to present the next annual report on Bank and VTB24 cover almost all segments of the to RUB 6.6 trillion, while customer deposits were of the VTB team for their energy, effort and hard work VTB Group results. Amid the continued slowdown retail market, providing the Group with opportunities up 2.7 times to RUB 4.3 trillion. We strengthened to ensure the growth of our business in 2013. of the Russian economy in 2013, we demonstrated to take full advantage of its growth potential. our position as a market leader by increasing I also want to thank our partners, investors and growth across all major business lines and achieved business volumes faster than our competitors, and shareholders for their trust and for the advantages impressive financial results. In 2013, the Group We demonstrated healthy growth not only in the outperformed our growth targets. However, our that we get from working with you. VTB Group is net income increased by almost 11% compared retail segment, but also in our Corporate and profitability margins did not always correspond to our looking forward to the next stage of its development. to 2012 and amounted to RUB 100.5 billion. Investment Banking, although the difficult economic targets, and that is why this will become a priority for I’m confident that we will continue to be successful This is an undoubted success, which confirms situation had an impact on the growth rate of the the next cycle of the Group development. and generate growth for our shareholders. the sustainability of VTB Group business model. latter. Nevertheless, both our retail and corporate businesses managed to increase their market share In April 2014, the Supervisory Council approved One of the key events of the reporting period was the in loans and deposits. During the year, the Group VTB Group development strategy till 2016. The new RUB 102.5 billion additional share placement, which credit margin remained at a stable level, resulting strategy is based on expectations that there will be a VTB Bank President took place in May 2013. This enabled us to strengthen in a 31% increase in net interest income in slowdown in the banking sector amid the stagnation and Chairman our capital and to continue developing our core the reporting period. Due to active development of in the Russian economy. Therefore, our new strategy of the Management businesses, while optimising the level of risk we are the retail and transaction banking businesses, is focused on increasing business efficiency and Board Andrey Kostin VTB Annual Report 2013 1. Financial highlights

10 1. Financial highlights 11

Total assets, RUB billion Total shareholders equity, RUB billion

6,790 2011 625 2011

7,416 2012 766 2012

8,769 2013 947 2013

Loan portfolio, RUB billion Net profit, RUB billion

4,590 2011 90.5 2011

5,085 2012 90.6 2012

6,330 2013 100.5 2013

Customer deposits1, RUB billion Selected indicators, %

2011 2012 2013 3,687 2011 Net interest margin (NIM) 5.0 4.2 4.5

Cost to operating income before provision (CIR) 49.4 50.5 49.1

3,813 2012 Return on assets (ROA) 1.7 1.3 1.2

Return on equity (ROE) 15.0 13.7 11.8

4,341 2013

1 The data for 2011 and 2012 are presented as reclassified. For further information on the reclassification, please see VTB Group IFRS consolidated financial statements for the years ended 31 December 2013 and 2012. Flexural strength formula

where: M — the maximum Bending Moment;

Wn, min — the sectional modulus;

Ry — the steel flexural design resistance (subject to steel type);

γc — the condition load effect factor. Improving the system elements is the first step to a new round of development VTB Annual Report 2013 2. VTB market position

14 2. VTB market position 15

VTB Group international presence

VTB Group is one of the leaders in the Russian 1,600 sales points, and is present in the world’s and international financial services market, and is key financial markets. VTB employs approximately Russia’s second largest banking group, which has 100,000 people and its majority shareholder is 17% of the banking sector total assets. The Group the Russian Federation, which holds 60.9% has an extensive branch network in Russia with over of VTB shares.

VTB Group key businesses:

Non-banking Corporate and Investment Banking Retail Banking financial services provides an integrated service offering to large and provides services to individuals and small business. includes leasing, factoring, medium businesses, as well as government executive insurance, and pensions bodies and local authorities. provided by VTB Group • Clients: 243,000 corporate customers in Russia • Clients: 14 million retail clients in Russia financial companies. • Loan portfolio: RUB 4,809 billion • Loan portfolio: RUB 1,521 billion • Customer deposits: RUB 2,548 billion • Customer deposits: RUB 1,793 billion

VTB Group in the Russian banking market

Segment Market share,% Rank Corporate loans 15.5 2 Corporate accounts and deposits 17.8 2 Retail loans 13.4 2 Retail accounts and deposits 9.3 2

VTB Group possesses an international network a wide range of comprehensive financial services unique among Russian banks, which is made up in the CIS, Europe, Asia and Africa, and is Russia’s of over 30 banks and financial companies across second largest corporate and retail bank. 23 countries worldwide. VTB offers its customers VTB Annual Report 2013 3. The economy and banking sector

16 17 VTB Group organisational structure 3. The economy and banking sector JSC VTB Bank

“Bank VTB 24”, CJSC “Holding VTB Capital”, CJSC “Insurance company VTB-Insurance”, Ltd The Russian economy in 2013 decreased by 0.3%, while it increased by 6.4% “Leto Bank”, OJSC VTB Capital plc (UK, Singapore, UAE) “VTB Factoring”, Ltd in 2012. At the same time, industrial production Russian economic growth has slowed over recent “VTB Bank”, PJSC (Ukraine) “VTB Capital IB Holding”, Ltd effectively came to a standstill, with annual growth Non-State Pension Fund VTB, years and declined to 1.3% in 2013, which is the of 0.4%, compared to 3.4% in 2012. NGO “VTB Bank (Belarus)”, CJSC “VTB-Capital”, CJSC lowest level since 2009. “VTB Real Estate”, Ltd The fundamental trend in 2013 was that the private “VTB Bank (Armenia)”, CJSC “VTB Pension administrator”, Ltd In the reporting period, GDP amounted to sector rather than the public sector became the main “VTB Specialized RUB 66.7 trillion in nominal terms, or approximately driver behind economic growth generation. Depository”, CJSC “VTB Bank (Kazakhstan)”, JSC “Bank of Moscow”, OJSC USD 2.1 trillion. Local and external factors influenced The dynamics of investment spending demonstrate this trend, with deteriorating domestic demand being this trend. As the budget and state-owned companies “VTB Registrar”, CJSC “VTB Bank (Azerbaijan)”, OJSC “VTB DC”, Ltd the main factor. Household consumption slowed to reduced capital expenditure, private companies 4.7% in real terms in the reporting year, compared continued to increase investments at a steady, albeit “Multicarta”, Ltd JSC “VTB Bank (Georgia)” to 7.9% in 2012. In 2013, fixed capital investment slowing, pace. “VTB-Leasing”, OJSC Banco VTB Africa, SA (Angola)

“VTB-Leasing Finance”, Ltd Russian macroeconomic indicators, % year-on-year RCB Bank Ltd

“VTB-Leasing Ukraine”, Ltd Industrial production Fixed capital investments Retail turnover VTB Bank (Austria) AG “VTB Leasing”, (Belarus) VTB Bank (Deutschland) AG “VTB Leasing”, (Europe) Ltd VTB Bank (France) AG (Cyprus) 8.2 8.3 6.6 7.0 6.0 6.4 6.3 VTB Leasing Capital Ltd 4.7 VTB Bank JSC Belgrade 3.9 (Ireland) 2.6

0,6 0.3

Parent organisation –0.3

JSC VTB Bank subsidiaries –5.1

Subsidiaries of JSC VTB Bank subsidiaries –9.3

2009 2010 –15.7 2011 2012 2013

Source: Federal State Statistics Services (Rosstat). VTB Annual Report 2013 3. The economy and banking sector

18 19 Real growth of Russian GDP compared to other countries, % year-on-year 7.8% compared to the end of 2012. During the first Russian banking system performance indicators, nine months of 2013, the rouble/US dollar exchange RUB billion rate demonstrated a weakening trend and after the maximum of RUB 29.85 was reached on 1 February Assets

Russia World Eurozone CEE China USA 2013, it came close to approximately RUB 33.52 on 3 September 2013. During the last quarter of 2013, 29,430 the rouble/US dollar exchange rate was mostly 33,805 10.4 between RUB 32.0 and RUB 33.0. The fundamental 9.3 9.2 factors putting pressure on the rouble were a 41,628 7.7 7.7 sustainable reduction in the current account surplus and negative global sentiment on emerging market 49,510 5.2 5.4 4.5 4.3 4.6 currencies (against the backdrop the U.S. Federal 57,423 3.4 3.9 3.1 3.0 2.8 Reserve tapering its loose monetary policy). 2.5 2.5 2.0 1.8 1.9 1.3 1.5 1.4 According to the Bank of Russia, Russia’s total external debt increased by USD 95.6 billion to Equity –0.4 –0.7 –0.4 USD 732.0 billion in 2013. The banking sector –2.8 –3.6 liabilities increased by USD 13.4 billion to 3,766 –4.4 USD 214.9 billion, while corporate borrowers external debt was up USD 73.0 billion to USD 437.8 billion. 4,339

–7.8 4,963 The Russian banking sector in 2013 5,911

2009 In 2013, the growth in the Russian banking sector 6,629 2010 further decelerated to 16% year-on-year from 19% 2011 in 2012, as demand for loans weakened. Banks also 2012 tightened lending requirements as GDP growth slowed 2013 and the CBR introduced measures to curb consumer Net profit credit expansion. At the same time, the banking sector Source: IMF World Economic Outlook Database and Federal State Statistics Services (Rosstat) for Russian data. penetration — defined as banks’ total assets divided by 205 GDP — increased to 85% in 2013 from 79% in 2012. 573

The inflation rate amounted to 6.5% at the end of curb inflation expectations and to enhance The slower economic growth also weighed on the 848 2013, exceeding the upper bound of the Bank of the credibility of inflation targeting, despite development of the sector loan portfolio. While the Russia’s target range of 6.0%. This mainly resulted a noticeable slowdown in economic growth. growth rate of the corporate loan portfolio remained 1,012 from prices for fruit and vegetables, as well as animal In the reporting period, the regulator also continued flat in 2013 at 13% year-on-year, the growth in the 994 products, increasing at a faster pace. At the same to transition to a fully flexible exchange rate. retail loan portfolio slowed to 29% year-on-year from time, since summer, there was a clear trend towards In particular, the value of accumulated interventions, 39% in 2012. This slowdown can be attributed to

slower growth in prices for goods and services, which resulting in a shift in the operating interval by banks tightening lending requirements amid lower 2009 formed part of the base inflation rate calculation. 5 kopecks, was reduced from USD 450 million demand from creditworthy borrowers, and to new 2010 However, since autumn, the core inflation rate to USD 350 million. The size of targeted currency CBR measures introduced in 2013 designed to curb 2011 stabilised at a moderate level of 4.5–4.6%. interventions was reduced to USD 60 million a day. consumer credit expansion. 2012 2013 Throughout 2013, the Bank of Russia kept its key rate At the end of the reporting period, the rouble/US Asset quality across the Russian banking sector at 5.5% while following a tight monetary policy to dollar exchange rate was RUB 32.73, weakening by improved in 2013. The share of overdue loans Source: the Bank of Russia. VTB Annual Report 2013 3. The economy and banking sector

20 21 declined to 4.2% from 4.5% at the end of 2012, The sector’s total capital adequacy ratio edged down Russian banking sector loan portfolio and customer deposits, RUB billion largely due to improvements in the corporate to 13.5% from 13.7% at the end of 2012, as higher segment, where overdue loans dropped to 4.1% risk weightings and provisioning requirements for Corporate loans Retail loans from 4.6%. Despite this, the share of overdue loans consumer loans were mostly offset by slower loan in the retail segment increased to 4.4% from 4.1%. growth and capital generation. Banks increased provisions by 15% year-on-year in 12,542 3,574 nominal terms (the ratio of provisions to the gross The concentration of assets in the Russian banking loan portfolio declined slightly to 7.4% from 7.6%) sector increased in the reporting year. At the end of 14,063 4,085

and improved the coverage ratio to 176% from 169% December 2013, the 30 largest banks accounted for 17,715 5,551 at the end of 2012. 76.4% of total banking assets compared to 74.6% in the previous year. In 2013, the five largest banks 19,971 7,737 The sector’s total profit slid by 2% to RUB 994 had a larger share of the sector (including VTB 22,499 9,957 billion from the record level of RUB 1,012 billion in Group), rising to 57.5% from 54.2% in 2012. 2012, primarily due to higher provision charges. The State banks maintained their leading position. number of unprofitable banks in the sector increased The four largest state-owned banks — Sberbank, VTB Corporate deposits Retail deposits to 88 from 55 in the previous year. Group, Gazprombank and Russian Agricultural Bank — accounted for 55.1% of all assets in the Russian The growth rate of customer deposits remained flat in banking system in 2013 compared to 51.6% in 2012. 9,358 7,485 2013 at 16% year-on-year, as the increased growth in the corporate segment to 13% from 12% in 2012 10,893 9,818 was offset by the mild deceleration of retail deposits 13,701 11,871 growth to 19% from 20% the previous year. The share of customer deposits in gross liabilities stayed at 15,328 14,251 68%, while the net loan-to-deposit ratio edged up to 17,354 16,958 88% from 87% at the end of 2012, suggesting that there is still potential for further loan growth in the

sector. 2009 2010 2011 2012 2013

Source: the Bank of Russia. VTB Annual Report 2013 4. Management report

22 4. Management report 23

4.1. Key events in 2013 4.2. VTB Group strategy profitable retail business in the Group’s loan portfolio increased from 17% to 24%. The customer deposits Implementation of the Group strategy segment demonstrated a similar trend, with faster February July in 2010–2013 growth in the retail segment.

On 28 February 2013, VTB stock was upgraded to VTB Bank elected its new Shareholders Consultative In 2010–2013, VTB Group focused its efforts on At the same time, the Group continued to strengthen Quotation List A Level 1 on the Moscow Exchange. Council. Over 850 shareholders took part in the improving the structure of its business, growing its its market position in corporate lending and deposits, A1 is the top quotation list on MICEX. voting, which began on 10 June. market share and improving operating efficiency. achieving the market share of 15.5% and 17.8% In addition, the Group paid particular attention to respectively and outperforming its growth targets. April–May November developing its “growth areas”, which are the most VTB’s market share in the retail deposit market rose promising products and segments where VTB Group from 6.0% to 9.3%. Amid growing retail credit risk, VTB Bank conducted a secondary placement offering VTB Group completed the process of merging had the greatest potential for revenue growth. the Group decided not to pursue market share growth (SPO) raising RUB 102.5 billion by issuing 2.5 trillion TransCreditBank with VTB24. at any cost and to instead work with high-quality new ordinary shares at RUB 0.041 per share. Over the reporting period, VTB not only cemented borrowers. As a result, over the past four years, the December its leading position in all segments of the banking Group’s share in the retail lending market grew from May business, supported by the integration of 10.2% to 13.4% (the aim was to achieve 15% market As of the end of 2013, Leto Bank issued over TransCreditBank and the Bank of Moscow, but also share). VTB Bank completed the reform of its regional 500,000 loans. The bank’s loan portfolio amounted managed to bring new business lines, which had network, which began in 2012 to improve to RUB 28.3 billion and grew by more than 40 times already become additional sources of growth for the During the period when the 2010–2013 strategy the quality of customer service and to consolidate since the beginning of 2013. Group, to a new level of business development. The was in place, VTB Capital became the leading its regional outlets. VTB has formed a matrix Group also continued to invest in new businesses, management system consisting of seven basic thereby laying the foundation for growth, which will affiliates and three operations support centres, be achieved within the 2014–2016 period. Therefore, Fulfilment of performance targets for VTB Group allowing the Bank to centralise its service and the Group fulfilled its objective of creating a business assets growth, RUB trillion operational functions. fundamentally different in terms of scale and efficiency, with a more diversified revenue base. 2.4x June The Group outperformed its strategic growth On 28 June 2013, the Annual General Meeting of VTB objectives for 2010–2013. It continued to outpace the 1.8x Bank shareholders was convened. More than 300 market, increasing its assets by 2.4 times. Moreover, 8.8 VTB shareholders and shareholder representatives VTB’s market share by assets in Russia grew from 6.3–6.5 attended, and the event was broadcast live online via 12.1% at the end of 2009 to 15.4% in 2013. 3.6 the VTB Bank website. VTB Group strengthened its position in lending and 2009 2013 2013 deposits by fully implementing its growth objectives (Target) (Actuals) for these portfolios. Corporate loan portfolio increased by 2.4 times, while retail loans grew by Source: VTB Group consolidated financial statements under IFRS for 2009 3.5 times. As a result, the share of the more and 2013; VTB Group strategic objectives for 2010–2013. The lift formula

where: Y — the lifting force; Cy — the lifting force factor; ρ — the air density at flight altitude; V — the free-stream velocity; S — the reference area. Precise calculation of the resources required to achieve a new height VTB Annual Report 2013 4. Management report

26 27 Fulfilment of performance targets for VTB Group loan VTB Group implemented a number of significant VTB Leasing maintained its leading position in the - acquired and integrated businesses — Promstroibank, portfolio2 growth, RUB trillion reforms and major projects during the 2010–2013 market, while continuing to remain among Russia’s TransCreditBank and the Bank of Moscow — and strategic period: Top 3 leasing companies. improved their financial performance;

2.6x Established a VTB Group management system along When preparing the 2010–2013 strategy, VTB Group Proved a high degree of flexibility in decision-making the Corporate and Investment Banking and Retail included ambitious plans for profitable growth in a as a result of the work of different legal entities; >2x Banking global business lines, which synchronises stable market environment with economic growth. business activities across the companies of the Many macroeconomic indicators during this period Demonstrated the ability to quickly structure and 6.6 Group; coordinating the support and control turned out to be lower than forecast. As a result, implement complicated transactions, many of which 5.1–5.5 functions is currently being implemented; many borrowers were unable to service their debt, are of significant market importance; 2.5 which led to a significantly higher level of risk and Reformed the regional network and centralised back- higher provisioning, which had an impact on the Continued to develop strong professional teams in 2009 2013 2013 office functions; Group’s profit. Nevertheless, despite the RUB 60 billion the retail segment, corporate and investment banking (Target) (Actuals) loss in 2009, the Group generated income of services for large customers and other business Source: VTB Group consolidated financial statements under IFRS Acquired the Bank of Moscow, which is actively RUB 54.8 billion in 2010, RUB 90.5 billion in 2011, units. for 2009 and 2013; VTB Group strategic objectives for 2010–2013. developing as a universal bank. A financial recovery RUB 90.6 billion in 2012 and exceeded RUB 100 billion plan for the bank is currently being implemented, in 2013. Despite the fact that VTB Group met or exceeded and has been approved by the Deposit Insurance most of its targets for 2010–2013, there is still room Russian investment bank, having prominent market Agency. A programme aimed at improving operational While implementing its strategy, VTB Group to further improve the Group’s performance. positions in the trading of bonds, stocks, currencies performance, including optimising the sales network, demonstrated high return on equity (ROE) compared and interest rates, placement of debt instruments is also underway; to the global banking industry average. VTB “Quality growth” — VTB strategy in the capital markets and asset management. The additional share issue in 2013, which raised for 2014–2016 Group transaction banking business has developed Over 900 corporate customers with a loan portfolio RUB 102.5 billion for further business development, considerably, particularly in its settlement and cash of more than RUB 300 billion were transferred to VTB was the main reason for lower ROE. In 2013, In April 2014, VTB Group adopted a new three-year service, documentary business and factoring. Group following the integration of TransCreditBank the Group’s ROE stood at 12% with the target ROE development strategy for 2014–2016. into the Group Corporate and Investment Banking being over 15%. business, and approximately 2 million retail Against the backdrop of a weaker economic customers with a loan portfolio of RUB 125 billion As a result, the Group strengthened its competitive environment and tighter financial markets regulation, Fulfilment of performance targets for VTB Group joined VTB24; advantages: the Group anticipates a slowdown in the growth of deposits growth, RUB trillion the Russian banking sector both in terms of lending Conducted a RUB 102.5 billion additional share Increased its market share and strengthened its and deposit-taking. VTB expects to see continuing issue. leading position across all key banking and financial consolidation in the banking sector with the largest 2.7x services products and segments; banks strengthening their market positions. In addition, the Group successfully developed its In corporate lending, growth rates will remain stable, >2.3x non-banking financial business: Strengthened its position as a strong and reliable although loan yields and interest margins will brand; gradually contract. In the retail lending business, it is 4.3 VTB Insurance significantly increased its share of expected that banks will reduce the level of risk they 3.5–4.5 the gross premium in the Russian insurance market Demonstrated its ability to grow assets and generate are exposed to, and therefore strengthen the role of 1.6 over the last three years, entering into the Top 10 income at a rate equal to or faster than the market: mortgage loans as a driver of market growth. insurance companies; 2009 2013 2013 (Target) (Actuals) - established new businesses and gained leading In accordance with the Group estimates, corporate VTB Factoring became the undisputed market leader, market positions (VTB24 and Leto Bank in the retail and retail loans are forecast to increase at a Source: VTB Group consolidated financial statements under IFRS for 2009 and 2013; VTB Group strategic objectives for 2010–2013. outperforming its closest competitor in 2013 by business; VTB Capital in the investment business; compound average growth rate (CAGR) of 7–10% 1.5 times in terms of receivables assigned; VTB Leasing, VTB Factoring and VTB Insurance in and 15–20%, respectively, while corporate and retail their respective financial markets); deposits will expand at respective CAGRs of 6–9% and 12–15%. 2 Total loan portfolio includes financial assets which are classified as loans and advances to customers, pledged under repurchase agreements. VTB Annual Report 2013 4. Management report

28 29 Key strategic objectives focus on current accounts. The key objectives of the Mid-corporate business: key targets 2013 2016 segment are: Market share in Russia by product The new strategy addresses the key opportunities Customer loans 8% 10% and challenges for VTB Group in an environment To diversify the business and improve concentration Current accounts 13% 17% of slower economic and banking sector growth. levels in revenues and risks; Term deposits 19% 22% The primary objectives of the Group for the next Business structure and performance Accelerated volume growth while maintaining risk profile and diversified income structure three years will be: To further enhance the transaction banking business, Substantial CIR improvement aiming to increase the share of fee-generating Growing contribution to the Group’s performance To maintain the Corporate and Investment Banking products in the Group revenues, including cash business position, while further improving its management and settlement products; efficiency and non-interest earning capabilities; Retail banking 2014–2016. The Group plans to achieve better efficiency To maintain the leading position of the Group in by implementing the following key initiatives: To outperform the market in retail loan and deposit the corporate and investment banking business; The retail banking will continue to consistently grow growth, and further increase the retail business share its client base and market share in retail and small- Reducing staff costs in CIB by optimising headcount of the Group’s total assets and income streams; To improve efficiency by optimising headcount, business loans and deposits. By the end of 2016, and remuneration; streamlining business processes, upgrading the Group retail customer base should include more To prioritise mid-corporate businesses as a separate infrastructure and IT, and optimising the Group than 20 million individuals (every fifth bank customer Integrating the Group support and control operating segment and profit centre, and to achieve regional footprint. in Russia will be a client of the Group by 2016) and infrastructure; substantial growth in volumes, market share and the number of the Group’s small-business clients profitability in this business; Mid-corporate businesses should exceed 300,000. To achieve this, the segment Achieving closer cooperation on servicing corporate will expand the Group retail branch network and businesses between the branches of VTB and Bank To focus on stringent cost control across all business Work with mid-corporate businesses will develop further invest in its remote banking services. The total of Moscow, and further optimising the Group regional lines; as a separate operating segment, and is expected number of retail offices in Russia operating under the network; to become a significant contributor to the Group VTB24, Leto Bank and the Bank of Moscow brands To further strengthen the risk management function; revenue base. As the Group sees strong potential in is expected to increase to about 2,600 compared to Improving back office efficiency and optimising doing business with mid-sized clients, the segment’s approximately 1,600 at the end of 2013. At the same administrative expenses. To achieve further synergies from integration, and to objective will be to boost its market share in key time, the share of sales flow and service operations prepare the ground for the future merger of the major products including loans, current accounts, fees performed through ATMs, online and telephone To facilitate cost cutting initiatives, the Group is banks of the Group. and commissions, in particular by enhancing cross- banking is expected to increase further. establishing a specialised office to manage this selling opportunities. The segment customer base is effort, which will involve introducing changes to Corporate and Investment Banking expected to increase by 1.6–1.8 times to over Improving efficiency the incentive programme in the largest entities 20,000 active clients during the lifetime of the Group. Corporate and Investment Banking (CIB) will seek to of the strategy. Another priority for the segment will Improving efficiency and cost control across all grow in line with the market in loans and faster than be to substantially reduce its cost base. business lines is a key priority for the Group in the market in customer deposits, with a particular

CIB: key targets 2013 2016 Retail banking: key targets 2013 2016 Market share in Russia by product Retail banking in Russia Customer loans 20% 20% Customer loans 14.3% 18.5% Current accounts 10% 13–15% Customer deposits 9.3% 12.0% Term deposits 12% 16% Small business in Russia Business structure and performance Customer loans 6.8% 10.0% Moderate CIR improvement Customer deposits 11.8% 12.8% Increasing share of fee and commission income in revenues Business performance Increasing product penetration per client More than doubling profit Maintaining stable CIR VTB Annual Report 2013 4. Management report

30 31 VTB Group 2016 financial targets integrated, packaged offering. In 2013, VTB Bank was repeatedly nominated as the best project for completed the project aimed at optimising infrastructure financing in Europe. 2013 2016 the Group regional network in Russia. Total assets, RUB trillion 8.8 12–13 The Bank also enhanced its dual-currency products. Net interest margin,% 4.5 ≈5 Lending business In particular, VTB’s structured financing facilities Net fee and commission income / Operating income before provisions,% 13 ≈15–17 allow borrowers to significantly reduce their interest CIR,% 49.1 42–43 Growth in Russian lending slowed in 2013 compared rate by informing the Bank of their preferred CoR,% 1.6 ≈1.9–2.2 to 2012. VTB Group’s corporate loan book reached repayment currency. Net profit, RUB billion 100.5 160–180 RUB 4.8 trillion by the end of 2013, up 21.0% year-on- ROE,% 12 ≈15 year. VTB Group ranked second in Russia’s corporate As part of its commitment to financing concession lending market with the market share of 15.5%. projects in the Russian regions, the Bank became an investor and lender in the first regional project The Group will also take steps to further integrate its VTB Group investment business offers a full range Corporate clients focus on optimising the cost of to build a toll bridge across the Kama river. This Russian banking entities with the aim of establishing of investment banking products, including trading lending and increased competition in the banking project was carried out as part of the Private Public a unified banking platform in the longer term beyond operations in the global markets, organising sector were the main factors affecting the Russian Partnership project with the Government of the the span of this strategic period. debt and equity issuance, M&A transactions and lending market in 2013. On this backdrop, most Republic of Udmurtia. consulting services, private equity investments, asset Russian banks were focused on improving their asset management and others. quality and enhancing cross-selling capabilities. In 2013, the Bank began to actively develop import 4.3. Review of operating and export trade financing. New solutions were performance Work with major corporate clients is organised along VTB Bank offers a wide range of lending products, introduced offering VTB Group customers a wide sector lines. The servicing model is based on sector including plain vanilla credit and structured finance. range of import and export trade financing services, desks/departments, each being responsible for doing The lending business organises its departments including those protected by the Export Credit 4.3.1. Corporate and investment business business with clients from respective sectors of the along sector lines in order to facilitate efficient Agencies. In 2014, the Bank plans to actively grow this economy, including state-controlled enterprises. This customer service. Financing for the Bank’s clients is business in all regions where VTB Group operates. The Corporate and Investment Banking (CIB) global approach enables the Group to improve the quality available for varying time periods and in all the major business line specialises in servicing major corporate of its sector expertise and build banking products world currencies. The Bank also offers various types Lending to customers in the Russian regions and clients and mid-corporate businesses, selling credit, tailored to the needs of specific clients. of credit lines — with drawdown limits, credit limits to medium-sized companies was one of the Bank’s transaction and investment products across all and with a combination of these limits. priorities in 2013. VTB Group holds a leading regions of the VTB Group presence, including Russia, In 2013, the Bank successfully transferred position in the medium-sized business segment in the CIS countries, Europe, Asia, the USA, the Middle TransCreditBank corporate clients to VTB Bank and VTB Group offers its large and medium business the food retail industry, restaurant business, film, IT East and Africa. the Bank of Moscow. The project aimed at transferring customers complex credit products, including TransCreditBank business with the Russian Railways structural repo, investment and project financing, VTB credit services unit provides a wide range group was unique in terms of its scale, and involved debt and equity financing services, advisory services VTB Group market share in Russia’s corporate of lending products. The structure of the unit is synchronising and fine-tuning business processes on structuring investment projects, trade financing lending market, % designed to tailor customer service to the needs in different time zones from Kaliningrad to Yuzhno- services and direct financing from institutional

of clients operating across various industries and Sakhalinsk. In 2013, the Bank improved the quality investors and commercial banks. Loan leasing and 15.5 15.5 14.7 business segments. This helps the Group to improve of service it provides to its major corporate clients in factoring products are offered through the financial 13.0 credit analysis and the quality of the corporate loan VTB regional offices. subsidiaries, VTB Leasing and VTB Factoring. 12.2 portfolio. Mid-corporate client segment is strategically The Bank is a key player in financing the “Western The transaction banking unit product line includes important for VTB in terms of diversifying the Group High-Speed Diameter” project of LLC Nothern Capital settlement and cash services, control of foreign business and facilitating economic growth in the Highway in St. Petersburg. The construction is 2009 2010 2011 2012 2013 exchange transactions, deposits and accounts, Russian regions. The servicing model in this segment expected to be completed by 2015. This project is

centralised settlements and liquidity management, is to be based on a standard range of banking the world’s largest public-private partnership, and Source: VTB estimates based on RAS financial results of VTB Group as well as trade finance services. products and services that can be provided an Russian banking subsidiaries. VTB Annual Report 2013 4. Management report

32 33 Corporate loan portfolio, RUB billion and publishing industries. In 2013, medium-sized Deposits customer settlement centre by developing its liquidity business customers were offered new loan products, management products. 4,809 including credit lines with pricing for individual VTB Group deposit portfolio has been steadily 3,965 3,766 tranches and remote banking products. growing since the beginning of 2013. The Bank VTB Group objectives in developing its documentary remained committed to its flexible interest rate business in 2013 were to maintain its leading 2,518 2,110 The Bank continued to actively participate in policy, taking into consideration both customers’ position in the Russian market, to increase its developing regional infrastructure by financing needs and the current market situation. documentary portfolio, to improve service quality transport projects (particularly through Private and the accessibility of documentary products and

2009 2010 2011 2012 2013 Public Partnership projects), food and agricultural In order to make deposit products more attractive, services for all types of corporate clients. production, construction and modernisation VTB Group introduced the option for clients to

Source: VTB Group IFRS consolidated financial statements. of community facilities, including educational terminate fixed-term deposits ahead of schedule and In 2013, the number of issued guarantees more than institutions and housing. In 2013, VTB Bank extended the time for closing deposit transactions to doubled compared to the previous year. Increased participated in the reconstruction and modernisation “overnight”. demand for documentary products (primarily of water supply systems in the Kirov region; in tender securities and cash collateral guarantees) 2013 Corporate loan portfolio by segment the project for establishing a large centre for LNG As the bank expanded its product range, a number of resulted from external market factors, as well as production in the Yamal Peninsula; in expanding innovative strategies for placing excess liquidity were the advantages of VTB product line with instant refining capacity of regional forest industries in the introduced. In particular, in 2013, the Bank started procedures and flexible pricing. Vologda region; in launching large-scale production offering its customers the option to allocate funds at of plywood in the Novgorod region and large meat- a floating rate linked to various benchmarks. Decentralisation of the sales function and processing and pig-breeding farms in the Kaliningrad standartisation of operational support gave a region; in the construction of a dairy farm in Voronezh As at the end of 2013, VTB Group is the second powerful impetus to the development of business and in the modernisation of the airport in Stavropol. largest player in the corporate deposits market in with regional medium-sized businesses. The number Russia with the market share of 18%. VTB corporate VTB continues to focus on optimising business deposit portfolio rose by 7% compared to 2012 and processes in corporate lending and increasing amounted to RUB 2.5 trillion. efficiency in the Group banking subsidiaries. Corporate liabilities3, RUB billion The Group’s priorities include the geographical The transaction business key results for 2013 expansion of the banking product offering and the 2,548 development of specialised products for different The Bank improved its remote banking services 2,526 customer segments. during 2013. VTB introduced new options for rouble- 2,379 649 878 Building construction (15%) denominated letters of credit in Russia, rolled out 1,465 920 Manufacturing (13%) Transaction banking business account statements in the SWIFT MT940 format, along 1,092 Trade and commerce (12%) with a number of other services to improve customer 490 Finance and holding companies (11%) In 2013, VTB Group continued to improve the service quality. 472 1,877 1,670 1,459 Metals (11%) quality of its customer service within the transaction 975 620 Energy (7%) business by introducing international best practices During the year, the Bank established a centralised Oil and Gas (6%) and responding promptly to market demands. treasury and introduced other products within the 2009 2010 2011 2012 2013 Chemicals (6%) transaction business for 150 large holdings, which Transport (6%) The Bank has significantly expanded its transaction include 1,150 legal entities. Government bodies (3%) banking capabilities, introduced new products, and Current accounts Food and agriculture (2%) optimised and improved the sales processes within VTB placed particular focus on developing the Term deposits Other (8%) this business. transaction banking business with medium-sized businesses. VTB increased the capacity of its Source: VTB Group IFRS consolidated financial statements. Source: VTB Group IFRS consolidated financial statements for 2013.

3 The data for 2011 and 2012 are presented as reclassified. For further information on the reclassification, please see VTB Group IFRS consolidated financial statements for the years ended 31 December 2013 and 2012. VTB Annual Report 2013 4. Management report

34 35 of new customers using documentary business number of initiatives to improve the security of its VTB clients are able to access equity capital markets in the bond market exceeded 15% for both rouble- services more than doubled compared to 2012. remote banking service. In 2013, the documentary of South Africa, Turkey, Poland, Czech Republic, denominated bonds and Eurobonds. portfolio of VTB Bank (Ukraine) increased by 30% Hungary, Israel and several Middle East countries. Development of the transaction banking business in compared to 2012 as a result of actively selling its VTB Capital is a member of the London Stock VTB Group maintained its leading position in the Russia’s regions and abroad documentary business products. Exchange (LSE), the Frankfurt Stock Exchange (Xetra) foreign exchange operations market, as well as in and the Warsaw Stock Exchange. The Bank also has operations with derivative products, accounting for In 2013, a number of measures were taken to VTB Bank (Belarus) has greatly expanded its product access to a number of other foreign markets through 16% and 22% market share, respectively. improve the effectiveness of transaction products range for corporate clients. It improved its overdraft its wide network of local brokers. Furthermore, during sales across VTB Bank regional network. Therefore, products, developed and implemented a new import the reporting period, VTB Capital became a market In 2013, VTB Capital Finance, which is part of VTB specialised units were established for transactional irrevocable standby unpaid letter of credit product, maker of the Turquoise trading platform (London), Capital, was the first in Russia to offer market products sales in key regions of Russia. This allowed and launched a project to introduce an “Internet Eurex Exchange (France), as well as a market maker participants capital protected structured bonds with the Bank to focus on attracting new customers, Banking” service. of the MICEX-RTS Stock Exchange Derivatives Market yield linked to the performance of the Eurostoxx as well as increasing the efficiency of the existing (FORTS). VTB Capital is also a market maker on a 50 and S&P 500 indices, as well as bonds with yield customer base. VTB Bank (Kazakhstan) further enhanced sales of number of shares on the Main Market of the MICEX- linked to a chosen issuer. transaction business products and expanded its RTS Stock Exchange. During the year, the transaction banking business offering with a remote banking system, new deposit In 2013, VTB Capital was recognised as the began to develop a special product offering for products and treasury services. In 2013, VTB Capital strengthened its position in the best transaction facilitator in Russia’s currency mid-corporate business customers. Improved Russian equity market and became the leading bank instruments market for the third consecutive year, cooperation with regional clients on documentary VTB plans to develop the transaction business in its by trading volume for repurchase agreements on according to the Global Finance magazine. business products and liquidity management created European sub-holding in 2014. the MICEX-RTS Stock Exchange. OTC repo transactions the foundation for the growth of the Bank fees and are available to clients of the Russian companies Investment banking operations interest income. Investment banking of the Group, and also to the clients of VTB Austria, VTB Deutschland, VTB France and the Russian VTB Group offers its clients a full range of investment In 2013, the transaction banking business in VTB VTB Group is the leader in the Russian investment Commercial Bank (RCB), Cyprus. banking services, including consulting services in subsidiary banks in Ukraine, Belarus and Kazakhstan banking market, providing VTB Group clients access relation to M&A transactions, and debt and equity also performed well: to the global capital markets. Sales of investment VTB Capital continued to actively develop its direct issues. The business is focused on working in the key banking services are primarily carried out by the market access (DMA) service on the MICEX-RTS sectors of economy and servicing clients in Russia VTB Bank (Ukraine) introduced individual deposit VTB Capital brand. VTB Capital growing popularity Exchange. This service is provided by VTB Capital and the international markets. solutions for corporate clients and launched a in the global capital markets enabled the Group Broker. In 2013, VTB Capital Broker introduced a to successfully participate in a range of large and new fee structure for its clients and expanded its In 2013, VTB Group strengthened its leading complex investment projects in 2013. client base. In 2014, the Group plans to increase the position in Russia and improved its reputation in VTB Group market share in the Russian corporate geographical scope of its DMA services by including the international M&A market. VTB Capital acted as deposits market, % Trade operations in the global markets new markets. a financial consultant in accordance with the UK City Code on mergers and acquisitions for the first time VTB Group offers a full spectrum of trade operations During the reporting period, VTB Group secured during the USD 4.75 billion buyout and delisting of 21.1 services in the debt and equity markets, and also its position as one of the leading traders in the ENRC plc. 18.4 17.8 carries out currency exchange transactions and government and corporate bonds market on the 15.0 transactions in the global commodities markets. Moscow Exchange and in over-the-counter markets, Despite the adverse market conditions in the equity 12.7 The Group also provides currency and interest remaining the leading trader in the Russian fixed- capital market, VTB Capital strengthened its leading rate risk management services, including hedging income instruments market. In 2013, the Group position by participating in a number of deals during services, as well as structured finance, structured conducted a significant number of its trade and the reporting period. In particular, VTB Capital acted deposits and notes, and other structured credit investment operations with government securities, as one of the book runners of VTB Bank RUB 102.5 billion 2009 2010 2011 2012 2013 and hybrid products. In 2013, the Group retained including bonds issued by the Russian Ministry equity placement, and also participated in the USD its leading position in various segments of the of Finance and the Russian Federation sovereign 1.3 million privatisation of OJSC ALROSA, which was Source: VTB estimates based on RAS financial results of VTB Group investment banking market. Eurobonds. In 2013, VTB Group’s share of trades the first and largest public placement of shares with Russian banking subsidiaries. VTB Annual Report 2013 4. Management report

36 37 an exclusive listing on the Moscow Exchange. In Dealogic also rated VTB Capital as first in the equity markets, equity and commodities markets, carries foreign issuers. The majority of companies operating 2013, VTB Capital took part in an IPO capital markets in Russia and the CIS countries, out analysis of the macroeconomic situation and in the Russian market hold depository accounts with in the Middle East for the first time, by participating organising 7 deals with the total value of provides analytical support to the companies of the the Bank. The Group Custody currently services over in Damac Real Estate Development Ltd USD 2.25 billion, holding 22.5% of the market. Group. In 2013, the geographical scope of research 2,100 depo accounts. USD 348 million share placement. services was significantly enlarged to include Turkey, Furthermore, the Bank was named the leading M&A the Middle East, Central and South-East Europe, and During the reporting period, transaction services In April 2013, VTB Group acquired 100% of Tele2 consultant in Central and Eastern Europe, Russia and Africa. VTB Capital analysts regularly score highly in with Russian sovereign bonds were in high demand Russia shares from the Swedish telecom operator the CIS by Dealogic. In 2013, VTB Capital completed the international rankings of Institutional Investor among local and foreign participants of the Russian Tele2 AB for the further company development and 23 transactions in Central and Eastern Europe with magazine and Thomson Reuters Extel Survey. securities market. These services were jointly the subsequent sale of investments. In October the total value of USD 24.96 billion, with a 15% share developed with Euroclear Bank, one of the largest 2013, VTB Group sold a 50% stake in the company of the market. The company organised 20 deals in Operations in commodities markets international account depositories, which appointed to a group of strategic investors, which includes Russia where it has a 25.5% market share. VTB Group Custody as its depo account manager in Bank Rossiya Group and companies affiliated with VTB Group offers a wide range of risk management the Central Depository. Alexey Mordashov. The upcoming merger of the VTB Capital won an Infrastructure Journal award for services for those participating in commodities mobile assets of Tele2 Russia and Rostelecom into a financial consultancy in the infrastructure sector markets transactions, including hedging products, The Group Custody acts as the Russian sub- combined company, T2 RTK Holding LLC, will create in Eastern Europe, after completing three project commodity-linked finance etc. The range of VTB custodian for the Bank of New York Mellon keeping new development opportunities for the operator, financing deals with the total value of USD 3.8 billion. Capital services encompasses structured deposits the underlying assets for issuing share depositary including roll-out networks in all Russian regions and and structured notes with interest rates linked to receipts for 26 Russian issuers. The Custody also acts offering high-speed mobile Internet services. In 2013, VTB Capital won the prestigious “Best event commodity prices or commodities indices. for Deutsche Bank Trust Company Americas. organiser” award at the International Public Relations In the Middle East, VTB Capital conducted Association (IPRA) Golden World Awards for holding The Group participates in trading precious metals, In 2013, VTB Custody was named the best Russian a USD 100 million Islamic financing deal for the “Russia Calling!” investment forums. The “Russia performs operations with derivative instruments, custody for the seventh consecutive year in the the first time. The structure of the deal involved Calling!” forum also won the Corporate & Financial carries out export operations and sells precious Global Custodian magazine Agent Banks in Emerging Islamic bonds (Sukuk) and trade financing Awards for “Best investment event with participation metals on behalf of its clients, who are either Markets survey and was classified as “Top Rated”, (Murabakh). VTB Capital won the mandate after of research team/investors/media” and “Best precious metal producers or other banks. VTB Bank is the highest ranking, by Russian and international competing with global investment banks and carried strategy for communication with foreign investors a member of the London Bullion Market Association, clients. out the deal in a strict regulatory environment and and media”. Communicate Magazine (UK) Corporate which enables the Group’s clients to gain direct in accordance with the client requirements. & Financial Awards are among the most reputable access to a number of potential markets, primarily in Asset management international awards in the communications sphere. Asia. This will further promote business development In 2013, VTB Capital strengthened its leading as part of the Bank strategic diversification of its VTB Group offers effective asset management position in the global markets in all investment Among other awards, VTB Capital was named the customer base and markets it operates in. solutions in the Russian and international markets. banking service segments. “Leading financial consultant in Russia and the CIS” VTB Capital Investment Management, which includes at the Financial Times & Mergermarket European VTB Group is actively developing commodity-secured CJSC VTB Capital Asset Management, CJSC Bank of According to Dealogic, VTB Capital was ranked first M&A Awards in 2013. In addition, the Global Finance financing. In 2013, for the first time, VTB Capital Moscow Management Company and LLC VTB Capital by total volume of transactions in the debt capital magazine named VTB Capital as the best investment completed a deal on advanced payment for raw Pension Reserve provide services in this market markets in Central and Eastern Europe, Russia and bank in Russia. materials supplies to a large coal producer (SUEK). segment. VTB Capital Investment Management the CIS countries, organising 121 placements for a The structure of the deal enabled VTB Group to (VTB Capital IM) is a key part of VTB Capital and VTB total sum of USD 20.65 billion and holding an 11.6% Research receive a high yield, while the leading commodity Group’s investment business. share of the market. In the international market, VTB markets players had attractive financing terms for Capital became one of the organisers of Vivacom In 2013, VTB Capital research reports provided the supplies. VTB Capital IM is among Russia’s Top 5 investment EUR 400 million Eurobond issue, which was the first full coverage of the capital markets and the main management companies by total assets under Eurobond issue since 2006 by a private Bulgarian sectors of the economy, offering VTB clients a well- Custody services management. By the end of 2013, VTB Capital IM’s company. According to the Global Finance magazine rounded and thorough analysis. VTB Capital Research assets under management grew by over 45% and 2013 ranking, VTB Capital was named as the best Department covers more than 220 Russian and VTB Group Custody is one of the largest custodians in exceeded RUB 208 billion. In 2013, all key areas of the investment bank in Central and Eastern Europe debt international companies. It also regularly conducts Russia and provides the full range of custody services business were actively developed: the retail business, capital market. independent research in fixed-income instruments for all types of securities issued by Russian and VTB Annual Report 2013 4. Management report

38 39 VTB Capital notable transactions in 2013

Moscow Exchange VTB Bank Tele2 DAMAC Real Estate Ltd VIVACOM RUB 15 billion Platinum Bank RUB 102.5 billion Rosneftegas USD 3,55 billion USD 348 million €400 million Power Machines USD 59.3 billion Not disclosed RUB 10 billion Initial Public Offering Eurobond issue Follow-on offering Acquisition of TELE2 Russia Initial Public Offering Acquisition of TNK-BP Sale of Platinum Bank Debut local bond

Joint Global Coordinator Joint Global Coordinator Joint Global Coordinator, Joint Bookrunner Financial Advisor Financial Advisor Joint Bookrunner Co-Manager Exclusive Financial Advisor Joint Bookrunner Joint Lead Manager 2013 2013 2013 2013 2013 2013 2013 2013

JOINT STOCK COMPANY

Sollers PIK Group PhosAgro DTEK Russian Grids OJSC Russian Utility Krasnoyarsk Region USD 330 million USD 467 million Russian Agricultural Bank USD 600 million new Circa USD 9.2 billion Systems RUB 11 billion Winner in privatisation issue and USD 800 million Follow-on Offering auction for 13.2% of OJSC USD 300 million tender Follow-on offering Eurobond issue Restructiring Advisory Rating advisory Local bond issue “UAS”

Joint Lead Manager & Joint Global Coordinator & Joint Global Coordinator & Joint Lead Manager, Bookrunner Joint Bookrunner Joint Bookrunner Financial Advisor Rating Advisor Joint Bookrunner Exclusive Financial Advisor Bookrunner 2013 2013 2013 2013 2013 2013 2013 2013

Polyus Gold Russian Railways Russian Federation Barclays Bank USD 3.62 billion CHF 675 million Luxoft ALROSA Not disclosed USD/EUR 7 billion USD 1.8 billion GBP 6.1 billion Acquisition Advisory and USD 80 million USD 1.38 billion Dual Tranche Eurobond 4-Tranche Eurobond with Financing to Purchasers Sale of gas assets to Sale of 40% stake in Arctic Disposal of TPC Russe Initial Public Offering Rights issue Debut Euro Tranche OJSC Rosneft Russia BV to Rosneft (heating utility) in Bulgaria

Joint Lead Manager, Exclusive Financier & Joint Lead Manager, Bookrunner Financial Advisor Joint Bookrunner Joint Bookrunner Exclusive Financial Advisor Financial Advisor Financial Advisor Sub-underwriter 2013 2013 2013 2013 2013 2013 2013 2013

KinoPoisk ENRC ALROSA Kinopoisk Bank Saint Petersburg Credit Suisse Exillon Energy Bank for Development USD 1.3 billion USD 80 million USD 288 million USD 300 million and Foreign Economic Affairs USD 4.75 billion USD 100 million CHF 250 million (Vnesheconombank) Advisor to BidCo re Initial Public Offering Sale to Yandex Follow-on offering Eurobond issue Sale of 29.99% in Exillon RUB 20 billion Tier 1 Eurobond Take Private of ENRC Energy Plc Local bond issue

Joint Global Coordinator & Sole Financial Advisor Joint Global Coordinator & Joint Bookrunner 2013 Lead Manager Joint Bookrunner Senior Co-Manager Exclusive Financial Advisor Joint Bookrunner Joint Financial Advisor 2013 2013 2013 2013 2013 2013 2013 VTB Annual Report 2013 4. Management report

40 41 VTB Capital awards in 2013

Best Ongoing Best Analyst/Investor/ Communication with Best investment Bank Press Meeting: Overseas Investors #1 Financial Best Event Management: Best investment Bank Best investment Bank Best FX Provider in Russia in Russia and / or Media: Advisor in in Russia in CEE “RUSSIA CALLING!” Eastern Europe “RUSSIA CALLING!” “RUSSIA CALLING!” Investment Forum Investment Forum Investment Forum 2011–2013 2011–2013

Investment # 1 Best Bond #1 Best Bond Best Primary Corporate Best Primary Financial Advisor #1 Private Equity Firm Most Innovative Company of the Year Market Trading Futures Team Bond Deal Subfederal/Municipal of the Year in Russia investment Bank in CEE Bond Deal in Russia & CIS

Elite of Securities Market Elite of Securities Market in Recognition of Excellence Awards Awards

Best Macroeconomics Russia #1 Best Bond #1 Best Investment Bank Best Best investment Bank Best Equities Company Best investment Analyst – Vladimir investment Banking Market Sales (Company): Arranger Bank in Russia Securitisation House Kolychev for First Tier Issuers

2010–2013 2012–2013 VTB Annual Report 2013 4. Management report

42 43 work with institutional clients, wealth management Orient Express Bank, Banca Intesa and the Bank In 2012, a Russian-Kazakh Nanotechnology Fund was in Russia and abroad. As the second largest bank and management of closed-end mutual funds. of Moscow, bringing the number of sales outlets established, with OJSC RUSNANO and Kazyna Capital in Russia serving individual customers, VTB24 to 1276. To attract new customers and create an Management JSC acting as anchor investors. VTB continues to form a core part of the Group’s retail VTB Capital IM companies are among the market alternative way for investors to diversify their savings, Capital Investment Management manages the fund in business. VTB Group retail banking services in Russia leaders by volume of pension savings (which includes VTB Capital Asset Management launched a new cooperation with the international venture company, are also provided by the Bank of Moscow and Leto the Pension Fund of the Russian Federation and non- investment strategy, “VTB — Eurobonds Fund”. The I2BF Innovation Partners. As of 31 December 2013, Bank, which began its operations in 2012. governmental pension funds), insurance reserves, aims of this investment vehicle are to preserve and the fund had invested in one company, which is endowment funds and indemnification funds of self- grow capital in US dollars terms through coupon yield implementing a project in the nanotechnology sector. In total, VTB Group active Russian retail customer regulatory organisations under its management. In and growth in the market value of issuers bonds, and base exceeded 14 million, including customers of 2013, CJSC VTB Capital Asset Management continued to achieve returns which exceed the bank deposit Besides the number of closed-end mutual the Bank of Moscow and Leto Bank. As at the end to implement its strategy of building long-term rates in US dollars. investment funds under management in the portfolio of 2013, VTB Group banks outside Russia (Ukraine, relationships with the largest non-governmental investments business grew to 14 with total assets Armenia, Azerbaijan, Kazakhstan, Belarus, Georgia, pension funds, insurance companies and endowment By the end of 2013, VTB Capital Investment under management amounting to RUB 85 billion. France, Austria and Germany) provided services to funds. In particular, trust management agreements Management companies managed a range of 31 retail approximately 3 million individuals. for pension savings were signed with NPF Telekom- mutual funds with various investment strategies, VTB Capital Investment Management’s strategic plan Soyuz, NPF Almaznaya Osen and NPF Sotsium. Trust including investments into foreign assets. to become a market leader in the asset management Despite the slowdown in economic growth in 2013 management agreements for insurance reserves were space was highly recognised by the professional compared to 2012 and increased competition in the also signed with SK RGS-Zhizn. During the reporting period, VTB Group also rapidly community. The National Rating Agency assigned VTB banking sector, VTB Group retail loan portfolio grew expanded its line of closed-end mutual investment Capital Investment Management a reliability rating of by 36% to RUB 1,521 billion in 2013. At the same In 2013, CJSC VTB Capital Asset Management started funds. These funds helped qualified investors to carry AAA (maximum reliability), whilst Expert RA assigned time, VTB Group maintained its second position to cooperate with four endowment funds: Transsoyuz out a range of projects. an A++ rating (extremely high/highest level of reliability among Russia’s retail lenders with a 13.4% market Charity Foundation, Endowment Fund of the Higher and quality of service). VTB Capital Investment share as at the end of 2013, which the Group has School of Economics, Fund of the Institute for Urban In 2007, VTB, together with the Russian Venture Management companies won the Financial Elite of retained for the past six years. The launch of Leto Economics and Endowment Fund of the Ural Federal Company, established its first high-risk close-ended Russia awards in the Grand Prix: asset management Bank enabled the Group to strengthen its position in University named after the first President of Russia venture fund, “VTB — Venture Fund”. VTB Capital company of the year and Company of the year in the the lower and middle client segments. B.N. Yeltsin. Asset Management manages the assets of this fund. management of pension savings categories, and Expert As of 31 December 2013, “VTB — Venture Fund” had RA awards in the Leader in the management of pension In the reporting period, the Group demonstrated In 2013, the Group actively developed its wealth invested in 15 companies operating in the high-tech savings, Innovation in the collective investments rapid growth rates in retail deposits, which greatly management business for high-net-worth individuals, sectors. market and Effective risk management of venture exceeded the market trend. At the end of 2013, which resulted in it significantly expanding its capital investment categories. The VTB Capital Russia & VTB Group’s portfolio of retail deposits reached client base. Qualified investors were offered an Within the framework of a public-private partnership, CIS Equity Fund was named The Best Emerging Markets RUB 1,793 billion, an increase of 25% compared to upgraded range of strategies for trust management, VTB Capital Asset Management established four Fund, Europe 2013 in the Single Funds category at the 2012. In an increasingly competitive environment, which, apart from the existing investment solutions, regional venture funds for investing into small World Finance Hedge Funds Awards. VTB Group was able to capitalise on its brand includes, structured products, available both with businesses in various Russian regions. As of reputation and secure a significant inflow of customer and without capital protection, and also conservative 31 December 2013, the funds had invested VTB Capital Investment Management ranked first in funds. At the end of 2013, VTB share in Russia’s retail strategies with fixed income instruments. in 15 projects. nominations for “Best investment strategy in fixed deposit market increased from 8.7% to 9.3%. income instruments management” in the Private The asset management company, VTB Capital Asset At the beginning of 2012, VTB Capital Asset Banking & Wealth Management Survey — Russia Loan products Management, has repeatedly been named among Management, together with OJSC RUSNANO and in 2014, conducted by the influential international the Top 10 firms in terms of market share in the retail partnership with the American venture fund Draper magazine, Euromoney. Consumer loans mutual fund sector4. Fisher Jurvetson (DFJ), established the DFJ VTB Capital Aurora fund. By the 31 December 2013, the fund 4.3.2. Retail banking In 2013, the main objective of the Group, represented In 2013, the company continued to expand its retail invested in four projects in the nanotechnology and by VTB24, in the consumer lending segment was to network by signing sales agency agreements with e-commerce sectors. In 2013, VTB Group retail banking business ensure sales growth, profitability, and reduced levels continued developing in a dynamic fashion both of non-performing loans. In order to increase sales,

4 According to Investfunds.ru as of 31 December 2013. VTB Annual Report 2013 4. Management report

44 45 the Bank conducted marketing campaigns, offering As a result, the volume of loans granted in 2013 collaborative programmes with car manufacturers conditions of some of them were greatly improved lower interest rates on loans for different types of amounted to approximately RUB 35 billion. such as Chevrolet (which is among the Top 5 in terms to increase the availability of mortgage loans. VTB24 borrowers. In addition, VTB24 expanded its target of foreign car sales in Russia), SsangYong and UAZ. also launched new programmes and a number of audience and introduced its offer to new customers In 2013, Leto Bank modified its product offering by pilot projects. with a good credit history. In 2013, the Bank changing the range and rates of cash disbursement, Foreign banks car loan portfolio increased by more concentrated its efforts on working with corporate and by introducing the option to use a reduced rate than 40% in 2013. The Group managed to take a VTB24 effectively cooperated with construction and payroll clients, who demonstrated a lower level service if there have been no arrears over a long-term leading market position in certain countries. The companies and actively participated in implementing of credit risk, and this had a positive impact on period. In addition, in 2013, the bank launched a Group has become the market leader for loans on the VEB programme, which enabled the bank to bring profitability. large number of POS-products, began issuing loans new cars in Georgia, representing 49% of all sales its share of new housing mortgage loan sales to 50% through its bank counters, and introduced a wide on credit. by the end of the reporting year. Implementing a In 2013, VTB24 issued over 1,105,000 consumer range of products for repeat customers. Leto Bank number of campaigns in the new housing mortgage loans amounting to more than RUB 390 billion. also offered its clients the WEB POS and WEB CASH Mortgage lending market in the second half of 2013 also helped to online services, which allows customers to apply for improve sales. The number of cash loans issued by the Bank of the bank’s products online. In 2013, the mortgage market continued to expand Moscow increased by 1.5 times in 2013 compared to at a steady pace comparable to 2012, despite market VTB24 mortgage sales network consisted of 230 sales 2012. This result has been achieved by implementing VTB Group also managed to achieve dynamic growth expectations. Russia’s mortgage market was worth points located in 138 cities across Russia. a number of measures, which allow the bank to of its consumer loans portfolio in the CIS market. Its RUB 2,765 billion by the end of 2013, demonstrating accept customers for a loan and grand a loan with total volume rose by more than 30% and exceeded an annual increase of 30%. The Bank of Moscow also actively developed its just one visit to a branch. These initiatives include RUB 20 billion at the end of 2013. mortgage lending in the reporting year. The bank expanding the list of documents used to verify 2013 was marked by a significant increase in replicated VTB24 sales and mortgage lending indirect income, automating the process of early Car loans lending activity in the new build housing segment. processes. Customers of the Bank of Moscow were repayment and lowering the minimum credit limit Demand for mortgages continues to remain high, and able to get a mortgage based on VTB24 offering in to RUB 30,000. In 2013, VTB Group strengthened its leading position mortgage lending penetration in housing transactions their nearest Bank of Moscow branch. in the car loan market. The car loan portfolio of the is also growing. According to estimates of the Following its successful launch in 2012, Leto Group increased by 30% to RUB 133 billion in 2013. Federal Service for State Registration, Cadastre and Bank expanded its footprint across more than In the reporting period, VTB24 became the market Cartography and the Agency for Housing Mortgage 10,000 retail outlets in the reporting period, with leader in the car loan market by volume, with its Lending, the share of housing transactions which Loans to individuals, RUB billion its own employees working in approximately a market share increasing from 12.8% to 13.6%. involved a mortgage approached 25% in 2013 thousand outlets and with representatives of trade compared to 21% in 2012. For new-builds, this figure organisations servicing the remaining outlets On 1 July 2013, the Russian government launched a reached 40% or above, depending on the class of 1,521 (11 federal and many regional retailers). state programme to subsidise interest rates on car property. 1,120 loans. At the end of 2013, VTB24 share of car loan 824 848 sales on this programme exceeded 60%. In October In the reporting period, the quality of mortgage debt 628 VTB Group retail lending market share, % 2013, the Bank increased its securitised car loan continued to show signs of improvement. The number 542 440 portfolio from RUB 13 billion to RUB 18 billion, which of non-performing mortgages decreased from 2.24% 435 133 enabled it to continue diversifying sources of funding. to 1.57% during the year. 272 102 208 76 13.3 13.3 13.4 53 12.2 46 540 10.2 In 2013, the Bank launched the following new As of 31 December 2013, VTB Group mortgage 309 391 182 217 products and services within car lending: portfolio grew by 38.1% year-on-year to RUB 540 billion, compared to RUB 391 billion in 2012. 2009 2010 2011 2012 2013 new programmes for purchasing additional equipment and motorcycles; VTB24 was the main contributor to the Group Cash, credit card loans and other 2009 2010 2011 2012 2013 total mortgage sales. In 2013, VTB24 continued Car loans new products and services: GAP-insurance and to implement its pre-existing mortgage lending Mortgage loans Source: VTB estimates based on RAS financial results of VTB Group AutoMap; schemes. During the reporting period, the mortgage Russian banking subsidiaries. Source: VTB Group IFRS consolidated financial statements. lending schemes were reviewed and the terms and VTB Annual Report 2013 4. Management report

46 47 In 2013, the mortgage portfolio of VTB Group priority small business customers are presented with VTB24, the Group’s leader in retail lending, uses best VTB Group retail deposit market share, % foreign banks grew at a moderate pace of 10% an individual offering of banking products and lending practices, which have been replicated across year-on-year and amounted to RUB 6.3 billion. a personal manager service. the Bank’s subsidiaries. As a result, products from 9.3 the “Kommersant” range, which correspond to VTB24 9.0 8.7 Services for small businesses VTB24 currently offers one of the most extensive products and are aimed at entrepreneurs and small 7.2 6.0 product ranges in the market for small businesses, business owners, were launched in Kazakhstan, Small business customers make up a key part of VTB covering most segments and meeting almost any Azerbaijan and Georgia. Group retail business. The Group provides services customer need. to individual entrepreneurs and small enterprises Deposit products mainly through VTB24. In 2013, the growth rate In order to further develop its business in the small 2009 2010 2011 2012 2013 of VTB24 small business segment outpaced business segment, VTB24 did the following: As of 31 December 2013, the account balances of the market by almost three times in lending VTB Group’s individual customers amounted to Source: VTB estimates based on RAS financial results of VTB Group Russian banking subsidiaries and mortgage products. In the reporting period, Replicated a new remote banking platform for “Bank- RUB 1,793 billion, including term deposits of the bank increased its lending to small businesses Client Online”, through which the Bank’s customers RUB 1,456 billion. During the course of the year, by 1.2 times compared to 2012. can not only make payments, but also acquire the term deposits portfolio increased by 25.0%. market situation. While the rates were raised in the products and services remotely; first half of the year, starting from June 2013, VTB24 Since the beginning of 2013, the total liabilities of In 2013, VTB24 deposits formed the main part of the was forced to slightly lower rates on deposits in line the small business segment increased by 1.6 times. Optimised the terms and conditions and technology Group’s total deposits. In the reporting period, the with the market environment. However, lower rates on The segment’s deposit portfolio tripled year-on- of credit products, and launched new services and bank significantly upgraded its range of deposits for the main deposit products were offset by profitable year, while account balances of small businesses improved customer care in payment and commission- individuals by excluding the least popular deposits and promotional offers on certain types of deposits. increased by 32%. based products; introducing new products. In addition, “VTB 24 — Your Bonus” was launched for payroll customers, which has In 2014, VTB24 will continue to further develop its The small business guarantee portfolio significantly Optimised the decision-making system behind all a higher interest rate. Optimising the range of deposits deposit product range. In the second quarter, the increased by more than five times in the reporting kinds of products enabling the bank to generate was primarily aimed at meeting customer needs. bank plans to launch a comprehensive deposit and period. A significant portion of documentary offers tailored to individual customers; investment product. business was also transferred to VTB24 as part of VTB24 interest rates on individuals deposits in 2013 the integration with TransCreditBank. In addition to Updated the range of banking guarantees, reduced were repeatedly revised in accordance with the In turn, the Bank of Moscow launched a range of guarantees, the documentary business portfolio is terms and simplified mechanisms for VTB24 regional new deposit accounts in the reporting period, which represented by RUB 8.0 billion of corporate letters branches to provide guarantees. include “Maximum Income”, “Maximum Growth”, of credit. Deposits by individual customers, RUB billion “Maximum Comfort”, “Annual Bonus” and “Savings The Bank of Moscow also paid considerable attention Account”. The process of obtaining a bank deposit The success of VTB24 in servicing small businesses to the small business segment in 2013, which helped 1,793 account has become easier, as the time taken to open mainly resulted from the bank’s customer-oriented it to achieve 9th position among the Russian banks a new account has decreased by 2.5 times and takes 1,434 337 approach towards business development, which by SME loan portfolio size (2012: 15th position). up to 21 minutes, including a consultation. 1,162 is aimed at improving service quality while also According to Expert RA, the Bank of Moscow also 307 255 increasing profitability. VTB24 has also benefited ranked first among the Top 10 Russian banks for its 1,162 In 2013, the deposit portfolio of individual clients in 477 143 1,456 from the segmented approach to customer service growth rates. In 2013, the Bank of Moscow launched 1,127 VTB Group’s foreign banks rose by 23.0% year-on- 85 907 based on standardised procedures: three new loan products: “Perspective for business” 805 year, reaching RUB 167.0 billion. Most of the deposits 392 (debt refinancing), “Commercial mortgages” and in this portfolio were in VTB Austria and VTB France, small business customers with an annual revenue of “Business success” (scoring microcredit). 2009 2010 2011 2012 2013 the Bank’s European sub-holdings. up to RUB 20 million are offered standard types of credit products and packaged cash and settlement At present, nine loan products make up the Bank Commission-based products

service products; of Moscow credit offering for small businesses. Current accounts The bank focuses on companies with revenues Term deposits Commission-based income forms a significant up to RUB 300 million a year. proportion of the Group’s retail banking income, Source: VTB Group IFRS consolidated financial statements. and VTB24 contributes the most to its growth. VTB Annual Report 2013 4. Management report

48 49 Commissions earned on card transactions continue was released in conjunction with the foundation to RUB 149 million in 2012. In the reporting period, increase in the number of organisations, whose to be the main contributors of non-interest income. support the construction of churches in Moscow. The the bank launched the Salary, a new SMS package, products and services are available to pay for by Commissions earned on settlement and cash services bank also expanded sales of pension cards in the which informs customers about salary deposits free using the Bank’s different channels. for small business customers, achieved by the growth regions. As of 31 December 2013, the total number of charge (655,000 customers used this service as at of VTB24 customer base and by providing packaged of Bank of Moscow payment cards in circulation, the end of 2013). In 2013, VTB24 and the Bank of Moscow introduced banking services, also contribute to this. including Muscovite social cards, was 11.8 million the option to make government payments (taxes, (up from 10.3 million at the end of 2012). As at the end of 2013, VTB24 mobile banking service fines and so on) with interest rate charges and Bank cards doubled its share of all customer transactions to account details taken from the Public Information Remote banking services 10.7%. In addition, a new project, “Mobile Banking System for regional and local payments; this In 2013, the total number of VTB24 cards in 2.0”, was launched during the reporting year. As part significantly simplified the payment procedure. circulation grew by 12.0% year-on-year. This positive In 2013, the number of active clients using VTB24 of this on-going project, the browser version (PDA) trend resulted from attracting new customers, which, remote banking service, “Telebank”, increased by and mobile applications for the three major platforms VTB24 customers were able to use the new in turn, was driven by optimising and improving 21.0% year-on-year and reached 478,000 users, will soon be completely redesigned, and separate “Telebank” service to pay for the services of Russia’s the product line. Over the course of the year, the compared to 394,000 as at the end of 2012. The applications will be developed specifically for tablets. largest association of housing and communal bank worked on improving its service offering for number of “Telebank” and “Teleinfo” users amounted settlement centres, the Uniform Information and existing cardholders by conducting various marketing to more than 2.4 million at the end of 2013. In the In 2013, the Bank of Moscow main focus in the Accounting Centre in Moscow. campaigns together with payment system providers. reporting period, the proportion of deposit accounts remote banking segment was to develop its Internet opened remotely increased by 5.2 p.p year-on-year to service. The bank introduced a number of new In February 2013, the Bank of Moscow launched an As of 31 December 2013, the total number of VTB24 19.3% of VTB24 total deposits. Internet-banking services, including the possibility innovative service for transferring money to any Russian payment cards in circulation, including cards with to open a deposit account online, inquire about bank card (Money Send, Money Transfer) across all an agreed overdraft facility, amounted to over In 2013, substantial work was done to introduce receiving a statement from the Pension Fund of remote sales channels. In 2013, the bank carried out 12.5 million (RUB 11.3 million as at the end of 2012). new functions and services to VTB24 Telebank Russia and pay STSI fines. Customers can use the over 265,000 transfers totalling more than RUB 2 billion. (“Telebank 2.0”): online chat facility to receive advice from the bank’s In 2013, VTB24 attracted 6,095 payroll projects. specialists, and also have access to a range of other Services for high-net-worth customers Therefore, as of 31 December 2013, the total number a new version of the system, “Telebank 2.0”, was services. In 2013, the Bank of Moscow launched of businesses using the bank’s services exceeded launched for customers in all regions; BM Mobile, a free application available on the iOS, In 2013, VTB24 continued to be active in attracting 29,000, compared to 27,000 in 2012. Android and Windows Phone 8 platforms. Using privileged and high-net-worth customers to use the new security measures were introduced this application any user (not only Bank of Moscow bank’s comprehensive services over the long term. In 2014, VTB24 plans to continue developing (authentication); customers) can pay for more than 200 services, In the reporting period, the bank launched the free loyalty programmes with its partners to increase the including utility bills, and can transfer money using “Privilege” and “Priority” packages for its high-net-worth proportion of active cards in the portfolio, including changes were made to the way transactions made cards of any Russian bank in Moscow and the customers, and expanded its range of services, resulting creating new co-branded products. The bank intends within “Telebank” are validated — clients can now regions. This application can also be used to find in improved customer loyalty, a stronger competitive to focus on conducting activation campaigns among choose their preferred way of confirming the nearest Bank of Moscow branch or ATM. position in the market and an increase in sales. cardholders, as well as measures to improve the the transaction at the time it is made; bank’s services within the card product offering. Transfers and payments In the reporting year, customers of the “Privilege” the option to make micropayments without package also had the opportunity to receive new The Bank of Moscow updated its range of credit confirmation was introduced; In 2013, VTB24 continued to develop its payment cards, since VTB24 was the first Russian bank to cards in 2013. During the year, the bank conducted a and money transfer services. Transactions carried out launch the new status cards, VISA Signature and number of credit card activation campaigns, including a service for paying taxes and STSI (State Traffic by individuals to pay for services increased by 21.0% MasterCard World Black Edition. “Credit Card Rules!”, “A gift as good as gold”, and Safety Inspectorate) fines was launched. year-on-year in the reporting period and amounted to “Summer of useful gifts” among others. These RUB 138 billion. The average payment size increased In 2013, sales of the “Privilege” and the “Priority” campaigns led to the credit card portfolio increase In 2013, the number of “SMS-notification” users by 25.0% year-on-year. As in previous years, this packages increased by 40.0% year-on-year. As at by 1.6 times compared to 2012. In the reporting increased by 46.0% year-on-year and exceeded significant increase was driven by high demand for 31 December 2013, 35,300 clients were subscribed period, a national co-branded card was launched with 1 million, leading to fee income from the service services from the Bank’s existing and new customers, to the “Privilege” package, and 99,600 to the the airline S7, and a new credit card “Sacred Gift” increasing to RUB 220 million, compared to continued expansion of its branch network and an “Priority” package. VTB Annual Report 2013 4. Management report

50 51 Private banking the Hermitage Gallery; limited edition cards with investment strategies, which track a stock exchange In 2014, VTB24 plans to expand its own ATM network individual design featuring semi-precious metals. or combination of indices, from RUB 1 million to to 10,250 units and introduce new devices, such The Group private banking services in Russia are In addition, the bank simplified the process of RUB 500,000. For basic investment strategies, as information and payment terminals for non-cash provided by VTB24 and the Bank of Moscow. reviewing and approving credit card applications the amount was lowered from RUB 2.5 million to payments. from private banking clients. RUB 1 million. As a result, VTB24 brought its terms VTB24 Private Banking is the leader in Russia’s and conditions in line with similar products from other The Bank of Moscow ATM network increased by 138 private banking market. VTB24 Private Banking Investment services for retail customers banks. This led to an increase in active contracts. units in 2013 and amounted to 2,013 ATMs. The bank has offices in Moscow, St. Petersburg, Krasnodar, plans to expand its ATM network to 2,150 units in 2014. Yekaterinburg, Kazan, Samara, Rostov-on-Don, Nizhny VTB Group — represented by VTB24 — maintains its In 2013, money raised in mutual investment funds Novgorod and Novosibirsk. leading position among companies and banks that through VTB24 branches amounted to more than RUB In 2013, the number of Leto Bank ATMs grew by 353 provide brokerage services to retail clients. In 2013, 1 billion. The number of sales points offering mutual units year-on-year to 413 ATMs. Leto Bank plans to In 2013, “Prime” package holders were offered VTB24 firmly held its position among the leading investment funds increased by 73 agency offices to a increase its number of ATMs to 680 in 2014. the option to add up to three minors on their travel brokerage companies and banks providing brokerage total of 738 in 2013. insurance policy with medical cover of up to services. It is ranked number one by the number Network USD 50,000. of customers registered on the Moscow Exchange, Access to VTB24 investment services is available and fourth based on the number of active clients through its entire network of branches and offices. VTB Group has one of the most developed networks “Prime” package holders could to apply for “Prime” registered on the Moscow Exchange. All the bank’s regional offices share a unified of sales and service offices in Russia. This includes cards based on MasterCard World Elite since July approach to providing investment services. offices of VTB, VTB24, the Bank of Moscow and Leto 2013. The bank introduced a cash-back promotion The volume of VTB24 customer transactions on Bank, which, when combined, amount to 1,610 units. for purchases using the “Prime” cards in order to the stock market amounted to over RUB 650 billion, ATMs stimulate the increased turnover within the card driving the bank to the eighth place in the Moscow In 2013, VTB24 demonstrated impressive growth sales and service network. Exchange rating of the Leading Market Operators VTB24 ATM network increased by 1,500 units rates in the scale of its network, as well as high — Shares: Main Trading Regime. The average daily year-on-year and amounted to 12,100 ATMs as of levels of quality and efficiency. In the reporting year, In 2013, VIP-clients funds were transferred from volume for marginal lending in 2013 totalled over 31 December 2013. VTB24 is continuously improving VTB24 branch network increased by 1.5 times to TransCreditBank to VTB24 Private Banking. The RUB 4.3 billion. The volume of VTB24 customer its self-service network, enhancing service quality 1,034 offices in 341 cities across 72 Russian regions. number of the bank’s VIP-clients increased by 39.0% transactions on the FORTS futures and options market and expanding the network. During 2013, the The Bank opened 84 new offices, and another year-on-year to 3,927 customers in the reporting amounted to approximately RUB 1.8 trillion. number of self-service devices increased by more 259 offices were added following the merger with period. In total, VIP-clients placed over RUB 308 than 900 units, 400 of which are equipped with TransCreditBank. TransCreditBank offices enabled billion with VTB24, while the increase in cumulative In 2013, through its brokerage services on the a cash pay-in function. VTB24 to significantly expand its geographical balances for 2013 was 44%. The average credit stock market, VTB24 successfully placed JSC VTB footprint, increasing its coverage to 90 cities, which balance per customer reached RUB 78.5 million at Bank additional share issue. At the end of 2013, As of 31 December 2013, the number of devices have a total population of 3.5 million. the end of 2013. 201,298 broker accounts were registered on the used for cash withdrawal, pay-in and cash payments Moscow Exchange for the Bank’s customers. In 2013, for goods (works, services), including non-card In the largest metropolitan area, the Moscow region, VTB24 Private Banking sells its products and services VTB24 customers were able to conduct brokerage payments, amounted to more than 6,800 units (with there are 145 VTB24 sales points in operation. through a specialised premium network. A VIP-office transactions with shares of foreign issuers traded on TransCreditBank network of self-service devices, The bank has also established sufficiently strong was opened in Novosibirsk in the reporting period. foreign stock exchanges. which merged with VTB24, this number reached networks in St. Petersburg (59 sales points), the Ten VTB24 Private Banking offices currently operate in more than 9,500 units). 37% of these devices are Sverdlovsk region (46 sales points), the Tyumen nine Russian cities, including two offices in Moscow. The volume of Forex transactions of VTB24 customers equipped with a cash pay-in function. region (30 sales points), the Novosibirsk and VTB24 Private Banking is also represented in the retail in 2013 amounted to over USD 200 billion, including Kemerovo regions (28 sales points) and in other network sales points in ten other Russian cities. swap transactions. In 2013, the number of customers In 2013, VTB24 ATM network processed regions. using the Forex service increased by 1,400, or by 17% more than 250 million transactions. More than In 2013, the Bank of Moscow introduced a number year-on-year. RUB 1.7 trillion of cash was withdrawn, and over In 2013, VTB24 outperformed its competitors by of new products for its Private Banking customers, RUB 310 billion was received and credited to business volumes. The average loan portfolio per including savings certificates; co-branding with the In 2013, while developing its property trust service, customers card accounts. branch amounted to RUB 1.3 billion, which was real estate developer “Donstroy”; co-brand with VTB24 lowered the minimum investment amount for almost 60% higher than the closest competitor. VTB Annual Report 2013 4. Management report

52 53 The average volume of retail deposits per branch was services in leasing, factoring, insurance and private base by 65%. In total, more than 800,000 people and offices and seven direct sales offices were opened in RUB 1.5 billion, outpacing VTB24 main competitors pensions. Establishing synergies and promoting the over 12,000 companies operating in different sectors 2013. by at least one third. cross-selling of banking and non-banking products used VTB Insurance’s services in 2013. remain some of the Group’s key development MSK Insurance Group also developed well in 2013. For the fifth consecutive time, VTB24 won an award priorities. During the reporting period, VTB Insurance continued The company completely redeveloped its car for best customer service from The Retail Finance to partner with the Ministry of Internal Affairs for insurance products. The company launched complex magazine, which annually publishes an independent Insurance the mandatory personal life and health insurance products, providing packaged solutions to meet the rating of customer service quality among Russian programme for military servants of the Ministry’s armed needs of different types of customer. The company banks. According to the Finalta research, The Group’s insurance business is represented by forces, for citizens called for temporary military training widened the range of risks covered by its insurance VTB24 customer satisfaction levels and customers VTB Insurance and MSK Insurance Group. at the armed forces, as well as for employees of the and launched new products such as “GAP”, “Accident willingness to recommend VTB24 is 1.5–2 times Ministry. Manager” and “Technical Assistance”. higher than the average for European banks. VTB Insurance is one of the most dynamic players in The average waiting time at VTB24 branches the market. Between 2007 and 2013, the sales of the In 2013, VTB Insurance offered a unique product In 2013, MSK Insurance Group also substantially is 4.5 minutes, which is lower than the average company grew by more than 26 times. VTB Insurance called “Onkopomosch”, a voluntary type of personal modified its product offering in the personal property of 5 minutes in European banks. managed to climb from 49th place in the insurers insurance, which guarantees financial support in insurance segment. The company developed ranking in 2007 to 9th place in 20135. the event the policy holder is diagnosed with cancer various kinds of packages and cross products. According to the network development plan for 2014, during the insurance period. Another new product Furthermore, the company introduced packaged VTB24 aims to open 70 new sales points, prioritising In 2013, the company saw significant growth. called “Golden Parachute” was launched, which insurance products for businesses of various sectors openings in Russia’s largest cities. The Russian insurance market grew by 13% in the insures against job loss. This type of insurance has and sizes, including small and medium-sized reporting period, while VTB Insurance total premiums never been offered as a separate product before, businesses. The voluntary health insurance product During 2013, the Bank of Moscow also opened new increased by 39%. VTB Insurance sales reached without being linked to other types of insurance. line was updated for individuals and corporates. branches and optimised its network. Many sales RUB 31.9 billion in the reporting period, making The company launched the versatile products NS- points were redeveloped both functionally and it one of the ten largest insurance companies in At the end of 2013, three insurance companies came Express, My Megapolis and My Russia, which allow visually to correspond with VTB Group standards. Russia (excluding companies providing life insurance under VTB Insurance’s control: one of the largest customers to be accepted for insurance without filling At the end of 2013, the Bank of Moscow network services)6. VTB Insurance market share Russian reinsurance companies, Moscow Re, the life an application form and offer a number of broad increased by six offices to 304 in 41 Russian regions. by volume of premiums earned increased to 3.4% insurance company, MSK-Life, and the mandatory benefits. in 2013, compared to 2.8% in 2012. health insurance company, Solidarity for Life (Sovita). In 2014, the Bank of Moscow will continue to work on VTB Insurance plans to develop its life insurance Leasing streamlining its branch network and plans to leave In 2013, VTB Insurance continued to successfully business line under the MSK-Life brand and to start 14 regions by transferring its business to VTB Group develop its key business lines. Sales of corporate selling insurance products in 2014. VTB Leasing is one of Russia’s leading leasing banks. insurance increased by 24% to RUB 15.3 billion companies, providing world class services. Today, and the retail insurance business demonstrated In 2013, VTB Insurance strengthened its position in VTB Leasing has 51 regional offices across Russia The number of Leto Bank branches increased by 229 a significant upward trend, growing by 56% in a number of insurance market segments. In particular, with subsidiaries in the CIS and Europe. VTB Leasing sales points in 2013 and amounted to 272 customer the reporting period. Total premiums in the retail the company became a leader in accident insurance. is among the Top 5 leasing companies in Russia7 and centres. The bank plans to increase the number of business exceeded income from the corporate VTB Insurance is among the Top 5 financial lines ranks among Top 50 leasing companies in Europe. customer service centres to 550 in 2014, and the business and amounted to nearly RUB 16.6 billion. insurers and Top 10 insurers in property insurance, number of bank counters will be expanded to 400, Property insurance and voluntary health insurance fully comprehensive insurance of air transport and 2013 was extremely successful for all of VTB Leasing representing a growth of 270 bank counters per year. saw the biggest gains with increases of 75% and 65% liability insurance for air transport owners. business lines. Leasing of light motor vehicles respectively. VTB Insurance overall payments totalled and freight transportation, as well as leasing of 4.3.3. Other businesses RUB 11.8 billion in the reporting period. In 2013, VTB Insurance continued to strengthen and specialised equipment, grew during the reporting develop its regional network. The company opened period. As at the end of 2013, the combined leasing In addition to retail and corporate and investment As at the end of 2013, VTB Insurance increased its six new branches, as well as three offices jointly with portfolio of VTB Group companies amounted to banking services, VTB Group provides financial retail client base by 2.5 times and its corporate client VTB24. Overall, 63 sales points, 13 regional sales RUB 346.3 billion, and the volume of new leasing contracts totalled RUB 112.8 billion. Key segments of

5 According to data from the Bank of Russia Financial Markets Service. 7 According to Expert RA Rating Agency. 6 According to data from the Bank of Russia Financial Markets Service. VTB Annual Report 2013 4. Management report

54 55 the company’s leasing portfolio include rail transport, and non-state retirement benefits, including developing services in Europe, Asia, North America and Africa economy, particularly in the oil, petrochemical, aircraft, oil production and refining equipment, as and offering corporate pension programmes. and also facilitate international cooperation by energy, food and engineering industries. well as power generation and engineering equipment. helping to promote Russian businesses in the In 2013, VTB Pension Fund assets grew international markets. VTB’s international operations One of the bank’s priorities in 2013 was to develop In 2013, VTB Leasing won the Trade Finance by more than 80% to RUB 68 billion, compared also enable the Group to diversify its business and retail lending by upgrading its product line, improving magazine award for “Deals of the year” after signing to RUB 36.8 billion in 2012. increase its profitability by working in high-margin business processes, and optimising its pricing and a loan agreement with JP Morgan for export-loan markets. marketing policies. Moreover, during the reporting guarantees, provided by US EX-IM Bank. As at the end of the reporting period, the fund attracted period, the Bank’s export factoring segment reached pension savings from more than one million clients. At the end of 2013, VTB Group banking business a new level of development by continuing to actively In 2014, the Group continues to actively develop its During 2013, the Fund actively cooperated with VTB was represented in 23 countries across the world. support financing industrial exports to Russia. leasing business. It plans to focus on leasing in the Group banks and regional banks in order to attract new In the CIS countries, the Group is present in Armenia, automotive industry, offering a full-cycle service and clients. The vast majority of contracts were signed in Ukraine, Belarus, Kazakhstan, Azerbaijan. VTB banks In 2013, VTB Bank (Ukraine) portfolio of loans gradually increasing its geographical coverage. VTB the sales offices of VTB24 and the Bank of Moscow. in Austria, Germany and France operate as part of the to individuals amounted to UAH 3,463 billion Leasing also intends to expand its leasing operations European sub-holding headed by VTB Bank (Austria). (USD 432 million). The bank took a conservative of oil and gas production equipment. In 2013, VTB Pension Fund ranked 8th by the number Furthermore, the Group has subsidiary banks in the approach to corporate lending in 2013, seeking of contracts signed for mandatory pension insurance United Kingdom, Cyprus, Serbia, Georgia and Angola, primarily to improve the quality of the portfolio. Factoring during the year and 7th by the total number of clients branches in China and India, as well as two branches At the end of the year, the bank ranked 9th in the for mandatory pension insurance. Furthermore, the of VTB Capital plc in Singapore and Dubai. The Group corporate lending market with 2.9% market share; VTB Factoring Limited is the absolute leader in the Fund also moved up from 9th to 6th by total pension investment banking arm provides broker and dealer in retail lending, the bank took 12th place with 2.1% Russian factoring market. The company operates assets under management8. operations in the US, conducts securities dealing and market share. By the volume of corporate deposits, across Russia though its own branch network, which financial advisory in Hong Kong, and also engages in the bank ranked 19th with 1.6% market share and is spread across 18 of Russia’s largest cities, and VTB Pension Fund practises a conservative investment banking activities in Bulgaria. In addition, took 14th place in retail deposits (1.6% market VTB Bank regional branches. The company offers a investment policy, ensuring that clients funds grow VRB Bank jointly established by VTB and the Bank for share). full range of financial services for accounts receivable while remaining protected. The yield on pension Investment and Development of Vietnam operates in and accounts payable. savings in 2013 was 8.07% per annum, and 8.89% Vietnam. VTB Bank (Kazakhstan) demonstrated high growth per annum on pension reserves. rates in 2013, exceeding the business plan forecasts, A key priority of VTB Factoring strategy is to focus Business in the CIS and Georgia the number of corporate clients increased by 72% on working with Russia’s largest goods and services The Fund was granted a rating of “A++” to 9,100. In 2013, the bank launched merchant enterprises. (“Exceptionally high level of reliability”), with Developing VTB business in the CIS countries is acquiring and Internet banking services for its a “stable” outlook9. In 2013, the Fund won the a key priority of the Group international strategy. corporate and individual clients. Turnover reached RUB 453 billion in 2013, increasing “Reliability” award at the Financial Elite of Russia The Bank’s active presence in the financial markets by 33% year-on-year, while the factoring portfolio Awards 2013. of the former Soviet Union states facilitates the At the end of 2013, the total assets and the loan amounted to RUB 90 billion, showing a 24% increase strengthening of economic relations between the portfolio amounted to RUB 30.8 billion and compared to 2012. The company was the top Russian In 2014, the Fund is planning to review its funding countries, and enables VTB to provide a broader RUB 23.1 billion respectively. Moreover, the loan factoring firm by portfolio size (with a 28% market procedure due to changes in legislation. Effective range of services to its corporate clients. portfolio increased by 35% during the year, compared share) and by assigned receivables (with a 24% internal procedures and prompt decision-making will to the average growth rate of 13.7% for the Kazakh market share), as well as by revenue. enable VTB Pension Fund to comply with all the Bank VTB Bank (Belarus) continued to rapidly develop banking sector as a whole. of Russia’s requirements and to continue operating as a universal bank. At the end of 2013, the bank’s VTB Pension Fund under the new rules. assets reached RUB 29.5 billion (USD 959 million) VTB Bank (Kazakhstan) is actively developing its by national standards, which is 20% higher than transaction business, offering trade finance operations VTB Pension Fund is one of the most dynamically 4.3.4. Business outside of Russia in 2012. The retail loan portfolio grew by 36.5%, with all types of bank guarantees and letters of developing non-state pension funds. The Fund provides with the corporate loan portfolio increasing by 14%. credit, as well as complex structured transactions a full range of services for mandatory pension insurance VTB Group has a significant presence outside of In 2013, the Bank continued to actively finance for trade finance organisations involving foreign and the country. The companies of the Group provide Belarusian companies operating within the real development banks. The bank conducted 2,900 trade finance and documentary operations since the 8 According to data from the Pension Fund of the Russian Federation at the end of 2013. 9 According to the Expert RA Rating Agency. VTB Annual Report 2013 4. Management report

56 57 beginning of 2013, which is a year-on-year increase of In the reporting period, VTB balanced the portfolio 1 November 2014 under the Single Supervisory of Angola and intends to actively participate in 2.1 times. These operations had a total value of over structure of its sub-holding banks, revised its strategy Mechanism. developing Angola’s capital markets. RUB 7 billion, which is 1.7 times higher than in 2012. of aggressive balance sheet growth in favour of greater diversification of credit risk and developed In May 2013, VTB acquired 100% of Bank of Moscow In the Vietnamese market, VTB Group is represented VTB Bank (Azerbaijan) developed rapidly in 2013. the lending business in South-Eastern Europe. (Belgrade), which was renamed VTB Bank (Belgrade) by the Vietnam-Russia Joint Venture Bank (VRB), By the end of 2013, the loan portfolio increased by in August. In October, the bank opened a new branch a universal commercial bank providing an extensive 174%. The retail business, which includes banking For VTB Bank (Austria), 2013 was the year when its in Belgrade. Russian companies operating in Serbia range of banking products and services. services for small businesses, developed the most, consolidating role within the European sub-holding and employees of the Russian Embassy became with the loan portfolio to small businesses increasing strengthened, as well as when efforts were made to customers of the new branch. VRB activity is focused on providing reliable support by more than three times during the year. In synchronise business units and support functions. to Russian companies operating in the Southeast September 2013, the bank opened its fourth branch In September 2013, the bank decided to introduce JSC VTB Bank (Belgrade) works with large Serbian and Asian markets. In order to increase its market and intends to continue expanding its network a new automated banking system to coordinate the Russian companies, small and medium enterprises representation and create a convenient infrastructure throughout 2014. work of all three banks in the European sub-holding. and individual customers. The bank’s corporate to service clients, VRB has been paying close clients account for 90% of its loan portfolio. Servicing attention to developing its sales network. In addition VTB Bank subsidiary in Armenia, VTB Bank (Armenia), In 2013, VTB Bank (Deutschland) increased its equity Russian and joint Russian and Serbian companies to the head office in Hanoi, it currently includes five continued to develop as a universal bank and capital as a result of retained earnings from the operating in Serbia is JSC VTB Bank (Belgrade) main branches, centres that deal with specific transaction significantly strengthened its position in the republic, previous period. As a result of the Bank’s successful priority. and card requests, as well as additional offices in becoming the market leader. VTB Bank (Armenia) is performance, the German Deposit Insurance Fund the country’s economic centres. In 2013, the bank gradually diversifying its resource base, improving raised its total limit on deposit insurance from Business in Asia and Africa continued to support Russian business in Vietnam: its asset structure, increasing its profitability and EUR 700 million to EUR 1.2 billion. memorandums of cooperation were signed the quality of the products and services it offers. The main objective of VTB Group banking operations with JV Vietsovpetro, CJSC Atomstroyexport The bank’s credit policy aims to comprehensively VTB Bank subsidiary in Cyprus — Russian Commercial in Asia and Africa is to establish strong partner and JSC Uralvagonzavod. facilitate Armenia’s sustainable economic Bank — was operating against the backdrop of the relationships with Russian and CIS companies development. financial crisis, which, among other things, led operating in these markets, and with local businesses The VTB Bank Branch in Shanghai has been operating to restrictions on capital transactions. The bank looking to expand into the CIS. in China since 2008. VTB Bank is currently the only VTB Bank (Georgia) was among the ten largest banks management made every possible effort to avoid bank from Russia and the CIS to have a banking in the country as at the end of 2013. The bank mostly customers suffering financial losses. During the The joint Russian-Angolan bank, Banco VTB Africa licence in China. It aims to provide support to the developed its retail business segment, including reporting year, the bank customer base grew by more (VTB-Africa), has been successful since it was Russian companies in China and facilitate access to servicing small businesses. The bank significantly than a third. launched in 2007. The bank is actively working to the Chinese market for CIS companies and banks. expanded its alternative sales channels. According attract new clients and develop the transaction and The branch has been active in trade finance to independent surveys, the bank is one of the Top 3 In 2013, Russian Commercial Bank (Cyprus) changed lending banking business. In line with its approved transactions, servicing Russian and CIS importers and Georgian credit institutions by brand awareness. its name to RCB Bank following approval from the development concept, the bank formed a new matrix exporters, and in lending to the subsidiaries of Russian bank shareholders. The Bank is currently Cyprus’ organisational structure in 2013 and identified a businesses in China, as well as to local customers. Business in Europe second largest in terms of assets and is one of the number of priority business areas, such as Global In 2013, the branch successfully entered into a new country’s most trusted financial institutions. The Transaction Banking, FX Trading and International client segment servicing Chinese enterprises, which In 2013, the European sub-holding of the Bank Bank was included in the list of international banks, Corporate Project Finance. form part of large Chinese state holdings, and which continued to strengthen its market position in meaning that from 13 May 2013, capital restrictions also cooperate with strategically important clients of servicing export and import operations of largest were not applied to its non-resident clients. The In 2013, the bank organised the Russian-Angolan VTB Group. During the reporting period, the branch Russian and CIS exporters. The reporting period Bank’s clients are therefore able to conduct all business forum, which was attended by leading received a licence to conduct business in the local saw a slight decrease in corporate lending due to banking operations without any restrictions. Russian companies with interests in Angola or currency, Yuan, which enabled the bank to expand its premature down-payment for loans on the back of by those who believe that sub-Saharan Africa is customer base and its range of services. favourable market conditions. During the reporting RCB Bank was among the 128 most important a promising market for commercial opportunities period, the European sub-holding loan portfolio European banks, control over which will be and investments. In addition, VTB Group is working The VTB Bank Branch in Shanghai placed particular shrank by 6.4% to RUB 249 billion. transferred to the European Central Bank from closely with the Ministry of Finance of the Republic emphasis on developing operations in national currencies. The branch has had a market maker VTB Annual Report 2013 4. Management report

58 59 status since 2010, which allowed it to participate in Today, the VTB Bank Branch in India examines commission income increased by 14.7%, driven by to customers, securities and cash held with other setting the rouble/yuan exchange rates and conduct opportunities to participate in Russian-Indian joint retail and transaction banking; banks. operations on the China Foreign Exchange Trade projects in India across a variety of sectors, including System (CFETS). Since 2011, the VTB Bank Branch technical military projects, chemicals, metals, energy, Against the backdrop of Russia’s macroeconomic In 2013, the Group net interest income before in Shanghai maintained its leading position on the agriculture, telecommunications and infrastructure. slowdown, the Group’s cost of risk increased to 1.6%, provision for impairment amounted to RUB 323.0 local foreign exchange market for transactions in the up from 1.2% in 2012; billion, up 31.3% compared to 2012. This increase rouble/yuan pair. The bank is particularly focused on primarily reflected greater growth in average developing its cooperation with financial institutions 4.4. Financial report Staff costs and administrative expenses increased by lending volumes, mainly on loans and advances to in the CIS and China, increasing its interbank lending 16.4% to RUB 210.9 billion, driven by the expansion customers, than in interest-bearing liabilities. transactions in U.S. dollars, Russian roubles and yuan. Financial highlights of the Group’s retail business, while the cost to income ratio (CIR) was 49.1%, a decrease of 140 b.p. In 2013, VTB interest income increased by 23.5% VTB Bank attaches great importance to its operations VTB Group 2013 net profit increased by 10.9% to RUB compared to 2012; to RUB 686.3 billion. The Group generates interest in the Indian market, where its branch is the flagship 100.5 billion, corresponding to an ROE of 11.8%; income on loans and advances to customers, its of Russian banking. The key objective of the New The Group’s balance sheet demonstrated significant securities portfolio and amounts due from other Delhi VTB branch is to become an intermediary As a result of VTB Bank RUB 102.5 billion additional growth: the total gross loan portfolio increased by banks. The table above outlines the principal between Russian and Indian businesses, developing share issue in May 2013, the Tier 1 capital adequacy 24.5% to RUB 6,330.1 billion, and customer deposits components of the Group interest income for the new projects and opening new markets. ratio increased by 80 b.p. and amounted to 10.9%, were up 13.8% to RUB 4,341.4 billion. periods indicated. while the total capital ratio was 14.7%; The branch focuses on the foreign trade operations of Income statement analysis The key contributing factors to the interest income both Russian companies that operate in India, along The Group demonstrated significant growth across growth were the expansion of the Group loan with their subcontractors, and Indian companies with all core income items: net interest income increased Net interest income portfolio, which was up 24.0% in the reporting interests in Russia. The branch currently services by 31.3%, driven by robust loan book expansion period, as well as an increase in the share of higher- approximately 70 corporate clients. combined with a stronger net interest margin (for VTB Group operating income was mainly driven by net yielding retail loans in the total loan portfolio. 2013 NIM was 4.5% vs. 4.2% for 2012); net fee and interest income, generated by loans and advances

VTB Group key financial indicators Interest income and expense RUB billion 2012 2013 Change Net interest income 246.0 323.0 31.3% RUB billion 2012 2013 Change Net fee and commission income 48.3 55.4 14.7% Interest income Operating income before provisions10 358.7 429.3 19.7% Financial assets at fair value through profit or loss 27.5 37.0 34.5% Provision charge for impairment of debt financial assets (59.4) (96.9) 63.1% Loans and advances to customers 513.3 637.4 24.2% Staff costs and administrative expenses (181.2) (210.9) 16.4% Due from other banks 9.8 7.2 –26.5% Net profit 90.6 100.5 10.9% Other financial assets, including securities 5.1 4.7 –7.8% Gross loans and advances to customers 5,084.8 6,330.1 24.5% Financial assets not at fair value through profit or loss 528.2 649.3 22.9% Customer deposits 3,813.4 4,341.4 13.8% Total interest income 555.7 686.3 23.5% Net interest margin 4.2% 4.5% 30 b.p. Interest expense Provision charge for loan impairment / Average gross loan portfolio (CoR) 1.2% 1.6% 40 b.p. Customer deposits (173.8) (208.3) 19.9% NPL ratio (90 days+)11 5.4% 4.7% –70 b.p. Due to other banks and other borrowed funds (68.4) (83.2) 21.6% Tier 1 ratio 10.1% 10.9% 80 b.p. Debt securities issued (48.2) (49.7) 3.1% ROE 13.7% 11.8% –190 b.p. Subordinated debt (19.3) (22.1) 14.5% Total interest expense (309.7) (363.3) 17.3% 10 Here and below, operating income before provisions is calculated before provisions for impairment of debt financial assets and impairment of Net interest income 246.0 323.0 31.3% other assets, credit-related commitments and legal claims. 11 Ratio is calculated to total gross loans including financial assets classified as loans and advances to customers pledged under repurchase agreements. Source: VTB Group IFRS consolidated financial statements for 2013. VTB Annual Report 2013 4. Management report

60 61 As at the end of the reporting period, interest income noticeable effect on the rise in the Group interest commission income is generated by settlements Provision charge for impairment from lending to customers amounted to RUB 637.4 expenses, the costs of which were up 21.6% to and cash transactions, although the share of these billion, up 24.2% compared to 2012. Interest income RUB 83.2 billion. transactions in total fee and commission income During the reporting period, VTB increased its from the retail banking business continued to decreased to 67.6% from 70.6% in 2012. In 2013, provision charge for impairment of debt financial outperform interest income dynamics in the corporate In the reporting period, the Group costs of funding the commission on settlement and cash transactions assets to RUB 96.9 billion, compared to and investment banking business of the Group. increased to 5.0% compared to 4.8% in 2012. increased by 10% year-on-year to RUB 47.5 billion. RUB 59.4 billion in 2012. The increase in provision This was primarily due to more robust growth in the VTB Group expenses related to handling customer charges was due to the provision charge for loan retail loan portfolio (a 36.0% increase compared to deposits in 2013 accounted for 55% of total interest Securities and capital markets transactions made a impairment growing to RUB 96.2 billion in 2013 from 21.0% growth in the corporate loan portfolio), while expenses, 1 p.p. lower than in 2012. significant contribution to the increase in the fee and RUB 59.5 billion in 2012. During the reporting period, maintaining its high profitability compared to the commission income, with the fee and commission provision charge for loan impairment (cost of risk) corporate loan portfolio. Net interest margin income from these transactions rising by 31.3% grew to 1.6% of the average gross loan portfolio, to RUB 8.4 billion. Improvements in the Group’s compared to 1.2% in the previous reporting year. VTB Group interest income on amounts due from The Group net interest margin increased by 30 b.p. investment banking business were the main driver other banks fell by 26.5% to RUB 7.2 billion, resulting year-on-year to 4.5% in 2013. behind this dynamic income growth. In 2013, the allowance for loan impairment increased primarily from the decrease in the average interest to RUB 361.1 billion from RUB 323.3 billion in 2012. rate on interbank loans from 1.9% to 1.1%. This was Net fee and commission income In 2013, VTB fee and commission expenses increased A 55.0% increase in reserves was achieved through partially offset by a slight growth in average balances by 15.5% to RUB 14.9 billion, which was slightly the provision charges for retail loan impairment, which to RUB 638.5 billion from RUB 518.3 billion. VTB Group continues to actively develop its transaction above the income performance. In the reporting amounted to RUB 82.9 billion compared to banking business by expanding and optimising period, the commission expenses on settlement and RUB 62.1 billion in 2012. The allowance for VTB Group interest expenses in 2013 grew at a its product line and improving the sales system of cash transactions grew by 5.2% versus 10% income corporate loan impairment increased by 6.5% slower pace than its interest income totalling 17.3% commission-based products. In 2013, the Group growth on them. to RUB 278.2 billion, while its share in total allowance and 23.5%, respectively. The increase in expenses continued to consistently grow income in the transaction for loan impairment amounted to 77.0% compared resulted mainly from a 19.9% year-on-year rise in banking business, with net fee and commission income Net gains arising from financial instruments and to 80.8% in 2012. servicing customer deposits, which amounted to increasing by 14.7% to RUB 55.4 billion. foreign currencies RUB 208.3 billion in the reporting period. The rise in In the reporting period, the Group improved its these costs was due to the organic growth in funds The gross fee and commission income in 2013 In 2013, the net gains arising from financial asset quality after tightening its lending and risk raised (+13.8%), with the simultaneous increase increased by 14.9% to RUB 70.3 billion, compared instruments, including the gains from financial management policies, and also increased the number in deposit rates. Liabilities to other banks had a to RUB 61.2 billion in 2012. The bulk of fee and instruments at fair value through profit or loss, and the of non-performing loan write-offs (90+ days). In 2013, gains from financial assets available for sale, increased impairment provision write-offs amounted to by 37% year-on-year to RUB 20.5 billion. This increase RUB 66.3 billion, compared to RUB 17.7 billion in Fee and commission income and expense was mainly driven by profitable private equity projects, 2012. At the same time, the share of non-performing including a number of successful divestments and de- loans (90+ days) in the loan portfolio, which includes RUB billion 2012 2013 Change risking of the Group’s balance sheet. financial assets classified as loans and advances Commission on settlement transactions 37.1 42.7 15.1% to customers, pledged under repo agreement, Commission on guarantees issued and trade finance 9.2 10.2 10.9% Gains less losses arising from dealing in foreign decreased to 4.7% as at 31 December 2013 Commission on operations with securities and capital markets 6.4 8.4 31.3% currencies amounted to RUB 20.4 billion in 2013 compared to 5.4% as at 31 December 2012. Commission on cash transactions 6.1 4.8 –21.3% (RUB 14.5 billion in 2012), while foreign exchange Other 2.4 4.2 75.0% translation losses net of gains reached As a result of the increase in non-performing loan Total fee and commission income 61.2 70.3 14.9% RUB 29.1 billion. As a result, the Group incurred write-offs, the ratio of provisions to the total loan 12 Commission on settlement transactions (8.2) (10.0) 22.0% a RUB 8.7 billion loss from foreign currency portfolio decreased from 6.1% to 5.5%. The Group Commission on cash transactions (2.4) (2.2) –8.3% transactions, compared to a the profit of continued to maintain its NPL coverage ratio at a Other (2.3) (2.7) 17.4% RUB 6.8 billion in 2012. prudent level, increasing it to 115.5% at the end of Total fee and commission expense (12.9) (14.9) 15.5% the reporting year, compared to 112.4% in 2012. Net fee and commission income 48.3 55.4 14.7%

Source: VTB Group IFRS consolidated financial statements for 2013. 12 The ratio is calculated to total gross loans including financial assets classified as loans and advances to customers pledged under repurchase agreements. VTB Annual Report 2013 4. Management report

62 63 Staff costs and administrative expenses Analysis of VTB Group’s financial position Liabilities

In 2013, VTB Group staff costs and administrative Assets RUB billion 2012 2013 Change expenses increased by 16.4% to RUB 210.9 billion, Due to other banks 759.9 666.6 –12.3% driven by the expansion of the Group retail business In 2013, VTB Group total assets stood at Customer deposits 3,813.4 4,341.4 13.8% (in accordance with the strategy of increasing the RUB 8,768.5 billion, compared to RUB 7,415.7 billion Liabilities of disposal group held for sale 6.1 20.7 239.3% share of the relatively higher margin retail business in at the end of 2012. The asset growth in the reporting Other borrowed funds 806.2 1,485.9 84.3% the Group assets and income). The cost-effectiveness period was mainly a result of loan portfolio expansion. Debt securities issued 753.9 738.2 –2.1% Deferred income tax liability 12.3 15.0 22.0% ratio improved during the reporting period with the The loan portfolio share in the Group total assets Other liabilities 212.0 262.6 23.9% cost-to-income ratio before provision for impairment increased to 68% in 2013 from 64% in 2012. Total liabilities before subordinated debt 6,363.8 7,530.4 18.3% decreasing to 49.1% compared to 50.5% in 2012. Subordinated debt 285.8 291.0 1.8% In the reporting period, the Group gross loan Total liabilities 6,649.6 7,821.4 17.6% Net profit portfolio (loans and advances to customers before provisions for impairment) increased by 24.5% Source: VTB Group IFRS consolidated financial statements for 2013. In 2013, VTB Group once again generated a record to RUB 6,330.1 billion. A 68.0% increase in the gross net profit, amounting to RUB 100.5 billion compared loan portfolio was driven by the growth in to RUB 90.6 billion for the previous year. The increase the corporate loan portfolio, which amounted 2012. As at the year-end, the retail loan increased deposits from customers and funding from was driven by solid balance sheet growth and strong to RUB 4,809.3 billion in 2013, compared to portfolio increased by 35.8% and reached the Bank of Russia. performance in core income lines. RUB 3,964.6 in 2012. The corporate portfolio increased RUB 1,520.8 billon, with a 24.0% share in the by 21.3% in 2013, compared to 5.3% in 2012. gross loan portfolio, compared to 22.0% in 2012. In 2013, VTB deposit portfolio increased by 13.8% Mortgages demonstrated the fastest growth rate, to RUB 4,341.4 billion, with customer deposits In 2013, the retail lending grew at a faster pace than increasing by 38.2% to RUB 539.9 billion. The growth being the major contributor. In 2013, the customer the corporate lending, but remained at the level of in consumer lending slowed in the reporting period deposits accounted for 55.0% of the Group liabilities, and amounted to 35.5% compared to 43.1% in the compared to 57.0% in the previous year. A 68% previous reporting year. growth in the deposit portfolio was driven by deposits Assets from individuals, with the Group retail deposits In line with the Group strategy of de-risking growing by RUB 359.3 billion to RUB 1,793.4 billion RUB billion 2012 2013 Change the balance sheet, VTB continued to reduce its in 2013. Cash and short-term funds 569.0 354.3 –37.7% investments in non-interest earning assets during Mandatory cash balances with central banks 63.8 58.7 –8.0% the reporting period. As part of this, VTB Capital The reduction in the proportion of customer deposits Financial assets at fair value through profit or loss 528.8 411.1 –22.3% made profitable exits from a number of large private within the Group liabilities, against the background of Financial assets pledged under repurchase agreements 302.9 466.6 54.0% equity projects, including projects in the real estate their substantial growth, was mainly due to increased Due from other banks 358.6 443.4 23.6% and IT sectors. The Group investments in equity funding from the Bank of Russia, which was raised Loans and advances to customers 4,761.5 5,969.0 25.4% securities during 2013 decreased by 37.4% to through repo operations and secured debt. At the Assets of disposal group held for sale 15.3 36.7 139.9% RUB 65.1 billion as at 31 December 2013, while end of the year, the Bank of Russia’s funds amounted Investment financial assets available-for-sale 97.4 135.4 39.0% the share of equity instruments in VTB total securities to 12% of the Group liabilities, compared to 6% in Investment financial assets held-to-maturity 0.9 0.7 –22.2% portfolio decreased to 6.0% from 11.0% in 2012. 2012. The Group regards the Bank of Russia’s funds Investments in associates and joint ventures 32.8 87.6 167.1% The Group securities portfolio in 2013 increased as reliable instruments for funding operations and as Land, premises and equipment 142.5 170.3 19.5% by 9.0% to RUB 1,013.8 billion. a source of rouble liquidity. Investment property 148.0 160.7 8.6% Goodwill and other intangible assets 152.8 162.5 6.3% Liabilities Total capital and capital adequacy Deferred income tax asset 42.9 45.5 6.1% Other assets 198.5 266.0 34.0% The Group total liabilities in 2013 increased by During 2013, VTB Group continued to improve its Total assets 7,415.7 8,768.5 18.2% 17.6% to RUB 7,821.4 billion, mainly as a result of capital adequacy ratios. In May 2013, the Group issued new ordinary shares on the Moscow Exchange Source: VTB Group IFRS consolidated financial statements for 2013. Pole Star formula

where: h1 — the Polar Star altitude as seen through theodolite; αε — the adjustment for the observed Pole Star altitude; R — the atmospheric refraction. Accurate environment analysis is essential for steady progress VTB Annual Report 2013 4. Management report

66 67 Total capital and capital adequacy management procedures, a number of collective is adequate for the nature and scale of the Bank’s bodies functioned under VTB Group Management activities and risk profile, but which also corresponds RUB billion 2012 2013 Change Committee, in particular: with the Bank’s future business development needs. Tier 1 capital 624.9 806.6 29.1% Tier 2 capital 293.4 292.0 –0.5% The Risk Management Committee; Developing and improving the Bank risk Less: deductions from total capital (23.0) (5.8) 74.8% management is done in accordance with banking Total capital 895.3 1,092.8 22.1% The Credit Committee; best practices, the Bank of Russia’s regulations Risk-weighted assets 6,203.8 7,430.8 19.8% and recommendations, recognised international Tier 1 capital ratio 10.1% 10.9% 80 b.p. The Assets and Liabilities Committee. standards and the recommendations of the Basel Total capital adequacy ratio 14.4% 14.7% 30 b.p. Committee on Banking Supervision.

Source: VTB Group IFRS consolidated financial statements for 2013. Control over organisation and risk management policies in the Group companies is carried out In terms of organisation, VTB Bank’s risk consistently through the Bank’s representation in management system comprises various collective in the amount of RUB 102.5 billion. Along with Analysing and managing VTB’s risks on a VTB subsidiaries Supervisory Councils and Boards bodies (the Management Board, the Assets and generating a significant amount of profit during the consolidated basis, covering all subsidiary banks and of Directors, and through the coordination of their Liabilities Committee, the Credit Committee, the year, this deal enabled VTB Group to strengthen its key financial companies of the Group; internal control and audit units. Small Credit Committee, the Moscow Branch Credit capital base. Committee, the Credit and Small Credit Committees Distributing risks within VTB Group; minimising In the reporting period, the Group further developed of the North-West Regional Centre, and the branches’ As at 31 December 2013, the capital adequacy ratio exposure and potential losses from risk effects in its risk management procedures and methods, Credit Committees) and the Bank’s structural units. and Tier 1 capital adequacy ratio amounted to 14.7% the national and international markets; including: and 10.9%, respectively, compared to 14.4% and The division that is responsible for developing the 10.1% in 2012. Developing a risk management culture within the A Risk-Adjusted Return on Capital (RAROC) simulation risk management system and controlling the credit, Group companies, including improving employees was carried out during the process of integrating the market and operational risks within VTB Group and skills to identify and prevent possible risks and “economic capital” model (ECap and Capital-at-Risk) VTB Bank is the VTB Bank Risk Department. As at the 4.5. Risk management losses in areas within their responsibility; into financial planning and forecasting; end of 2013, it comprised the following structural units: VTB Group-level risk management Introducing modern methods of assessing and A gap-analysis was conducted across the main banks monitoring risks based on the best industry of the Group in line with the international Basel II a) Operating units for risks and/or credit procedure The key risks VTB Group is exposed to are credit risk, standards. standards; the Group continued implementing the functions: liquidity risk and market risks. Basel II standards in certain VTB Group companies; VTB Group risk management system has a multi- Credit Risk Division; О Risk management at the Group level includes layered structure, which includes levels of centralised The methodology of calculating main risk indicators risk evaluation and monitoring, control over the (consolidated) and local risk management, and is and assessing risk management procedures was Market Risk Division; size, structure and distribution of the risks, and the based on the Group’s global business lines. harmonised across the Group; identification of efficient methods to optimise and Operational Risk Division; minimise the risks, and compiling regular risk reports on The standard organisational structure of the The Group improved its structure and processes for the risks. Group banks and financial companies includes an preparing risk consolidated reporting; Credit Applications Examining Service. independent division of risk assessment and control, The main risk management principles that have been which corresponds to the appropriate risk profile Stress testing methodology was developed for the b) The Strategy, Methodology and Consolidated adopted by VTB Group are: and scale of business, and a high-ranking manager Group’s credit and trading portfolios with the most Risk Analysis Division, which is responsible for responsible for comprehensive risk management. significant risks. consolidated risk management at the Group level, Complying with regulatory requirements of the implementation of the Basel II standards and general countries where the Group operates; transparency of In order to coordinate risk management policies VTB Bank-level risk management Group-wide standards. risk associated activities for shareholders, investors and practices across the Group, and to implement and other interested parties; and improve the analysis of consolidated risk The VTB Bank risk management policy is aimed at creating an integrated risk management system that VTB Annual Report 2013 4. Management report

68 69 Credit risk Regular review of the Group credit risk policy, resolve potential problems and bad debt at VTB Group loan portfolio quality harmonising and streamlining credit risk the Group level. Credit risk is the risk of financial loss (loss of management policies of the companies of the Group; Provision for loan impairment revenue or additional expenses) should a borrower/ VTB Bank-level credit risk management counterparty/issuer fail to meet its contractual Unifying credit procedures and methods of credit risk 6.1% 5.5% obligations. assessment (credit rating systems — for corporate VTB Bank manages credit risk by: customers and financial institutions, scoring systems VTB Group and VTB Bank are exposed to credit risk — for retail customers); Restricting credit risk through the Bank’s existing +12%

through their loan portfolios, securities portfolios, system of limits with regard to decisions on the 361 guarantees and letters of credit, derivatives portfolios Establishing consolidated limits and other concentration of credit risk for individual borrowers; 323 and other credit-related contractual commitments. restrictions within the Group (including limits on regular reviews of credit limits by the VTB Risk counterparties/groups of related counterparties, Management Department, which are approved by VTB Group-level credit risk management large transactions, countries, industry sectors); the Credit Committee and comply with the Bank of Russia’s regulations; 2012 2013 The key approaches and procedures in operations Assessing the “economic capital” sufficient to cover 13 Allowance for loan impairment/Total gross loans with corporate and financial institutions, which are the Group’s credit risks; Covering credit risk by taking collateral and insurance, Allowance for loan impairment, RUB billion exposed to credit risks, are defined by the Basic charging adequate fees for the risk, and establishing Principles and Provisions of VTB Group Credit Policy Stress-testing; reserves to compensate for potential losses on loans; Non-performing loans for 2013–2014, approved by the Group Management Committee. Preparing consolidated reports on the Group’s credit Assessing the level of credit risk the Bank assumes 5.4% risks. for individual borrowers, as well as regularly 4.7% The management of credit risk within the Group monitoring the credit portfolio, individual customers, is based on the combination of the following Consolidated risk management covers the most transactions and collateral (including ranking approaches: essential assets and off-balance sheet operations of borrowers); +9% the Group companies that bear credit risk and require 313 Local credit risk management at the Group company control over their concentration within VTB Group as a Preventing credit risk at the loan application review 288 level; whole. Within the context of consolidated control and stage, and taking prompt measures as soon as credit reporting, the scope and range of such operations is risk factors have been identified during the course of Consolidated credit risk management at the VTB defined by the coordinating bodies of the Group. monitoring. Group level. 2012 2013

VTB Group has a separate policy to regulate the The Group continued to undertake measures to 14 NPL ratio Within the framework of the local credit risk Group credit risk management relating to lending improve the credit risk management system in 2013: NPLs, RUB billion management system, the Group companies operations with individual borrowers and small assume and manage credit risks independently business clients. VTB subsidiary banks that perform Introduced a new approach to determining the (including insurance and hedging risks), within the above mentioned operations are guided by a set calculated credit exposure limit assumed for medium- Coverage ratio the scope of their authority and limits with regard of documents approved by the Group Management sized business customers; to risk indicators, and in accordance with national Committee which establish the standards and +310 bps regulations and the standards of VTB Group. The approaches for managing retail lending risks at the Developed a ranking methodology for investment Group companies are responsible for the results of level of each subsidiary bank and at the Group level. projects (project financing); 115.5% their lending activity, for the quality of their loan 112.4% portfolios, and for monitoring and controlling the Various specialised units of VTB Bank, which are not Developed a new approach to setting limits for credit risks associated with their portfolios. part of the Risk Department (including the Corporate independent credit risk-taking by VTB branches Business Support Directorate and the Non-Core Bad and its regional offices; 2012 2013 The key elements of consolidated credit risk Assets Department) work to identify, monitor and

management are as follows: 13 The ratio is calculated to total gross loans including financial assets classified as loans and advances to customers pledged under repurchase agreements. 14 Non-performing loans (NPLs) represent impaired loans with repayments overdue by over 90 days. NPLs are calculated including the entire principal and interest payments. The ratio is calculated to total gross loans including financial assets classified as loans and advances to customers pledged under repurchase agreements. VTB Annual Report 2013 4. Management report

70 71 Expanded the general procedure for setting limits VTB manages the Group’s liquidity by centrally Long-term liquidity forecasts and risk analysis across Despite the fact that a considerable portion of for independent credit risk-taking on VTB branches controlling and managing the key measures taken by VTB Group and within VTB Bank are carried out by the customer liabilities are short-term deposits and outside the Russian Federation; the Group; Market Risk Division, which presents the results in a “on-demand” accounts, the diversification of these consolidated report to the Bank Assets and Liabilities liabilities and VTB’s past experience indicate that Granted the credit committees of VTB subsidiaries The Group medium-term and long-term financing Committee, the Group Management Committee and these liabilities are consistently refinanced by the right to set credit limits for customers (groups of programme is developed and implemented under the Assets and Liabilities Commission operating customers, and they are, for the most part, a stable related customers) within the independent authority VTB Bank’s supervision. under the Group Finance Committee. source of funding. The stable element of short- of taking credit risks; term customer liabilities is determined for various VTB Bank-level liquidity risk management Each forecast includes receivables and payments currencies using a statistical trend analysis of the Improved the accounting limits procedures on according to the contractual terms for operations, cumulative balances of these accounts over time. operations with derivative financial instruments, The Bank has current and forecasted liquidity risk while also taking into account the following: taking into account new types of transactions and the management in place. Money market instruments (interbank loans and financial instruments used in VTB Bank; planned transactions; deposits, repurchase agreements) are used to control Managing current liquidity entails short-term short-term liquidity, and are not considered as a Extended the credit limits system, which regulates forecasting and control of fund flows in terms of possible extension of clients funds (deposits and source of funding for long-term assets. credit risks assumed for corporate clients, to financial currencies and timings. In this way, the Bank ensures promissory notes); institutions; that it meets its obligations, completes settlements Market risk on behalf of its customers and funds active possible outflows of unstable “on-demand” capital Enlarged the powers of the Credit Transactions operations. (clients current accounts and Loro accounts). The market risk is the risk of downward pressure on Monitoring Committee to allow it to suspend the financial results of the Group’s operations in disbursements of loans for up to one month if credit The current liquidity management is carried out by In addition, the Risk Division conducts stress- response to the overvaluation of both balance sheet risk factors are identified; the Treasury Finance Department based on real-time testing to assess risk factors liable to influence the and off-balance sheet assets and liabilities and (intraday) determination of the current payment Bank’s liquidity forecast and the Bank’s additional derivative financial instruments due to unfavourable The Management Committee of VTB Group approved position of the Bank and forecasted future payment opportunities to raise finance. changes in the market parameters, such as interest the Standards for credit transactions monitoring; position, taking into account the payments schedule rates (interest rate risk), exchange rates (currency these are the unifying principles that are applied to and other scenarios. Liquidity gaps are closed by new borrowing and risk) and the prices of securities (price risk). monitor transactions with credit risk, identify credit renewing existing deposits. The Group’s medium- risk factors and determine the status of transactions. The task in forecasted liquidity management is to term liquidity is managed by attracting interbank Interest rate risk develop and implement a number of instruments for loans and customer deposits, repo transactions, Liquidity risk managing assets and liabilities, aimed at supporting as well as the Bank of Russia’s secured loans. Interest rate risk management is based on internal the Bank’s instant funding capability, and to plan regulations adopted by the Group Management VTB Group-level liquidity risk management increases in its asset portfolio by optimising the ratio VTB also has a number of additional opportunities Committee and includes: of liquid assets and profitability. to raise finance to cover medium-term negative VTB liquidity management policy was applied in 2013 liquidity gaps, such as Eurobonds and bonds traded Setting standard interest rates for deposits and within VTB Bank and across the Group as a whole, The Bank achieves this by making long-term liquidity on Russian stock exchanges. The currency structure internal rates for funding, taking into account current based on internal regulations approved by the Group forecasts and by adhering to internal liquidity of liquidity is managed by conducting “conversion market conditions; Management Committee. standards (standards for liquid and highly-liquid swap” transactions. assets and the liquidity standard for the Treasury Calculating interest rate risk (CaR, EaR); Liquidity management within the Group is carried out securities portfolio), as formulated by the Assets A significant proportion of VTB Group’s liabilities is at three basic levels: and Liabilities Management Committee. The liquidity represented by customer deposits, promissory notes, Setting capital limits for covering the interest rate risk accounting standards of the Bank of Russia are bonds, the current accounts of corporate and retail for VTB Group and individual banks. Each bank/company of the Group manages its own also applied when carrying out forecasted liquidity customers, Federal Treasury deposits, Eurobonds and liquidity on a separate basis in order to meet its management. syndicated loans. The basic parameters used to assess the interest rate obligations and to comply with the requirements risk are: of the national regulator and the recommendations of VTB Bank; VTB Annual Report 2013 4. Management report

72 73 The sensitivity of the Group interest position to a Price risk Price risk and VaR analysis change in interest rates, measured in terms of (1) the size of the reduction in the net present value of The general principles for managing price risk at RUB billion F i n a n c i a l a s s e t s Financial assets at fair value the interest position and (2) the net interest income VTB Group are as follows: available-for-sale through profit or loss under an unfavourable parallel movement of the yield curves by 100 basis points; Restricting the size of the price risk that is taken on 2012 2013 2012 2013 by setting limits across instruments, portfolios and Debt securities 0.9 1.4 3.3 3.9 The economic capital for covering the interest rate types of transactions; Equity securities 0.2 – 2.8 1.4 risk, which is measured by assessing reductions in VaR 0.8 1.4 4.4 4.5 the current value of the Bank interest rate position Controlling the adherence to the established Source: VTB Group IFRS consolidated financial statements. in the event of potentially unfavourable interest rate limits and restrictions for taking on the price risk movements. (a minimum discount size on “reverse repo” operations and margin call conditions); Currency risk the proxy instrument should be the same type of VTB Bank operational risk management system is Organising on-going monitoring, analysis and financial instrument as the original instrument designed to prevent potential losses and to reduce The Group uses internal regulations adopted by reporting of price risk. (bonds/ Eurobonds); the possibility of business process failures and the the Group Management Committee to manage its inability to provide high-quality services to the Bank’s currency risk. It also ensures that the currency of its A the VaR risk assessment is carried out using the the issuer of the proxy instrument should be from the clients caused by staff errors, system breakdowns, assets match that of its liabilities and maintains an parameters described above for the currency risk. same sector and country as the original instrument, internal or external fraud or violations of the law. open currency position (OCP) in each of the Group’s Historical data was used for instruments with a quote and the issuers should have comparable credit banks within established limits, including internal history of at least 100 trading days in the previous ratings; In managing operational risk, the Bank adheres OCP and VaR (Value-at-Risk) limits and regulatory year, no more than ten successive trading days to the Bank of Russia’s regulations, as well as OCP limits. without quotes, and the issue date no later than the proxy instrument and the original instrument the recommendations of the Basel Committee on the beginning of the reporting year. The vast majority should be denominated in the same currency; Banking Supervision. To implement its operational A VaR risk assessment is carried out, which estimates of such instruments in the Group’s portfolio had risk strategy, VTB carried out regular procedures the largest potential negative effect (within a a history of 200 trading days in the reporting year. the proxy instrument and the original instrument to identify, assess, control and limit operational specified confidence interval) of changes in the value should have comparable durations. risk. All significant deficiencies from a risk of foreign exchange positions on the Group financial For instruments not satisfying these criteria (but perspective, identified within the internal control performance. The VaR assessment is conducted via nevertheless circulating in the market and carrying Proxy instruments were used for approximately system, are subjected to rigorous analysis. Based historical modelling over a period of two years with the market risk), the historical prices used were those one quarter of the securities in the portfolio in on the analysis, measures are developed and a ten trading day time horizon and a confidence of equivalent (proxy) instruments, expertly selected the VaR calculation (the Group implemented VaR implemented to eliminate the causes and sources interval of 99%. using the following criteria: assessments in 2010). of the risk. To monitor the operational risk, the Bank has implemented unified mechanisms to collect Operational risk information on incidents of the operational risk and those related to the operating losses, as well Operational risk is the risk of loss resulting from as key risk and control indicators. This enables a flaws in the type and scale of the Group’s operations quantitative assessment of operational risk to be Currency risk and VaR analysis or inconsistency between internal processes and carried out. This includes identifying sources of the legislative requirements for banking operations, risk, implementing risk prevention measures and RUB billion 2012 2013 their violation by VTB staff or other persons (due reflecting these in management reporting in the Open currency position 54.5 136.6 to unintentional or intentional acts or omissions), context of individual risk categories and the Bank’s VaR15 1.5 6.6 lack of functionality of IT and other systems or their activities. breakdown, as well as damaging external events. Source: VTB Group IFRS consolidated financial statements. The key methods for reducing and limiting the operational risk are:

15 VaR is calculated by taking into account all currencies, with exposure over RUB 100 million. VTB Annual Report 2013 4. Management report

74 75 Maintaining a complex system of current and follow- The above risk limitation strategies are supported by Key priorities in 2014 Implementing, developing and widely applying the up internal control that is common to all business insurance programmes diversified by the type and modern methods of quantitative risk assessment, units and operations throughout the Bank; scope of operations. These insurance programmes In 2014, the Group plans to further develop its risk classifying ways of building and validating the include the Financial Institution Blanket Bond management system, including compliance with models and methods used, including rating Regulating all key operations using the internal scheme (including electronic and computer crime), the new regulatory requirements and international borrowers and determining the probability of default; standards and codes of practice; insurance of funds and valuables while in storage standards, by implementing the following measures: and during transit, insurance of the card business, Carrying out further work on automating the key Registering and documenting banking operations and including the insurance of cash machines and the Developing and adopting the target risk management processes and analytical risk management tasks, transactions and maintaining consistent control over cash in them, as well as cover against bank card model, which includes the key parameters of including developing specialised software for primary documents and operating accounts; fraud. VTB Bank also insures against risks relating to international best practices; operational risk control. business activities (including buildings, equipment Applying the principles of dividing and limiting and vehicles), as well as risks of loss of property Developing VTB risk and capital management strategy employees functions, authority and responsibilitie; received as collateral for credit transactions. and its subsequent review by the Supervisory implementing dual controls; collective decision- Council; making; setting limits on the terms and scale of Operational risk, being subject to constant operations; monitoring by the Bank, did not have any material Continuing the phased implementation of the Group impact on VTB’s operating results in 2013. risk appetit models, which are in line with the best Automating banking operations using high- practice, and ensuring their effective incorporation performance IT systems that are constantly Programme for implementing Basel II standards into the system, along with processes of establishing monitored, and repaired promptly in case of aggregated limits and other restrictions on the risk breakdown; VTB Bank and VTB Group have been working which the Group takes on; systematically to incorporate the Basel II Good systems of physical and information security practices. This takes into account the relevant Further improving the “economic capital” calculation and control over access to the Bank’s facilities and its recommendations and requirements of the Bank methodology and expanding its scope in accordance IT resources; of Russia, as well as the degree to which the Basel with the best practice; standards have been integrated into the Russian A well-managed HR policy, good staff training and banking legislation. education; VTB Group persistently develops internal banking Prevention measures to ensure continuity of methods stipulated by the Basel II standards. These financial and economic activity related to banking methods are designed to assess internal capital operations and transactions by setting up alternative adequacy by introducing the “economic capital” communications channels, geographically distributed concept, based on the Basel II practices. In 2013, server rooms, independent sources of power, heat the Group started implementing the active phase of and water supply, and by taking fire protection the project. During the first stage, a correspondence measures. analysis of VTB Bank and VTB24 was conducted based on internal ratings, including an assessment In order to eliminate violations of the normal activity of the potential impact of the Basel II standards for by the Bank in a timely manner, VTB introduced capital calculation. At the same time, the Group is a system notifying authorised employees and IT working through issues around implementing the managers about incidents, which may disrupt the Basel II standards in its other banks, taking into banking systems. In 2013, there were no significant account the national regulatory requirements in the failures registered in the Bank’s financial and countries where they operate16. economic activities.

16 VTB Group Western European banks have been operating in accordance with the Basel II standards since 1 January 2008 (in accordance with the requirements of national regulators, taking into account the implementation of the Basel II standards in the banking legislation of European countries). The formula for calculating the strength of centrally stretched steel member

where: N — the highest tensile force applied to the element;

Аn — the net cross-sectional area;

Ry — the estimated resistance of steel, taken by the yield strength;

γc — the working condition ratio;

γn — the criticality ratio. Internal structure refinement is a guarantee of system sustainability VTB Annual Report 2013 5. Corporate governance

78 79 bodies are responsible for the Bank’s day-to-day of its financial position, economic performance and 5. Corporate governance management and carry out the tasks entrusted ownership structure, thereby giving shareholders and to them by the shareholders and the Supervisory investors the opportunity to make properly informed Council. decisions. Information is disclosed in compliance with the Russian legislation and the requirements VTB Bank has built an effective system of corporate of the UK financial regulator, the Federal Conduct governance and internal control of its financial and Authority (FCA). VTB Bank also has its own Regulation 5.1. Overview of the corporate equally, and gives them the opportunity to participate economic affairs as a means of safeguarding the on Information Policy, which establishes rules for the governance system in the management of the Bank via the General rights and lawful interests of its shareholders. The protection of confidential and insider information. Shareholders Meeting and to exercise their right to Supervisory Council oversees the Audit Committee receive dividends and information about the Bank’s which, in conjunction with the Internal Control VTB Bank corporate governance system is founded operations. Department, supports the management function 5.2. Development of the corporate on the principle of unconditional compliance with in ensuring the smooth running of the Bank’s governance system in 2013 the requirements imposed by Russian legislation The General Shareholders Meeting is the VTB Bank operations. The Statutory Audit Commission and the Bank of Russia. It also takes into account highest governing body. The Bank Supervisory monitors the Bank’s compliance with the relevant international best practice, including the generally Council, elected by the shareholders and accountable laws and regulations and the legality of its business During the reporting period, the Bank continued to recognised principles of corporate governance to them, provides strategic management and transactions. develop its corporate governance system in line with developed by the Organisation for Economic Co- oversight of the work of the executive bodies, namely best practice. operation and Development (OECD). VTB Bank the President and Chairman of the Management VTB contracts an external auditor, who has no guarantees that all its shareholders are treated Board and the Management Board. The executive connection to the Bank’s or its shareholders’ In 2013, the main activities in this area included: proprietary interests, to inspect and verify the Bank financial reports. Approval by the Supervisory Council of the results of the corporate governance system assessment, which VTB Bank corporate governance structure The Staff and Remuneration Committee under the was conducted using methodology recommended by Supervisory Council drafts recommendations on key the Bank of Russia; appointments and incentives for members of the elects Supervisory Council and the Bank executive and Election of independent directors to the Supervisory Independent Statutory Audit approves General Meeting of Shareholders control bodies. Board Audit Committee and Strategy and Corporate Auditor Commission reports Governance Committee; The Strategy and Corporate Governance Committee under the Supervisory Council considers and Election of members of the Shareholders Consultative elects reports recommends on strategic development issues and Council to the Supervisory Council, the Committees Strategy and on improving VTB corporate governance, as well of the Supervisory Council for Strategy and Corporate Corporate elects elects as on streamlining the management of the Bank’s Governance and the Committee for Staff and prepares Governance Staff and own stock. In May 2013, the Strategy and Corporate Remuneration; recommendations prepares Committee Supervisory Council Remuneration and reports recommendations Governance Committee considered the results of the and reports Committee assessment of VTB corporate governance system, Approval of a new edition of the VTB Bank Charter, Audit which was held by the members of the Supervisory which includes an improved information disclosure Committee Council in compliance with the Bank of Russia’s procedure in accordance with corporate governance appoints appoints reports appoints recommendations. The Committee also approved best practice; reports reports a plan of action to develop the Bank corporate governance system. Approval by the Bank of a number of key internal President and Chairman documents: the framework for the consolidated prepares Corporate Internal Control of the Management Board recommendations Secretary VTB Bank operates a policy of full and timely management of VTB Group compliance control Department and reports and the Management Board disclosure of reliable information, including details function, a protocol for the cooperation of the VTB Annual Report 2013 5. Corporate governance

80 81 compliance function across VTB Group companies, In December 2013, VTB Bank Supervisory Council The shareholders held discussions and voted 15. Termination of JSC VTB Bank membership in the and a new edition of VTB Group Code of Ethics. approved the new edition of its Code of Ethics, which on 16 matters, including: Professional Association of Registrars, Transfer contains a number of provisions on measures taken Agents and Depositaries (PARTAD); The measures taken by the Bank helped it to maintain by the Bank to counter corruption, to settle conflicts 1. Approval of VTB Bank Annual Report; a high rating of “7+” in the National Corporate of interest, and to prevent the misuse of insider 16. Approval of interested party transactions to be Governance Score (NCGS), which corresponds the information and market manipulation. The Code of 2. Approval of VTB Bank annual financial statements entered into by JSC VTB Bank in the course of its level of “Developed Corporate Governance Practice”. Ethics is published on VTB Bank website. under Russian accounting standards; ordinary business. The corporate governance rating for VTB Bank was based on the results of the annual independent 3. Approval of JSC VTB Bank profit allocation One of the most important decisions made at review of the Russian Institute of Directors (RID). 5.3. The General Shareholders for the year 2012; the AGM was electing Elena Popova, a minority VTB is currently the only Russian bank that has been Meeting of JSC VTB Bank shareholder and member of the Shareholders assigned the national corporate governance rating. 4. Approval of amount, terms and form of the 2012 Consultative Council, to the Supervisory Council. The dividend payment; Executive Director of the State Oil Fund of Azerbaijan Following the Bank’s additional share issue in May The Annual General Shareholders Meeting (AGM) is (SOFAZ), Shahmar Movsumov, was also elected to the 2013, the Russian Federation share in VTB Bank VTB Bank highest governing body. Any shareholder 5. Approval of remuneration payment to the Supervisory Council. SOFAZ is a large shareholder of authorized capital decreased from 75.5% to 60.9%. can exercise their right to directly participate in the Supervisory Council members who are not state the Bank having participated in its SPO. According to experts from the RID, the government Bank management by voting on the AGM agenda. The employees in compliance with JSC VTB Bank by-laws; reducing its stake in the Bank has had a positive Supervisory Council decides when to convene an AGM. In addition, new members of the Shareholders impact on VTB corporate governance practices in According to the applicable Russian law, the AGM must 6. Approval of the number of JSC VTB Bank Consultative Council were elected at the AGM. terms of protecting the rights of all shareholders to be held no earlier than the 1 March and no later than Supervisory Council members; A Consultation zone where shareholders could participate in managing the Bank. the 30 June. receive necessary information on the Bank and its 7. Election of JSC VTB Bank Supervisory Council subsidiaries from experts was set up. In 2013, the Bank continued to actively develop In accordance with the applicable Russian law and members; its compliance control function across the Group the Bank Charter, information about the location and The AGM approved the distribution of profits for 2012 in line with international best practices and the date of the Annual General Shareholders Meeting, 8. Approval of the number of JSC VTB Bank Statutory in the following order: requirements of supervisory and regulatory bodies. as well as the cut-off date for the list of shareholders Audit Commission members; VTB has therefore approved a number of internal eligible to participate in the meeting, is published Net profit to be distributed: RUB 18,095,755,130.14; documents, including the framework for the in Rossiyskaya Gazeta and is available on VTB Bank 9. Election of JSC VTB Bank Statutory Audit consolidated management of VTB Group compliance official website. Commission members; Dividend payment allocations: control function and a protocol for coordinating the RUB 14,958,574,112.39; compliance function across VTB Group companies. In 2013, the meeting was held on 28 June at the 10. Approval of JSC VTB Bank Auditor; Oktyabrsky Grand Concert Hall in St Petersburg and Retained net profit: RUB 3,137,181,017.75. The Annual General Meeting of Shareholders to was led by Sergey Dubinin, the Chairman of VTB Bank 11. Approval of the new edition of JSC VTB Bank review the 2012 results was held in June 2013. Supervisory Council. Charter; The shareholders decided to pay dividends in the The AGM approved the new composition of the amount of RUB 0.00143 per registered ordinary share Supervisory Council, which included Elena Popova, More than 300 shareholders and shareholder 12. Approval of the new edition of the Regulation of JSC VTB Bank with a par value of RUB 0.01, having a representative of the VTB Shareholder Consultative representatives participated in the meeting. on the Procedure for Preparing, Convening and increased dividend payments by 62.5% compared to Council and Professor of Management Theory and The meeting was also broadcast live via the Bank’s Holding JSC VTB Bank General Shareholders the previous year. Business Technology at Plekhanov Russian University official website for those shareholders unable to Meetings; of Economics. RID experts consider the current attend the meeting in person. More than 1000 users As of 31 December 2013, the amount of dividends composition of the Supervisory Board of the Bank watched the meeting online. A live broadcast was 13. Approval of new edition of the Regulation on paid reached RUB 14,956,541,819.36, and the share to be balanced and sensitive to the interests of all also shown at the Shareholder Liaison Centre in the Supervisory Council; of dividends paid of the total amount set aside for investors and shareholders. Ekaterinburg. dividends was 99.986%. The main shareholder, 14. Approval of new edition of the Regulation on the Russian Federation represented by the Federal the Management Board; VTB Annual Report 2013 5. Corporate governance

82 83 Agency for State Property Management, received best practice and ensures that all shareholders the Bank’s website at http://www.vtb.ru/group/ Chairman of the Supervisory Council organises RUB 11,293,392,682.42 in dividend payments. interests are represented at the Board level. The documents. the Council’s work, convenes and chairs its composition of the Supervisory Council is reviewed meetings, and also presides over the Bank General The results of the AGM are published in Rossiyskaya annually to ensure that it accords with the Bank’s Liability insurance the Supervisory Board Shareholders Meetings. In the absence of Chairman Gazeta. The voting results and the details on the current objectives, and that it is able to meet them members of the Supervisory Council, his or her duties are decisions made can be found on the Bank’s official effectively. assumed by one of the Supervisory Council members, website: www.vtb.ru. Responsibility is insured under the Directors Liability as decided by the Supervisory Council. The appointment of independent directors is Insurance Programme (Directors and Officers Liability, Besides the AGM, shareholders can hold an important component of VTB Bank corporate D&O). In accordance with the D&O, compensable Sergey Dubinin has been the Chairman of VTB Bank Extraordinary General Meetings. No EGMs took place governance. The role of independent directors is to losses (including legal expenses), incurred due to Supervisory Council since June 2011 in accordance in 2013. strengthen shareholders and investors trust towards unintentional wrongful acts, negligence or omission with the decision of the Supervisory Council. the Bank through their participation in the decision- of the members of the Supervisory Council during the making process, together with the Supervisory financial operations of the Bank, shall be reimbursed Composition of the Supervisory Council 5.4. The Supervisory Council Council. Together they analyse a number of matters, in relation to the claims, filed during the insurance of JSC VTB Bank including strategy and its implementation, the period by investors, shareholders or government On 28 June 2013, AGM elected four new members Bank performance and its competitive position bodies. The ground for a claim could be personal to the Supervisory Council: Yves-Thibault de Silguy and the extent to which objectives and tasks have responsibility of the Bank’s Supervisory Council (independent member), Shahmar Movsumov The scope of responsibilities of the Supervisory been achieved. They also assess mechanisms and members for mistakes made during the decision- (independent member), Alexey Moiseev and Elena Council systems of internal control and risk management, making process, a shortfall in financial control and Popova. settle corporate conflicts and improve the level of risk management, which led to losses, a fall in the The Supervisory Council is one of the most important transparency. share price and asset value, or damages caused to In 2013, new members of the Supervisory Council elements of VTB Bank corporate governance system. third parties. were provided with an Induction Pack, which Acting on the basis of Russian legislation, the Bank According to the Bank Code of Corporate Conduct, included, amongst other things, off-site meetings, Charter and the Supervisory Council Regulation, it the Supervisory Council should include at least two In 2013, the Supervisory Council reviewed and information about members duties, as well as the provides general oversight of the Bank’s operations independent directors who have expertise in the approved the extension of the directors liability Bank and the Supervisory Council activities. and formulates its long-term strategy. financial sector. The independent members of the insurance contract for the new term. The Procurement Supervisory Council must not have any relationship Commission and the Staff and Remuneration Leonid Kazinets, Leonid Melamed, Alexey Savatyugin Members of the Supervisory Council are elected at with the Bank that would prevent them from fairly Committee approved the feasibility of the extension and Alexey Uvarov left the Supervisory Council in June the General Shareholders Meeting and hold their and impartially making decisions with regard to of this contract. 2013 after a new Supervisory Council was elected at positions until the next annual meeting. The right to the strategy and current activity of VTB Bank. VTB the AGM. nominate candidates to the Supervisory Council is Bank observes the recommendations of the Federal Chairman of the Supervisory Council open to shareholders holding in aggregate no less Financial Markets Service Code of Corporate Conduct, Sergey Dubinin than two percent of the Bank voting shares. The as well as other internationally recognised standards, Chairman of the Supervisory Council is elected by Chairman of the Supervisory Council of VTB Bank election of members to the Supervisory Council takes to determine the criteria for independence. members of the Supervisory Council by a majority since 16 June 2011 place at the General Shareholders Meeting by means vote. The Bank Supervisory Council has the right to of a cumulative ballot. In accordance with the decision taken at the AGM on re-elect its Chairman at any time by a majority vote. Member of the Supervisory Board of JSC ALROSA, 28 June 2013, the remit of the Supervisory Council member of the Board of Directors of CJSC VTB Capital, The Supervisory Council coming into effect at the has been aligned with the new edition of the Bank Chairman of the Supervisory Council is not permitted Otkritie Financial Corporation, JSC VTB Capital IB Holding end of 2013 was elected at the AGM on 28 June Charter and extended to comply with the application to combine this role with the position of President Ltd., CJSC VTB Capital Holding; member of the Committee 2013. As of 31 December 2013, the Supervisory for listing the Bank’s shares and/or its equity and Chairman of the Management Board. Moreover, for Investment Strategy under the Supervisory Council of Council consisted of 11 members, ten of whom securities, which are convertible into shares. Chairman of the Supervisory Council cannot be a the Russian Corporation of Nanotechnologies; member were Non-Executive Directors and four of whom member of the VTB Management Board nor have any of the Advisory Council on Monetary Policy, Banking were Independent Directors. The combination of The main functions of the Supervisory Council type of employment relationship with the Bank. Regulation and Supervision under the Chairman of the Executive and Non-Executive Directors, including are defined in the Regulation on JSC VTB Bank Bank of Russia. Independent Directors, is in line with international Supervisory Council, which can be viewed on VTB Annual Report 2013 5. Corporate governance

84 85 Previous positions: as an extramural postgraduate of Moscow State Matthias Warnig VINCI Group; Chairman of the Supervisory Council 2005–2008 — Member of the Board of Directors, University. Higher Doctorate in Economics. Member of the Supervisory Council of VTB Bank since of Sofisport (France); member of the Supervisory Chief Financial Officer of RAO UES, 4 April 2007 Council of VTB Bank (France); member of the Board of 2004–2005 — Member of the RAO UES Board of Holds shares equivalent to 0.00164% of the authorised Directors of LVMH (France) and SOLVAY (Belgium). Directors, capital of the Bank as of 31 December 2013. 2006 to date — Managing Director of Nord-Stream 2001–2004 — Deputy Chairman of the RAO UES AG (Switzerland). Chairman of the Board of Directors Previous positions: Board of Directors, David Bonderman of JSC Transneft and United Company RUSAL plc; 2008–2011 — Member of the Board of Directors of 1998–2001 — Deputy Chairman of OJSC Gazprom Independent member of the Supervisory Council Board member of JSC Bank Rossiya and JSC Rosneft SMEG (Societe monegasque d’eau et d’électricité), Management Board, of VTB Bank since 3 June 2011 Oil Company; President of the Board of GAZPROM 2006–2010 — President of the Administrative Council 1995–1998 — Chairman of the Bank of Russia, Schweiz AG and Gas Project Development Central of the VINCI Group, 1995–1995 — Member of OJSC Gazprom Founding Partner and President of Texas Pacific Asia AG; member of the Supervisory Board of 2007–2008 — Member of the Supervisory Council of Management Board, Group Investment Fund (TPG); member of the Boards Verbundnetz Gas AG. JSC VTB Bank, 1994–1995 — First Deputy Chairman of the of CoStar Group Inc. and General Motors Company; 2005–2012 — Member of the Council for Foreign Management Board of Imperial Commercial Bank, member of Board of Directors of the following non- Previous positions: Affairs, French Foreign Ministry, 1994–1994 — Acting Minister of Finance of the profit organisations: The Wilderness Society, The 2005–2006 — Chairman of the Board of Directors of 2002–2010 — Member of the Economic Council, Russian Federation, Grand Canyon Trust and The American Himalayan CJSC Dresdner Bank, French Defence Ministry, 1993–1994 — First Deputy Minister of Finance of the Foundation; Chairman of the Board of Directors of 2004–2005 — Chairman of the Management 2002–2010 — Member of the Board of Directors of Russian Federation, Ryanair Holdings plc. Committee of Dresdner Kleinwort for Russia SUEZ-Tractebel, 1992–1993 — Deputy Chairman of the Russian State and the CIS, 1995–1999 — Member of the European Commission, Committee for Economic Cooperation with the CIS Previous positions: 2002–2005 — President of CJSC Dresdner Bank, responsible for economic, monetary and financial countries, 1992 to date — Founder of Texas Pacific Group 2000–2002 — Chief Coordinator of Dresdner Bank affairs, 1991–1992 — Economics Expert in the Executive Investment Fund, Group in Russia, 1993–1995 — Secretary-General of the Office of the USSR President, 1983–1992 — Chief Operating Officer of the Robert 1999–2000 — Managing Director of the BNP- Interdepartmental Committee for Questions of 1981–1991 — Associate Professor of Foreign M. Bass Group, Inc. (now Keystone, Inc.), Dresdner Bank branch in St. Petersburg, later Economic Cooperation in Europe. Adviser for Economies and Foreign Economic Relations of the Prior to 1983 — Partner in the law firm, Arnold & renamed Dresdner Bank, European affairs assisting in the preparation of Department of Economics, Lomonosov Moscow State Porter, Washington, D.C., where he specialised 1997–1999 — Deputy Manager of the Moscow summits of industrialized nations in the Cabinet of University, in corporate, securities, bankruptcy and antitrust branch of BNP-Dresdner Bank, Eduard Balladur, 1977–1981 — Assistant Professor of Foreign litigation, From 1990 — Management Board Advisor, Head of 1988–1993 — Director of International Affairs of Economies and Foreign Economic Relations of the 1969–1970 — Fellow in Foreign and Comparative the Trade Finance Division of Dresdner Bank, Usinor Sacilor Group, Department of Economics, Lomonosov Moscow State Law, studied Islamic Law at the American University 1981–1990 — Officer at Cabinet of Ministers of the 1986–1988 — Adviser for international economic University, in Cairo in conjunction with Harvard University, German Democratic Republic and Ministry of Foreign affairs in the Cabinet of Jacques Chirac, 1976–1977 — Teaching Assistant of Foreign 1968–1969 — Special Assistant to the U.S. Attorney Trade. 1985–1986 — Counsellor for Economic Affairs, Economies and Foreign Economic Relations of the General in the Civil Rights Division, French Embassy in Washington, Department of Economics, Lomonosov Moscow State 1967–1968 — Assistant Professor at Tulane Born in 1955. Graduated in 1981 from the Higher 1981–1984 — Advisor, then Deputy Head of the University, University School of Law in New Orleans. School of Economics (Berlin), majoring in Economics. Cabinet, then Vice President of the Commission for 1975–1976 — Junior Research Associate at Economic and Monetary Affairs, Commission of the Lomonosov Moscow State University, Born in 1942. Graduated in 1963 from the University Holds no shares in the Bank as of 31 December 2013. European Communities, 1974–1975 — Secretary of the Komsomol Committee of Washington and from Harvard Law School in 1966. 1976–1981 — Authorised representative of the in the Department of Economics, Lomonosov Moscow Yves-Thibault de Silguy Department for Economic Cooperation at the Ministry State University. Holds no shares in the Bank as of 31 December 2013. Independent member of the Supervisory Council of of Foreign Affairs of France. VTB Bank since 28 June 2013 Born in 1950 in Moscow. Graduated in 1973 from Born in 1948. Graduated in 1981 from University of Lomonosov Moscow State University, and in 1976 President of YTSeuropaconsultants (France); Vice- Rennes II — Upper Brittany, from University of Paris Chairman, member of the Board of Directors and I, Pantheon-Sorbonne and from the Paris Institute President of the Administrative Council of the of Political Studies (Sciences Po) in 1972 and from VTB Annual Report 2013 5. Corporate governance

86 87 the École Nationale d’Administration in 1976 (ENA), Andrey Kostin (now St. Petersburg State University). Doctor of Law 2012 to date — member of the Advisory Council “Guernica” promotion. Member of the Supervisory Council and Professor. under the Chairman of the Bank of Russia; Advisor to of VTB Bank since 2002 the President and Chairman of the Board of Directors Holds no shares in the Bank as of 31 December 2013. Holds no shares in the Bank as of 31 December 2013. of JSC Rosneft Oil Company; member of the Board of 2002 to date — President and Chairman of the Directors of the AVTOTOR Group of Companies. Leonid Kazinets VTB Management Board. Chairman of Supervisory Leonid Melamed Independent member of the Supervisory Council Councils of CJSC Bank VTB 24 and PJSC VTB Bank Independent member of the Supervisory Council Previous positions: of VTB Bank until 28 June 2013 (Ukraine); Chairman of the Board of OJSC Bank of of VTB Bank until 28 June 2013 2003–2011 — Deputy Chairman of the Bank of Moscow; Deputy Chairman of the Board of Directors Russia, since 2007 — First Deputy Chairman of the 2009 to date — Chairman of the Board of Directors of JSC Rosneft Oil Company; Board member of CJSC 2011 to date — Chairman of the Board of Directors of Bank of Russia, of CJSC Barkli; Board member of OJSC All-Russian VTB Capital, CJSC VTB Capital Holding, VTB Capital JSC Team Drive. Member of the Board of Directors of 1997–2003 — Deputy Chairman of the Management Exhibition Center (GAO VVC); Chairman of the Expert IB Holding Ltd.; member of the Council of the OJSC Rusnanomedinvest and OJSC NovaMedika since Board of OJSC Sberbank of Russia, Council for pricing in the construction sector under Association of Russian Banks; and President of the 2012. Advisor to the Chairman of the Board of 1992–1997 — Minister of Labour of the Russian the Government of the Russian Federation; Board Non-commercial Partnership Financial and Banking JSC RUSNANO since 2013. Federation, since 1996 — Minister of Labour and member of the Russian Union of Industrialists and Council of the CIS. Social Development of the Russian Federation, Entrepreneurs (RSPP), Co-Chairman of the RSPP Previous positions: simultaneously between 1993–1995 — member of Committee on the development of self-regulation; Previous positions: 2011–2012 — Deputy Chairman of the Board of the State Duma of the RF Federal Assembly, Head of the working group of the Agency for Strategic 1996–2002 — Chairman of Vnesheconombank, Directors, Chairman of the Nomination, Remuneration 1991–1992 — Vice President, member of the Initiatives which implements the initiative “To 1995–1996 — First Deputy Chairman of the and Corporate Governance Committee of Management Board of the International Fund of simplify the procedure of obtaining approval for Management Board of the National Reserve Bank. JSFC Sistema, Economic and Social Reforms, construction” within the framework of the National 2010–2012 — Chairman of the Board of Directors of 1991 — Deputy Chairman of the State Council on the Entrepreneurial Initiative to improve the investment Born in 1956. Graduated with Honours in 1979 from OJSC RussNeft Oil Company, Economic Reform under the Cabinet of Ministers of climate in Russia; project coordinator of the anti- the Economics Department of Lomonosov Moscow 2008–2011 — President, Chairman of the the USSR, corruption training for business representatives State University. PhD in Economics. Management Board, member of the Board of 1989–1991 — Deputy Head, Head of the Joint and their professional unions, which exists within Directors of JSFC Sistema, Department for the Economic Reform of the State the framework of the International Anti-Corruption Holds shares equivalent to 0.00183% of the Bank’s 2006–2008 — President, Chairman of the Economic Reform Committee of the USSR Council of Academy; Deputy Chairman of the Community Board authorised capital as of 31 December 2013. Management Board, member of the Board of Ministers, at the Ministry of Regional Development; member of Directors of OJSC Mobile TeleSystems, 1986–1989 — Assistant to Deputy Chairman of the the Council, chaired by the Prime Minister, on issues Nikolay Kropachev 2004–2006 — Head of the Expert Council on USSR Council of Ministers, related to housing construction and facilitating the Independent member of the Supervisory Council insurance legislation in the State Duma Committee on 1977–1986 — Leading Economist, Head of Labour, development of housing and public utilities. of VTB Bank since 26 June 2008 Credit Institutions and Financial Markets, Salary and Living Standards Department under the 1991–2006 — OJSC ROSNO Insurance Company, State Committee for Labour and Social Matters of the Previous positions: 2008 to date — Rector of St. Petersburg State since 2003 — Chairman of the Management Board. USSR Council of Ministers; Assistant to Committee 2008 — President of CJSC Barkli; University. Head of St. Petersburg and Leningrad Chairman, Deputy Head of Labour Organisation, 1993–2008 — General Director of CJSC Barkli Region Bar Association and Presidium member of the Born in 1967. Graduated from Sechenov Moscow Standardising and Efficiency Unit under the State construction company. Association of Lawyers of Russia. Medical Academy in 1992. Doctor of Medicine. Committee for Labour and Social Matters of the USSR Council of Ministers, Born in 1966. Graduated in 1989 from Moscow State Previous positions: Holds no shares in the Bank as of 31 December 2013. Born in 1947. Graduated from Lomonosov Moscow University of Geodesy and Cartography (MIIGAiK), 2006–2008 — First Vice Principal of St. Petersburg State University in 1974 and the Economics and in 2010 from the Moscow State University of Civil State University, Gennadiy Melikyan Department of Lomonosov Moscow State University Engineering. Obtained an MBA degree from INSEAD 2000–2005 — President of the Statutory Court Member of the Supervisory Council of VTB Bank since in 1977. PhD in Economics. Business School (Paris) in 2009. Holds a Ph.D in of St. Petersburg. 8 June 2012 Economics. Holds no shares in the Bank as of 31 December 2013. Born in 1959. Graduated in 1981 from the Legal Holds no shares in the Bank as of 31 December 2013. Department of Leningrad State University VTB Annual Report 2013 5. Corporate governance

88 89 Shahmar Movsumov 1995–1996 — Leading Economist of the Central Bank Alexey Savatyugin Alexey Ulyukaev Independent member of the Supervisory Council of of Russia. Member of the Supervisory Council of VTB Bank until Member of the Supervisory Council VTB Bank since 28 June 2013 28 June 2013 of VTB Bank since 2004 Born in 1973. Graduated in 1995 from Ordzhonikidze 2006 to date — Executive Director of the State Oil State University of Management and the University of 2010–2013 — Deputy Finance Minister of the Russian Deputy Chairman of the Supervisory Council of JSC Fund of Azerbaijan and Chairman of the National Rochester in 1998. Federation; Member of the Board of Directors of the Sberbank, Chairman of the Supervisory Council of the Committee on the Extractive Industries Transparency State Corporation, Deposit Insurance Agency. Russian Direct Investment Fund (RDIF). Initiative. Holds no shares in the Bank as of 31 December 2013. Previous positions: Minister of Economic Development of the Russian Previous positions: Elena Popova 2004–2009 — Director of the Department of Financial Federation since June 2013. 2005–2006 — General Director of the National Bank Member of the Supervisory Council of VTB Bank since Policy at the Ministry of Finance of the Russian of Azerbaijan, 28 June 2013 Federation, Previous positions: 1995–2005 — Various positions at Central Bank of 1992–2004 — Assistant and senior lecturer in the 2004–2013 — First Deputy Chairman of the Russian the Republic of Azerbaijan including Chief FX Markets Member of the VTB Shareholder Consultative Council Department of Economic Theory and Economic Policy Central Bank, Economist, Head of Group, Head of Section, Deputy since 2009. at St. Petersburg State University. 2000–2004 — First Deputy Minister of Finance of the Head of Department, Head of Department, Chief Russian Federation, Advisor to CEO. 2009 to present — Academic Secretary at Russian Born in 1970. Graduated in 1992 from St. Petersburg 1999–2000 — Deputy Director of the Institute for the Academy of Science’s Council for the Study of State University, majoring in Political Economy. Economy in Transition Foundation, Born in 1972. Graduated from the Moscow State Manufacturing Resources; since 1986 — Professor 1998–1999 — Deputy Director of the Institute for Institute of International Relations in 1995 with a of Management Theory and Business Technology, Holds no shares in the Bank as of 31 December 2013. Problems of the Economy in Transition, degree in Economics and from the John F. Kennedy Plekhanov Russian University of Economics. 1996–1998 — Member of the Moscow City Duma. School of Government at Harvard University in 2004 Alexey Uvarov with an MBA in Public Finance. Previous positions: Member of the Supervisory Council of VTB Bank until Born in 1956. Graduated from the Economics 2002–2012 — Deputy Director, Professor of 28 June 2013 Department of Lomonosov Moscow State University in Holds no shares in the Bank as of 31 December 2013. Innovation Management and Investment Business 1979. Holds a PhD in Economics and is a Professor. of State Regulation of the Economy, Head of General From November 2012 — Director of the Department of Alexey Moiseev Theoretical and Language Training at the State Industry and Infrastructure under the Government of Holds no shares in the Bank as of 31 December 2013. Member of the Supervisory Council of VTB Bank since Academy of Professional Development and Training the Russian Federation. 28 June 2013 for Senior Management and Investment Specialists, Meetings of the Supervisory Council 2003–2009 — Professor of the Department of Previous positions: 2012 to date — Russian Deputy Finance Minister. Economic Theory at the Institute of Economics of the 2008–2012 — Director of Department of the Ministry Meetings of the Bank Supervisory Council are Member of the Supervisory Council of Sberbank of Russian Academy of Sciences. of Economic Development of the Russian Federation, convened at the initiative of its Chairman, or at the Russia since 2013. 2004–2008 — Head of Division of the Federal request of a member of the Supervisory Council, the Born in 1958. Graduated in 1981 from Moscow Property Management Agency, Audit Commission, the auditor, the Management Previous positions: State Management University (Ordzhonikidze State 2002–2004 — Deputy Head of Division, the Ministry Board, or the President and Chairman of the 2010–2012 — Deputy Head of Analytics Department, University of Management), from the Russian Interior of Property Relations of the Russian Federation, Management Board. A quorum for meetings of the Head of Macroeconomic Analysis Division at CJSC VTB Ministry Law Higher School in 1999 and from the 2000–2002 — Head of Department of the Ministry of Bank Supervisory Council is formed by the attendance Capital, Russian Institute of Professional Accountants and Property Relations of the Russian Federation. of half of the elected members of the Supervisory 2001–2010 — Senior Economist, Deputy Head of Auditors in 2007. Received a PhD in Economics Council. Decisions at Supervisory Council meetings Analytics Department at Renaissance Capital — in 2003 and became a Professor of the Regional Born in 1975. Graduated from the Academy of the are made by a majority vote of the participating Financial Adviser LLC, Economy in 2004. Federal Tax Police Service of the Russian Federation, members, unless otherwise provided in the Charter 1998–2001 — Economist and Senior Analyst Russian Academy of State Service. and the Supervisory Council Regulation. For decision- in Sovereign Instruments Market, Fixed Income Holds shares equivalent to 0.000048% of the Bank’s making purposes, each member of the Council has Instruments Market Department of BNP Paribas, authorised capital as of 31 December 2013. Holds no shares in the Bank as of 31 December 2013. one vote at Supervisory Council meetings. London, UK, VTB Annual Report 2013 5. Corporate governance

90 91 Meetings of the Supervisory Council are held on Review of the implementation of the Basel III banking Assessment of the corporate governance Distribution of powers among managing bodies; a scheduled basis, however there may be non- supervision standards; system scheduled meetings, by means of postal ballots. Work of the Supervisory Council; Review of the report on the Bank’s sponsorship and In 2013, the Supervisory Council carried out an The work schedule for the Supervisory Council charity activities, as well as approval of the plans assessment of the Bank corporate governance Approval of the Bank development strategy and is compiled for the period between the Annual for sponsorship and charity activities in the next system. The methodology for this assessment was control over its implementation; General Meetings of Shareholders. Meetings of the calendar year; based on the provisions of Russian legislation Supervisory Council are scheduled in advance, based on joint stock companies, the Bank of Russia’s Coordination of the Bank risk management; on the Bank’s business cycle. Review of the reports on the activities of the recommendations (Letter of the Central Bank of the Supervisory Council Committees; Russian Federation from 7 February 2007 No. 11-T Prevention of conflicts of interest between In accordance with the work schedule for the Bank’s “About the list of issues regarding the assessment shareholders, members of the Supervisory Council, Supervisory Council, the mandatory number of Review of inspectors quarterly reports on the Bank’s of the state of corporate governance by credit the executive bodies of the Bank and its employees; meetings and postal ballots was set at an average professional activity in the securities market and institutions”), as well as on the Corporate Code of of six times a quarter. Members of the Supervisory specialised depositary, as well as on preventing the Conduct recommended by the Federal Commission on Cooperation with affiliates; Council receive the agenda and supplementary misuse of insider information and market manipulation; the Securities Market from 4 April 2002 No. 421/p. materials for the meeting no later than 15 days prior Establishment of rules and procedures to ensure to the meeting. The Supervisory Council meetings Review of activity reports and approval of the plans of During this process, the Bank Supervisory Council compliance with the principles of professional ethics; may be held by postal ballot. the Bank Internal Control Department; members completed a survey as part of the Council’s self-assessment of its work. Coordination of the Bank’s disclosure; In 2013, the Supervisory Council held nine meetings Review of reports on the state and efficiency of risk and ten postal ballots. During the reporting period, management; The corporate governance system was assessed monitoring of the internal control system. the Supervisory Council reviewed 201 different issues along the following lines: in total. Approval of the agenda for the AGM;

During 2013, the Supervisory Council made a number Approval of interested party transactions; 2012 2013 of decisions on priority areas of the Bank’s activities, Number of meetings in presentia 9 9 which included increasing the Bank’s share capital Election of the Deputy President and Chairman of the by issuing additional common shares; reviewing Management Board; Number of meetings conducted by postal ballots 14 10 a progress report on VTB Group Development Strategy for 2010–2013; issuing the Bank’s Election of the Chairman of the Supervisory Council Number of meetings / postal ballots attended by each Members of the Supervisory Council bonds; acquiring/disposing of shares in the and members of the Supervisory Council; member of the Supervisory Council Bank’s subsidiaries; increasing charter capital and Sergey Dubinin 19 out of 19 reorganising the Bank subsidiaries. Approval by the Supervisory Council of directorship David Bonderman 18 out of 19 positions for President and Chairman of the Matthias Warnig 19 out of 19 In addition, the Supervisory Council considered Management Board and members of the Yves-Thibault de Silguy 10 out of 10 the following matters in 2013: Management Board of VTB Bank within other Leonid Kazinets (left office on 28.06.2013) 9 out of 9 organisations; Leonid Melamed (left office on 28.06.2013) 9 out of 9 Review of the report on interaction with the Bank’s Gennadiy Melikyan 19 out of 19 shareholders and approval of plans for investor Approval of new editions of the Bank Code of Ethics Shahmar Movsumov (elected on 28.06.2013) 10 out of 10 relations and shareholder engagement over the next and Regulation on the Bank’s procurement of goods, Alexey Moiseev (elected on 28.06.2013) 10 out of 10 Andrey Kostin 19 out of 19 calendar year; works and services. Nikolay Kropachev 18 out of 19 Elena Popova (elected on 28.06.2013) 10 out of 10 Approval of amendments to the Bank Charter and Details on work of the Supervisory Council can be Alexey Savatyugin (left office on 28.06.2013) 8 out of 9 Regulation of the Staff and Remuneration Committee; found at: http://www.vtb.ru/ir/governance/council/ Alexey Uvarov (left office on 28.06.2013) 9 out of 9 activity/. Alexey Ulyukaev 9 out of 19 VTB Annual Report 2013 5. Corporate governance

92 Number of meetings / postal ballots attended by 93 Issues considered by the Supervisory In 2013, the number of meetings by absentee voting Members of the Audit Committee Council in 2013 decreased in comparison to 2012, and members of the member of the Audit Committee the Supervisory Council improved their attendance Yves-Thibault de Silguy (since 28.06.2013) 6 out of 6 at meetings. Approximately 50% of the issues Matthias Warnig 12 out of 12 addressed were related to the primary activities of Gennadiy Melikyan 12 out of 12 the Bank and VTB Group. This was mainly due to the Alexey Savatyugin (until 28.06.2013) 3 out of 6 Supervisory Board active position on summarising Alexey Ulyukaev (until 28.06.2013) 6 out of 6 VTB Group 2010–2013 strategy and developing the new 2014–2016 strategy. improvement. The Audit Committee is headed by an During the Committee meetings, the following topics Detailed information on the Supervisory Council independent member of the Supervisory Council. were reviewed: internal activities can be found on VTB Bank’s website: http://www.vtb.ru/ir/governance/council/ As of 31 December 2013, the Audit Committee Strategic development and risk management of activity/. comprised the following members: the Bank and VTB Group, including VTB individual business segments; Committees of the Supervisory Council Yves-Thibault de Silguy, Committee Chairman, independent member of the Supervisory Council of Plan and activity report of the Bank Internal Control The Supervisory Council has standing committees, VTB Bank; Department, including information on significant Defining the priority areas of VTB activities (43.3%) which support the effective implementation of the violations, errors and shortcomings that had been Approval of transactions (20.9%) Council’s managerial and supervisory functions Matthias Warnig, member of the Supervisory Council detected at VTB Bank and its subsidiaries and on Corporate governance and procedural matters (14.4%) and provide preliminary detailed analysis and of VTB Bank; measures taken to address those violations; Review of reports, business planning (11.4%) recommendations regarding the issues that the Personnel-related matters (7%) Council deems most important. As at the end of Gennadiy Melikyan, member of the Supervisory Results of the tender for an external auditor; Debt write-off (3%) 2013, these were: Council of VTB Bank; Reports by VTB Group independent auditor on the Audit Committee Alexei Savatyugin, Committee Member, member of Bank Annual Report, as well as on the results of the Following the assessment of the corporate Staff and Remuneration Committee the Supervisory Council of VTB Bank; audit of VTB Group consolidated IFRS reporting; governance, members of the Supervisory Board Strategy and Corporate Governance Committee view the level of development of the corporate Aleksey Ulyukaev, Committee Member, member of Regular consolidated financial reporting in governance system as relatively high. The main The Supervisory Council committees are not the Supervisory Council of VTB Bank. compliance with the International Financial Reporting elements of corporate governance received an governing bodies of the Bank, and cannot act in the Standards (IFRS). average of 3.8 points (95% of the maximum score). name of the Supervisory Council. During the reporting period, a total of three meetings Most components of the corporate governance and nine postal votes were organised by the Audit Staff and Remuneration Committee system received higher scores than they did in 2012, Audit Committee Committee in which matters covering all priority areas except for the “distribution of powers among the of the Bank’s activity were considered. Considerable The Staff and Remuneration Committee’s role is to management bodies”, which scored the same level of The Audit Committee performs an analysis and focus was placed on improving internal control assist the Supervisory Council in appointing and points (3.8). support function to ensure that the Bank internal procedures within the Bank and VTB Group, on the remunerating members of the Bank’s governing control system works adequately and effectively. financial and operational activities with the Bank and bodies and the Statutory Audit Commission. Assessment of internal activities The Committee’s exclusive remit includes VTB Group and on developing the risk management appraising candidates for the VTB Bank external system. The Committee’s work was based on the The Committee comprises members of the An assessment of the Supervisory Council internal audit team, reviewing the audit report, assessing approved action plan, in accordance with the Supervisory Council who have relevant expertise and activities was conducted as part of the overall the effectiveness of the Bank’s internal control established roles of the Committee, as well as with experience in this area. The Staff and Remuneration assessment of the corporate governance system. procedures and drafting proposals for their global best practice regarding the work of audit Committee is chaired by an independent member of The score for the Supervisory Council performance committees. the Supervisory Council. increased from 3.6 in 2012 to 3.8 in 2013. VTB Annual Report 2013 5. Corporate governance

94 95 Members of the Staff Number of meetings / postal ballots attended by Corporate Secretary 5.5. The Management Board and Remuneration Committee the member of the Staff and Remuneration Committee of JSC VTB Bank Nikolai Kropachev 6 out of 6 VTB Bank Corporate Secretary ensures that the rules Leonid Kazinets (until 28.06.2013) 3 out of 3 and procedures of corporate governance, which Leonid Melamed (until 28.06.2013) 3 out of 3 guarantee the rights and interests of shareholders The Management Board is the collective executive body Gennadiy Melikyan (since 28.06.2013) 3 out of 3 of the Bank and cooperation between the Bank and of VTB Bank, which, together with the President and Elena Popova (since 28.06.2013) 3 out of 3 its shareholders, are followed by the Bank and its Chairman, oversee the Bank’s day-to-day operations. The employees. Management Board reports to the General Shareholders Meeting and the Supervisory Council. As at 31 December 2013, the Staff and Remuneration Sergey Dubinin, Committee Chairman, Chairman of The Corporate Secretary of VTB Bank is elected by, Committee comprised the following members: the Supervisory Council; and reports on a functional basis to, the Supervisory The Management Board acts on the basis of Russian Council. In relation to administrative procedures, the legislation, the Charter of VTB Bank and the Nikolai Kropachev, Committee Chairman, David Bonderman, independent member Corporate Secretary also reports to the President and independent member of the Supervisory Council; of the Supervisory Council; Chairman of the Management Board of VTB Bank. Regulation of the Management Board of VTB Bank, which has been approved by the General Shareholders Gennadiy Melikyan, member of the Supervisory Council; Andrey Kostin, President and Chairman of the The Strategy and Corporate Committee of the Meeting. Management Board, member of the Supervisory Supervisory Council reviews the candidates for Elena Popova, member of the Supervisory Council. Council; Corporate Secretary and provides recommendations The Supervisory Council is responsible for determining to the members of the Supervisory Council. the size and composition of the Management Board and In 2013, a total of two meetings and four postal Shahmar Movsumov, independent member electing its members as well as the early termination of votes were organised by the Staff and Remuneration of the Supervisory Council; On 28 September 2011, the Supervisory Council their powers. Members of the Management Board are Committee, in which matters concerning the elected Evgeniy Ignatyev as the Council Corporate appointed by the Supervisory Council at the proposition composition and remuneration of the members of Alexey Moiseev, member of the Supervisory Council; Secretary based on recommendations provided by of the President and Chairman, and cannot serve longer the Management Board were considered, along with the Strategy and Corporate Governance Committee than five years. other issues. The Committee’s activities were based Elena Popova, member of the Supervisory Council. and the Staff and Remuneration Committee. on the approved plan of work in accordance with The Management Board is in charge of the day-to-day the main functions assigned to it. During the reporting year, the Committee held 13 Evgeniy Ignatyev is one of the Board’s founders and operations of VTB Bank, with the exception of matters meetings, including six in-person meetings and members, and is a member of the Russian public which fall within the exclusive remit of the General Strategy and Corporate Governance Committee seven postal votes, during which a range of matters organization, “National Association of Corporate Shareholders Meeting and the Supervisory Council, were considered, including the results of the Group Secretaries”. He has also been a registered member and it implements decisions handed down by these The Strategy and Corporate Governance Committee development strategy for 2010–2013, the integration of the Corporate Secretaries Business Club of the bodies. More detailed information on the powers of the assists the Supervisory Council with the Bank strategy of TransCreditBank into VTB Group and the new edition Russian Institute of Directors since 2005. and corporate governance. The Committee’s main of the Bank Code of Ethics. Other issues that were tasks are to determine the short-, medium- and long- discussed included the results of the assessment of Number of meetings / postal ballots attended term strategic objectives and priorities of the Bank the corporate governance system, conducted by the Members of the Strategy and Corporate by the member of the Strategy and to monitor the Bank’s progress on achieving members of the Supervisory Council in accordance Governance Committee and Corporate Governance Committee them; to support and improve VTB corporate with the Bank of Russia’s recommendations and the governance system; and to improve activities relating results of the independent review of the corporate Sergey Dubinin 13 out of 13 to the strategic management of the Bank’s stock. governance system; the distribution of income David Bonderman 13 out of 13 according to the 2012 financial results, and the issue Leonid Kazinets (until 28.06.2013) 7 out of 7 As of 31 December 2013, the Strategy and Corporate of the Bank’s participation in its subsidiary companies. Andrey Kostin 13 out of 13 Governance Committee comprised the following Shahmar Movsumov (since 28.06.2013) 6 out of 6 members: More information on the Supervisory Council and its Elena Popova (since 28.06.2013) 6 out of 6 Committees can be obtained on the VTB Bank website Alexey Savatyugin (until 28.06.2013) 4 out of 7 at: http://www.vtb.ru/ir/governance/council/. Alexey Uvarov (until 28.06.2013) 6 out of 7 Alexey Ulyukaev 6 out of 13 VTB Annual Report 2013 5. Corporate governance

96 97 Management Board is provided in the Regulations of the 1994–1996 — Dealer, Senior Dealer at the Currency from the Financial Academy under the Government of Mr. Oseevskiy joined VTB Bank in 2012. Until August Management Board of VTB Bank, which is available on Trading Department at JSC INCOMBANK. the Russian Federation. 2012, he served as Advisor to the President and the Bank’s website. Chairman of the Management Board. He is a member Born in 1970. Graduated from Plekhanov Russian Holds shares equivalent to 0.00112% of the Bank’s of VTB24 Supervisory Council. Composition of the Management Board Academy of Economics in 1994 and London Business authorised capital. School with an MBA degree in 2002. He previously held the following positions: Andrey Kostin Herbert Moos 2011–2012 — Deputy Minister of Economic President and Chairman of the Management Board, Holds shares equivalent to 0.00341% of the Bank’s Deputy President and Chairman Development of Russia, member of the Supervisory Council authorised capital. of the Management Board 2010–2012 — Vice Governor of Saint Petersburg and Head of Saint Petersburg City Administration, (For a detailed biography see the Supervisory Council Vasily Titov Mr. Moos joined VTB Bank in 2009 and was 2006–2010 — Vice Governor of Saint Petersburg, section on p. 86) First Deputy President and Chairman appointed Deputy President and Chairman 2001–2003 — First Deputy Chairman of the of the Management Board of the Management Board in November 2009. Management Board of JSC Industrial and Construction Yuri Soloviev Bank, First Deputy President and Chairman Mr. Titov joined VTB Bank in 2002 and and was He is also Chairman of the Board of Directors of 1999–2001 — Deputy Chairman of the Management of the Management Board appointed First Deputy President and Chairman VTB Capital plc; member of the Board of Directors Board of JSC Industrial and Construction Bank, of the Management Board in August 2009. of JSC VTB-Leasing, VTB Factoring Ltd, VTB Capital 1993–1999 — Deputy Managing Director and later Mr. Soloviev joined VTB in April 2008. Since May IB Holding Ltd, CJSC Holding VTB Capital, CJSC VTB Managing Director of the Saint Petersburg Currency 2011, he has been First Deputy President and He is also Chairman of the Supervisory Council of VTB Capital, OJSC Hals-Development, OJSC Bank of Exchange (SPCEX). Chairman of the Management Board. Bank (Austria) AG and JSC VTB Bank (Georgia) and Moscow and VTB Debt Centre Ltd.; member of the OJSC VTB Bank (Azerbaijan); Chairman of the Board Supervisory Council of CJSC Bank VTB24, OJSC Leto Awarded the Medal of the Order of Services to the He is also Chairman of the Board of Directors of CJSC of Directors of CJSC VTB Bank (Belarus), CJSC Moscow Bank and PJSC VTB Bank. Fatherland, 2nd class, and the Order of Friendship. VTB Capital, CJSC Holding VTB Capital, VTB Capital IB Dynamo Football Club and JSC Bank of Moscow Holding Ltd., VTB Capital Investment Management (Belgrade); Deputy Chairman of the Supervisory He previously held the following positions: Born in 1960. Graduated in 1983 from the M. I. Ltd., and JSC VTB-Leasing; member of the Supervisory Council of PJSC VTB Bank; member of the Supervisory 2008–2009 — CEO at VTB Capital plc, London, Kalinin Polytechnic Institute in Leningrad. Holds a Council of PJSC VTB Bank; member of the Board of Council of OJSC Evrofinance Mosnarbank, VTB24 2007–2008 — CFO at Lehman Brothers Asia-Pacific, Ph.D. in Economics. Directors of VTB Capital Investment Management (CJSC), OJSC Bank Moscow-Minsk; member of the Hong Kong, Holding AG, VTB Capital Private Equity Holding Board of Directors of OJSC ROSKINO, CJSC National 2002–2007 — Head of Asset and Liability Holds no shares in the Bank. AG, OJSC Bank of Moscow, OJSC United Aircraft Satellite Company. Management and Treasurer at Lehman Brothers Corporation, VTB Capital Russia & CIS Equity Fund Asia-Pacific, Tokyo, Andrey Puchkov Ltd., VTB Capital Russia & CIS Fixed Income Fund He previously held the following positions: 1995–2002 — Debt Management, Capital Deputy President and Chairman Ltd., Airport Alliance (Netherlands) B.V., Tele2 Russia and Transaction Planning, Asset and Liability of the Management Board Holding AB, T2 (Netherlands) B.V. Previous positions: Management, Lehman Brothers Bank, London. 1998–2002 — Deputy Head of the Administrative Mr. Puchkov joined VTB Bank in 2002 and was He previously held the following positions: Department, External and Public Relations Director, Born in 1972. Graduated in 2002 from London appointed Deputy President and Chairman 2008–2011 — Senior Vice President of JSC VTB Bank; Head of the Information and Communications Business School with a Masters Degree in Finance. of the Management Board in December 2008. CEO of CJSC VTB Capital, Division of USSR Vnesheconombank, and member of 2006–2008 — Head of Investment Business, the Board of Directors of Vnesheconombank, Holds shares equivalent to 0.00341% of the Bank’s He is also a member of the Supervisory Council of First Deputy Chairman of the Management Board, 1996–1998 — Deputy Managing Director of the All- authorised capital. PJSC VTB Bank, VTB24 (CJSC), CJSC VTB-Development, Deutsche Bank Russia, Russian Automobile Alliance, and Chairman of the Board of Directors of VTB Debt 2002–2006 — Director, Head of Global Markets in 1996 — Assistant to the First Deputy Prime Minister of Mikhail Oseevskiy Centre Ltd, OJSC Bank of Moscow and OJSC Hals- Russia and the CIS at Deutsche Bank AG, London, the Russian Federation. Deputy President and Chairman Development. 1996–2002 — Analyst, Executive Director at the of the Management Board Emerging Markets Department of Lehman Brothers, Born in 1960. Graduated in 1983 from the A.A. He previously held the following positions: London, Zhdanov Leningrad State University, and in 2002 1999–2002 — Member of the Moscow City Bar, VTB Annual Report 2013 5. Corporate governance

98 99 1996–1997 — Legal consultant in the Central Chairman of the Management Board, Chairman of the Born in 1972. Graduated in 1995 from the Holds no shares in the Bank. Economic Department of the Bank of Russia. Management Board of JSC VTB Bank North-West, International Relations Department of Moscow State 2006–2007 — Deputy Head of the JSC Vneshtorgbank Institute of International Relations (University) of the Valery Lukyanenko Born in 1977. Graduated in 1998 from the Law Branch in Saint Petersburg, MFA of Russia. Member of the Management Board Department of Lomonosov Moscow State University. 2004–2006 — Advisor to the General Manager and Deputy General Manager of the North-West Branch of Holds shares equivalent to 0.000504% of the Bank’s Mr. Lukyanenko joined VTB Bank in 2002 and was Holds shares equivalent to 0.00030% of the Bank’s GUTA-BANK, authorised capital. appointed a member of the Management Board in authorised capital. 1996–2004 — Consultant with the Liquidity December 2008. Management Department, Consultant with the Chaba Zentai Yulia Chupina Transfer Operations Department, Consultant with Member of the Management Board He previously held the following positions: Deputy President and Chairman the Department of Financial Instruments, Senior 2001–2002 — Chairman of the Council of Experts in of the Management Board of VTB Bank Consultant with the Brokerage Department, Chief Mr. Zentai joined VTB Bank in 2011. Since October Project Financing and Forecasting at Lanta Bank, Acquiring and Authorisation Expert, Head of the 2012, he has been a member of the Management 1994–2002 — Deputy Head of the State Programmes Ms Chupina was appointed as Deputy President and Acquiring and Authorisation Department at JSC Board. Division, Head of the Foreign Economic Relations Chairman of the Management Board of VTB Bank Industry and Construction Bank. Division at the Office of the President of the Russian between 2007 and 2009, and from September 2009 He previously held the following positions: Federation, to present. She is also a member of the Board of Born in 1974. Graduated in 1996 from Saint 2011–2012 — Head of the Regional Network 1993–1994 — Chairman of the GagarinStroi Directors of CJSC Holding VTB Capital. Petersburg State University of Economics and Finance Department, Senior Vice President of JSC VTB Bank, Industrial and Investment Centre. with a degree in National Economy. 2007–2011 — worked at Alfa-Bank, first as Head She previously held the following positions: of SME block, later as Head of SME and Regional Born in 1955. Graduated from Novosibirsk 2004–2009 — Vice President, Vice President and Holds no shares in the Bank. Corporate Business, Agricultural Institute. Holds a Ph.D. in Economics Head of the Corporate Development, Senior Vice 2000–2007 — worked at Citibank (Hungary), where and was a Professor of the Economics and Finance President and Head of the Corporate Development, Victoria Vanurina he gradually built up his career working as Director, Department at the Russian Presidential Academy member of the Management Board, Deputy President Member of the Management Board a Member of the Management Committee of the of National Economy and Public Administration, and Chairman of the Management Board of VTB Bank, Corporate Bank, Head of Commercial Banking and a Member of the Doctor Council. 1998–2004 — Junior Consultant, Senior Consultant, Ms. Vanurina joined VTB Bank in October 2009 and top manager of the main bank, Project Manager at the Moscow office of McKinsey has been a member of the Board of Directors since 1998–2000 — worked at ABN AMRO, where gradually Holds shares equivalent to 0.00046% of the Bank’s and Company. October 2012. She is also a member of the Board of had the positions of the Board Chairman at ABN authorised capital. Born in 1970. Graduated from Moscow State Directors of CJSC Holding VTB Capital and CJSC VTB AMRO Equipment Leasing in Hungary and Member of Linguistic University in 1993 and EADA Business Specialized Depository. the Board at ABN AMRO Pension Fund in Hungary, Erkin Norov School in Barcelona in 1997. 1995–1998 — worked at GE Capital (Hungary), where Member of the Management Board She previously held the following positions: had the position of a client manager, while further he Holds shares equivalent to 0.000397% of the Bank’s 2009–2011 — Senior Vice President of JSC VTB Bank; was moved to the headquarters in the United States Mr. Norov joined VTB Bank in 2002 and was a authorised capital. Chief Operating Officer, member of the Management (development of key practices at the top management member of the Management Board from 2002 to Board of CJSC VTB Capital, level). Established a leasing subsidiary in Hungary, 2007, and from September 2009 to present. He is Denis Bortnikov 2008–2009 — Managing Director, Head of the appointed as Deputy Chairman of the Hungarian also a member of the Board of Directors of OJSC Bank Member of the Management Board Business Support Division at CJSC VTB Capital, Leasing Association. of Moscow and Airport Alliance (Netherlands) B.V. 1998–2008 — Head of the Fixed Income Securities Mr. Bortnikov joined VTB in January 2006 and has Transactions Unit, Head of the Forex Transactions Born in 1970. Graduated in 1997 from GE Capital He previously held the following positions: been a Member of the Board since November 2011. and Fixed Income Transactions Unit, Head of the University (USA), and in 2000 from Buckinghamshire 2007–2009 — Senior Vice President, Management Operational Division at Deutsche Bank Ltd, Chilterns University College (Great Britain) with a Board member of JSC NOMOS-BANK, He previously held the following positions: 1994–1998 — Economist, Head of Back Office, degree in research management and afterwards, in 2002–2007 — Vice President, Senior Vice President, 2007–2011 — Deputy Chairman of the Management Head of the Interbank Transactions Unit of the Forex 2005, with an MBA degree. Management Board member of the Bank for Foreign Board and Head of the Department, First Deputy Transactions Division at JSCB Avtobank, Trade of the Russian Federation (JSC Vneshtorgbank), 1992–1994 — Forex Transactions Economist at Rosvooruzhenie. VTB Annual Report 2013 5. Corporate governance

100 101 1999–2002 — Development Director, Development 2010. According to the Regulations, the total amount Management Board. Salaries, including Compliance with the requirements of legislation, and Strategic Planning Director, USSR Bank for of remuneration a Supervisory Council member compensation and incentive payments, are fixed regulations and standards; Foreign Economic Activities, receives over a reporting period is determined by in the contracts of employment of the Management 1999 — Department Head, Calculation of Taxable assessing their participation in Council activities, Board members. Avoidance of involvement of the Bank and its Base and Tax Revenue Planning Department, Russian both as a member of the Supervisory Council and as employees in unlawful activity; Ministry of Taxes and Duties, a member and/or Chairman of a Supervisory Council In 2013, the members of the Management Board 1992–1999 — Deputy Chairman of the Management committee. In accordance with current Russian received remuneration (salaries and bonus) in the Management of banking risks on a consolidated basis. Board for Development of JSC AvtoVAZ servicing — legislation, members of the Supervisory Council who amount of RUB 1,325,135 thousand (compared to Lada Service; Marketing and Trade Director, General are civil servants do not receive any remuneration. RUB 1,325,669 thousand in 2012). The Group internal regulatory documents lay out the Director of the Economy and Finance Department of key requirements for organising the internal control the merged AvtoVaz Corporation. The decision to pay remuneration and compensation and audit systems, the main standards and operating is made by the Annual AGM of VTB Bank. On 28 June 5.7. Internal control and audit principles of VTB Group internal audit function, and Born in 1954. Graduated from Lomonosov Moscow 2013, the AGM approved the following: of VTB Group the allocation of accountabilities and responsibilities. State University in 1976, and the Academy of National The Coordination Commission for Internal Control and Economy under the Government of the Russian a) To pay remuneration to VTB Bank Supervisory Audit was established by the VTB Group Management Federation in 2001. Holds a Ph.D. in Economics. Council members who are not state employees in the VTB Group internal control and audit system is Committee to effectively coordinate internal control following amounts: integral to its corporate governance practice and is and audit of the Group, as well as to facilitate Holds no shares in the Bank. one of the most important factors in ensuring that the practical interaction between experts. For their work in the VTB Bank Supervisory Council — Bank performs effectively. The internal control and President and Chairman of the Management Board of RUB 4,600,000 each; audit departments support the stable development of The main objectives of VTB Bank internal control and VTB Bank the Group and ensure the protection of shareholders audit functions include: For chairmanship of the VTB Bank Supervisory Council and investors interests, which increases the The President and Chairman of the Management — RUB 1,380,000; attractiveness of VTB to investors. Independently assessing the effectiveness of the Board of VTB Bank oversees the Bank’s day-to-day internal control system, the risk management system, operations, and ensures that its targets are met and For chairmanship of a VTB Bank Supervisory Council The internal control and audit functions within VTB accounting reports, business processes and the its strategy is put into effect. The Management Board committee — RUB 920,000 each; Group operate in compliance with international best activities of departments and individual employees; President and Chairman reports to the Bank General practices, the requirements of Russian legislation Shareholders Meeting and Supervisory Council. Andrei For membership of a VTB Bank Supervisory Council and the applicable legislation in the countries where On-going monitoring of key risk areas and Kostin has been the President and Chairman of the Committee — RUB 460,000 each. the Group subsidiaries and affiliates are present. The mechanisms to control risks, with a view to Management Board of VTB Bank since June 2002. arrangements for interaction between the various identifying shortcomings in the internal control b) To provide compensation to Supervisory Council functions, and the order of priority between them, system, emerging risks and trends, and to also create members who are not state employees for expenses provide the necessary level of independence, which mechanisms to prevent these risks; 5.6. Remuneration of the members they incur whilst carrying out their duties, namely: enables the entire system to function effectively. of the Supervisory Council and accommodation, travel expenses including VIP Developing recommendations to improve the lounge services, other duties and fees for travelling VTB internal control system ensures: efficiency of systems, processes, procedures and the Management Board by air and/or train. departmental activities; Efficient transactions and delivery of results; In accordance with a resolution of the General In 2013, the amount paid to the members of the Bank Controlling compliance with legislation, professional Shareholders Meeting, the members of VTB Bank Supervisory Council who are not state employees was Effective management of assets and liabilities, standards of activity and VTB Group internal Supervisory Council may, during their term in office, RUB 51,060,000, compared to RUB 43,094,000 in including the safekeeping of assets; regulations, as well as assisting in development of receive remuneration and compensation for expenses 2012. Other members of the Supervisory Council did necessary regulations that comply fully with current incurred in the course of their duties. not receive any remuneration in 2013. Reliability and timeliness of financial and legislation and global best practices; management information and reporting; VTB Bank Regulations on remuneration and The Supervisory Council is responsible for Organising efficient communications with external compensation for expenses incurred by members determining the level of remuneration and Security of information; regulatory bodies and auditors. of the Supervisory Council have been in force since compensation paid to members of VTB Bank VTB Annual Report 2013 5. Corporate governance

102 103 VTB Bank internal control and audit the Bank’s internal controls, and the legality of Internal Control Department Verifying the compliance of self-regulating institutions transactions carried out by the Bank. with statutory requirements and standards; In accordance with VTB Group Charter, the internal The Internal Control Department (ICD) operates within control system of the Bank comprises the following: The composition of the Statutory Audit Commission, the Bank to provide direct support to its governing Verifying the adequacy and reliability of internal elected at the Bank AGM on 28 June 2013, is as bodies, in order to ensure that VTB Group works control when using computerised information Governance bodies (General Shareholders Meeting, follows: effectively. The ICD monitors internal control systems, systems; Supervisory Council, Management Board, and a conducts targeted and Group-wide inspections, and single-person executive body — the President and Zakhar Sabantsev — Chairman of the Statutory Audit provides impartial recommendations on how banking Establishing uniform approaches to organising Chairman of the Management Board); Commission; Head of the Banking Sector Monitoring, operations and control procedures may be improved. internal control systems in subsidiary organisations, Consolidation and Analytics Unit of the Financial reporting on the state of the internal control Statutory Audit Commission; Policy Department of the Russian Ministry of Finance; The ICD is an independent structural department system and providing recommendations for further that operates under the direct supervision of the improvements. The Chief Accountant of the Bank (and his/her Marina Kostina — Member of the Statutory Audit VTB Bank’s Supervisory Council, which approves deputies); Commission; Deputy Head of the Trade Organisations its plans and monitors their implementation. The Within its terms of reference, the ICD liaises with Unit and of Foreign Property of the Federal Agency for Supervisory Council also reviews reports on the the Bank Audit Committee and external auditors, Branch Managers (and their deputies) and Chief State Property Management; results of ICD audits and its monitoring of internal providing information on the internal control system Accountants (and their deputies) of the Bank control systems, as well as on the implementation of and reporting any insufficiencies identified by the branches; Aleksey Mironov — Member of the Statutory Audit the ICD recommendations and the measures taken department during the period being audited. Commission; Member of the Board of Directors of to address issues that have been identified. The Other operational divisions and managers in charge OJSC Roskhimzashchita Corporation; Supervisory Council also considers matters related to Compliance Control Department of internal control, in accordance with powers granted the resourcing of the ICD, including the appointment by the Bank by-laws. Nikita Tihonov — Member of the Statutory Audit of the Department Head. The Compliance Control Department operates within Commission; Head of Division of the Financial Policy VTB Bank in order to minimize any risks arising from Audit Committee Department of the Ministry of Finance of the Russian The Department organisational structure comprises regulatory and judiciary authorities and risks of loss Federation; a number of units responsible for day-to-day to reputation the Bank may suffer as a result of its Responsibility for the smooth running of the internal monitoring, the coordination of internal control failure to comply with laws and other legal acts, control system lies with VTB Bank Supervisory Maria Turuhina — Member of the Statutory systems across VTB Group and auditing. It also internal regulations, standards of self-regulatory Council. The Audit Committee was set up under the Audit Commission; Head of Financial and Credit includes a Control Group, which supervises the organisations, and normal banking practices aegis of the Supervisory Council to ensure that this Institutions, Oil, Gas, Fuel and Energy, Coal Industry Bank’s activities as a participant in the securities (“compliance risks”). task is carried out effectively. Its objectives also and Natural Resources of the Department for industry market. To increase the effectiveness with which include to analyse the internal control system and to organisations and Foreign Property of the Federal internal control systems are monitored in the Bank’s The Compliance Control Department is responsible for: ensure it runs effectively. The Committee activity is Agency for State Property Management; branches, the ICD structure includes dedicated governed by the Regulations of the Audit Committee internal control teams at branch level. Identifying areas of the Bank’s activities with of VTB Bank Supervisory Council. Olga Filippova — Member of the Statutory Audit increased levels of compliance risk; making a Commission. The Internal Control Department is responsible for: decision on monitoring these compliance risks on a More detailed information about the composition and constant basis or taking other measures to control activity of the Audit Committee can be found in the In 2013, the Bank did not remunerate members of the Monitoring and assessing the effectiveness of the and minimize compliance risks; Supervisory Council section. Statutory Audit Committee. internal control system; Developing and implementing compliance policies Statutory Audit Commission More details on the Bank Statutory Audit Commission Monitoring the operation of the Bank risk and procedures in accordance with the Bank’s can be found on the Bank’s website: http://www.vtb. management system; compliance internal documents; The Statutory Audit Commission, operating within ru/ir/governance/control/revission_commition/. the Bank, verifies the Bank’s compliance with the Verifying the reliability, completeness, objectivity and Assessing new products and services offered by the applicable legislation and other statutory instruments timely preparation of accounting and management Bank for compliance risk, and suggesting ways to that govern its activity, the proper functioning of reports; minimise such risks; VTB Annual Report 2013 5. Corporate governance

104 105 Regulating any conflicts of interest and developing In order to ensure that information is exchanged The tender procedure is subject to Federal Law No. 94 shareholders and investors. The Bank departments internal documents to prevent these from occurring; more effectively between the Group compliance as of 21.07.2005. responsible for maintaining and developing departments, VTB developed and introduced an communications with minority shareholders are Assisting with drafting VTB Bank internal internal information portal on the compliance Tender documents are prepared as part of VTB the Investor Relations Department, responsible for documents, containing the rules of corporate function, which is used by the banks and financial Bank tender process. The Audit Committee of VTB communications with institutional investors, and the conduct, and advising employees on the applicable institutions of the Group and contains documents, Bank Supervisory Committee considers the tender Shareholder Relations Department, responsible for rules of professional ethics; reports and other information of VTB Group documents and the initial price of an audit service communications with individual shareholders. companies on compliance. contract. Supporting the Bank in its cooperation with the In 2013, the following projects became priorities in regulatory authorities, investors, self-regulatory The main requirements for the organisation of the VTB Bank tendering committee carries out an open the Group’s communications with shareholders: organisations, associations and international compliance system, the standards and principles tender process to select an auditor. During the course of partners with regard to compliance; of its operations within the VTB Group, and the the tender process, members of the committee review The Bank’s additional share issue; distribution of powers and areas of responsibilities the proposals they have received. The applications are Fulfilling legal requirements on combatting the are set out in the Group internal documents. The then assessed based on the criteria set out in the tender Annual General Meeting of Shareholders (for more improper use of inside information and market following compliance documents were developed documentation, and the committee selects the supplier details, see “Corporate Governance”); manipulation; and introduced across the Group in 2013: with the best financial and technical terms. Election of new members to VTB Shareholder Reviewing the Bank internal regulations, which The concept of a VTB Group compliance management The auditing firm selected through the tender process Consultative Council; contain anti-corruption measures in accordance with function; is recommended to VTB Bank Supervisory Committee the Bank anti-corruption policy; and is presented to the AGM for approval. Continued training sessions and workshops for A protocol on liaising with companies within the individual shareholders in different regions. Considering reports of violations or potential Group on compliance matters; Based on its inspection of VTB Bank financial and violations, which are brought to the Committee’s commercial operations, the independent auditor Additional share issue attention by employees via the “Violations and Key Performance Indicators (KPIs) for the heads of prepares a report, which is submitted to the Audit Misuse Hotline”; compliance across the subsidiary companies of the Committee for preliminary review. The final audit In April–May 2013, VTB Bank issued 2.5 trillion new Group; report is submitted to the Bank Supervisory Council ordinary shares. The offering price determined by Monitoring changes to the legal base (laws, by-laws, and is also presented to the Annual General Meeting the Bank’s Supervisory Council was RUB 0.041 per the Banks’ internal documents and the standards A series of reports for the VTB Group companies, of Shareholders. share. of self-regulating bodies) falling within the remit of including quarterly compliance updates and an compliance, and informing the relevant departments annual assessment of the compliance system in the Ernst & Young Vneshaudit JSC, a Russian subsidiary 1,245 shareholders used their statutory pre-emptive about these changes. companies of the Group. of one of the world’s leading auditing firms, was rights and participated in the placement, purchasing appointed external auditor to VTB Bank in 2013. 14.048% of the total amount of issued shares worth In 2013, VTB Group defined compliance as a In order to ensure that unified approaches and approximately RUB 14.4 billion. Holders of GDRs functional business line, which is important for methods are used more effectively, VTB Bank offered Ernst & Young Vneshaudit JSC has been external (global depository receipts), using their statutory the effective and stable development of the secondments and opportunities to share experience auditor of VTB Bank since 2003. Besides the payment pre-emptive rights, bought 9.03% of the total Group. VTB Bank Compliance Control Department for representatives of the Group compliance it receives for auditing services, the company has additional issue for RUB 9.3 billion, which accounted coordinates compliance across the companies departments at the Compliance Control Department. no other proprietary interests in VTB Bank, and has for 57.12% of the maximum possible number of of the Group. no relationship of affiliation with the Bank, with shares offered to this category of shareholders. The VTB Bank’s external auditor members of its governing bodies or VTB subsidiaries. Bank shareholders, individuals and legal entities, The Coordination Commission for compliance excluding the Federal Agency for State Property and internal control operates under VTB Group VTB Bank appoints an independent professional Management, acquired 5.01% of the total issue for Management Committee with the aim of combatting firm of auditors to externally audit and verify the 5.8. Investor relations RUB 5.1 billion, or 57.72% of the possible number of money laundering and the financing of terrorism, compliance of its annual financial statements. shares available to this category of shareholders with and considers issues falling within the remit of the One of the key principles of VTB Bank’s operations statutory pre-emptive rights. Group’s compliance. In accordance with the applicable legislation, is its open and effective communications with its the auditor is chosen by means of an open tender. VTB Annual Report 2013 5. Corporate governance

106 107 The remaining 85.95% of the shares were sold on members, one joint meeting and three meetings with for the SCC candidates at VTB Bank Annual General Igor Repin, Deputy Executive Director of the Investor the open market, allowing several large investors, the new members of the SCC. The Council discussed Shareholders meeting in St. Petersburg. Information Protection Association; including sovereign wealth funds, to become the the most fundamental issues, as well as matters about the candidates, the form and instructions for Bank shareholders. Among them are: relating to shareholders’ interests, including: voting were posted on the VTB website and sent to Maksim Sergeev, Engineer of the Zh.I. Alferov the shareholders, together with the ballot papers for Academic University; The Central Bank of Norway; VTB Group financial performance; voting at the AGM. Vasiliy Sidorov, member of the Board of Directors of State Oil Fund of the Republic of Azerbaijan; Results of VTB 2010–2013 development strategy; On 2 July 2013, the process of electing new members OJSC Aeroflot; to the SCC was completed. Over 850 shareholders Qatar Holding LLC, a division of Qatar sovereign fund. New VTB development strategy; participated in the voting. A significant amount of Vadim Soskov, Deputy General Director of CJSC voting forms was received at the AGM on 28 June Kapital Asset Management; It should be noted that during the preparation and Dividend policy; 2013. Both individual shareholders and legal entities implementation of the offer, Russian legislation registered as of 13 May 2013 could participate in Elena Shtykanova, Advisor to the Deputy General underwent some significant changes. This led to Election of new members of the SCC. the voting. The amount of shares they held did not Director of OJSC Norilsk Nickel. the development of new procedures to govern affect their number of votes. Preliminary results were the process, from receiving applications from During the 19th meeting of the SCC, the Council published on the VTB website. Valery Petrov was elected Chairman of the SCC. shareholders to transferring shares to the depositary reviewed the results of the first SCC. A number of accounts. the Council’s initiatives were implemented over a Ten new candidates to the SCC were expected to be In the second half of 2013, the SCC members met four year period, including the share buyback from named according to the voting results; however, three with key managers of VTB Bank to discuss the new Following the additional share placement, the shareholders that participated in the Group IPO candidates received the same number of votes for the Council’s work plans and the format of interaction VTB Bank’s authorised capital amounts to in 2007. The Council processed over 600 requests final, tenth position. As a result, the number of SCC with the Bank top management, as well as the Bank RUB 129,605,413,373.38 and is divided into from shareholders and conducted more than 50 members was expanded to twelve. financial performance, dividend policy and the Group 12,960,541,337,338 ordinary registered shares consultation meetings. The SCC has become an development strategy. A number of suggestions have issued in book-entry form. The par value per important element of VTB Bank corporate governance New members of the SCC are listed below: been made on these issues, including proposals to share is RUB 0.01. The number of shares placed is system. increase dividend payments, develop key business 2,500,000,000,000, including 351,204,477,443 Leonid Volkov, authorised representative of the areas and improve financial results. shares placed with shareholders using their statutory As the four year term of the first SCC expired, a new Chuvash Republic under the President of the Russian pre-emptive rights. Council was elected in 2013. Federation; At the end of 2013, the SCC collected proposals from minority shareholders on a new development strategy As a result of the additional share issue, VTB Bank All the Bank shareholders over the age of 21 had the Sergei Gavrilov, Chairman of the Property Committee for VTB Group. Over 130 different proposals were free float increased from 24.5% to 39.1%, while opportunity to present their candidature. Applications in the State Duma; received, processed, thoroughly studied, systematised the share of the Russian Federation represented by from minority shareholders were accepted from and sent to the Bank management for further review. the Federal Agency for State Property Management 22 April to 31 May 2013. In early June, 30 candidates Stanislav Kleshchev, Managing Director and Chief Many of these ideas were implemented as part of the decreased from 75.5% to 60.93%. were selected out of the applications that were Analyst at VTB24 Investment Department; new Group development strategy. received. An expert jury selected candidates based on Shareholders Consultative Council their skills, experience, areas of activity, education and Evgeniy Korchevoi, Director of the Russian Investor and shareholder enquiries plans for their work on the Council. Association, Rosagromas; The Shareholders Consultative Council (SCC), an The most important area of VTB Bank’s activity is independent advisory body representing the interests Following this, an open vote for the candidates was Svetlana Mironyuk, Editor-in-chief of RIA Novosti to maintain and improve the way it communicates of VTB Group minority shareholders and relaying their launched. The Bank shareholders could vote from (until February 2014); with shareholders and potential investors, which is views to the top management, continued its active 10 June to 2 July 2013 inclusive using whichever considered to be one of the most effective among the work in 2013. method was most convenient for them: remotely via Valery Petrov, Deputy Chairman of the Board of the largest Russian public companies. the VTB website, in person at shareholders centres, Institute for the Development of Financial Markets; Throughout the year, the SCC worked in accordance as well as by sending their vote by e-mail or by post A large number of communication channels allows with the approved plan. In 2013, the SCC held six through Russian Post. Shareholders could also vote Elena Popova, member of the Supervisory Council of shareholders and investors to obtain necessary meetings, including two meetings of the SCC first tier JSC VTB Bank; information in the most convenient way. Enquiries HPS capacity formula

where: H — fall of the river; Q — flow rate; ρ — density of water; g — acceleration of gravity; η — mechanical efficiency of the hydraulic unit. Careful evaluation of the context for optimal use of resources VTB Annual Report 2013 5. Corporate governance

110 111 from shareholders are handled through personal The main objective was to inform shareholders about VTB Bank shareholder structure communication with the Bank representatives the activities of the Group, as well as possible ways and SCC members, as well as through remote of dealing in shares; Before SPO After SPO means of communication: call centre service, e-mail, shareholders support centres and the SCC. Open Day, which offered shareholders individual Shareholders and investors can also communicate consultations in VTB branches and offices. directly via phone. In 2013, regional meetings with individual In 2013, VTB received an average of approximately shareholders had new content. Due to changes in 1,100 enquiries per month through various the shareholder structure, the focus was shifted to communication channels. a more serious and in-depth analysis of VTB Group activities and financial performance, results of its Meetings with individual shareholders and investors 2010–2013 development strategy, dividend policy and interaction with shareholders. Since 2007, VTB Bank has been holding regular meetings with its investors and shareholders, During the reporting period, VTB held 16 Open where they can receive all the information about the Day events in different regions, where individual activities of VTB Group, its financial and operating shareholders were provided with consultations with performance, dividend policy and shares. the Group’s experts on a wide range of questions. Russian Federation represented by the Federal Agency Russian Federation represented by the Federal Agency These events were attended by experts from the VTB for State Property Management (75.5%) for State Property Management (60.9%) The Group paid great attention to personal meetings Bank Shareholders Support Centres, members of GDRs outstanding — BNY International GDRs outstanding — BNY International with institutional investors in 2013. VTB Bank held the Shareholders Consultative Council, as well as by Nominees (15.6%) Nominees (14.5%) 379 meetings with investment funds and participated representatives of the subsidiaries VTB Registrar, Ordinary shares outstanding (8.9%) Ordinary shares outstanding (24.6%) in 16 conferences with investors from the USA, VTB Insurance and VTB 24. Europe and Asia in 2013. A number of meetings were held as part of the Bank’s four roadshows to major In 2013, the Bank expanded its activities to improve Printed publications for individual shareholders In the autumn of 2013, an online version of the global financial centres, including London, New York, the financial literacy of VTB individual shareholders newspaper was launched in addition to the printed Boston, Toronto, Melbourne and Sydney. and potential shareholders. The Bank continued VTB Bank publishes a quarterly newspaper for its version. The online version of the newspaper the effort it began in 2012 to work with students shareholders and investors called “The Controlling is immediately available on the Bank’s website In 2013, the Group management team and Investor of Russia’s leading universities through a model Interest”, which is an important element of following the publication of the print version. Relations team focused on interaction with European programme it developed, which encompasses communications with shareholders. In 2013, the investors, which accounted for 54% of all meetings. a two-year cycle of workshops. newspaper circulation grew to over 17,000 copies, Electronic communication channels These teams also significantly strengthened ties with which were distributed to shareholders at the General investors from Asia and the Middle East during the The first series of workshops was held in November– Shareholders Meetings, at VTB branches and Bank One of the most effective channels of communications additional share placement. December 2013. These events took place in the Peoples’ VTB24 offices. with shareholders and investors is the IR section of Friendship University of Russia (Moscow), the Baikal the VTB website. The website content is not only In 2013, VTB Bank continued holding meetings with State University of Economics and Law (Irkutsk) and “The Controlling Interest” newspaper includes up-to-date, but also provides the most complete individual shareholders in different regions. Nearly the Ural State University of Economics (Ekaterinburg). information on the activities of the Bank and the information about the Group corporate activities. 50 meetings were held with shareholders, including Group, important news and product updates, The number of visitors increased by 22% year-on-year, meetings with the SCC, during the year. The key Workshops were held for senior students of economics, exclusive interviews with top management, expert with peak activity occurring in April–June 2013 (due to formats of these meetings were: along with postgraduate and MBA students. Over opinions and detailed comments from leading the additional share issue and the AGM). 600 undergraduate students, postgraduate and MBA analysts on the stock and currency markets, as well Investor Day held by the VTB management team and students attended workshops during the year. as on other investment instruments. VTB Bank informs shareholders about all relevant representatives of the Group subsidiaries in major VTB plans to further develop this practice by expanding news and the latest developments of the Group cities where the Bank’s shareholders are located. the geographical reach and the number of universities. through its electronic mailing lists. VTB Annual Report 2013 5. Corporate governance

112 113 Geographical spread of meeting participants Administrative management — realising the rights of Yuliya Chupina — Deputy President and Chairman 2012 2013 the parent bank as the main shareholder by allowing of VTB Bank Management Board; its representatives to participate in the management bodies of subsidiary companies; Chaba Zentai — Member of VTB Bank Management Board; Functional management — managing the Group business areas and other functional divisions within Denis Bortnikov — Member of VTB Bank Management the Group as a whole. Functional coordination Board; is a supplementary governance mechanism that guarantees expert elaboration of management Victoria Vanurina — Member of VTB Bank decisions while they are at the development stage. Management Board;

At the Group level, the VTB Group Management Valery Lukyanenko — Member of VTB Bank Committee (VTB GMC) is the main coordination and Management Board; advisory body, which analyses the development strategies of various business areas, the business Erkin Norov — Member of VTB Bank Management plans for the Group and its subsidiaries, examines Board;

Russia (15%) Russia (14%) reports on their implementation, assesses liquidity UK (34%) UK (41%) and risks, oversees the implementation of priority Maksim Kondratenko — Head of the Risk Department, Europe (excluding UK) (27%) Europe (excluding UK) (13%) projects, and approves the standards, approaches Senior Vice President of VTB Bank; USA / Canada (18%) USA / Canada (21%) and principles of the Group’s operations. In 2012, Africa / Middle East / Africa / Middle East / a Presidium was set up within the VTB GMC to resolve Riccardo Orcel — Head of the Client Coverage Asia / South America (6%) Asia / South America (12%) operational issues. Department, Senior Vice-President of VTB Bank;

The VTB Shareholder Newsletter is distributed More information about VTB Bank communication As of 31 December 2013, the VTB Group Management Igor Piun — Head of the Strategy and Corporate to everyone registered on the VTB website or to with its institutional investors and individual Committee consisted of the following members: Development Department, Senior Vice-President shareholders who have registered their email address shareholders can be found in the Investor Relations of VTB Bank; on a VTB24 depositary form. Depositors of JSC section on the website: www.vtb.ru. Andrey Kostin — Chairman of the GMC, President and National Settlement Depository have been receiving Chairman of VTB Bank Management Board, member Mikhail Zadornov — President and Chairman this newsletter since 2013. The subscriber base of VTB Bank Supervisory Council; of VTB24 Management Board; comprises over 40,000 recipients. In 2013, 5.9. VTB Group governance system the newsletter was issued 13 times. Yuri Soloviev — First Deputy Chairman of VTB Bank Alexei Krokhin — Chairman of the Board of VTB Bank VTB Bank governance system is based on the Management Board; (Austria); In 2013, social networks became new channels “strategic holding” model, which means there of communication with shareholders. The SCC is a common single development strategy for Vasily Titov — First Deputy Chairman of VTB Bank Mikhail Kuzovlev — President of the Bank of Moscow; launched its official page on Facebook and opened all companies within the Group, a single brand, Management Board; a Twitter account in August 2013. The SCC Facebook centralised management of financial performance Dmitry Rudenko — President and Chairman of Leto page registered a maximum number of 5,569 views and risk, unified control systems, and a focus on Herbert Moos — Deputy President and Chairman Bank Management Board; in one week. interaction in order to disseminate best practices and of VTB Bank Management Board; create common standards. Alexei Yakovitskiy — CEO of Holding VTB Capital; In 2014, the Group plans to further develop electronic Mikhail Oseevskiy — Deputy President and Chairman channels of communication with shareholders and In accordance with VTB current management model, of VTB Bank Management Board; Ekaterina Petelina — Deputy President and Chairman the investment community. the Group is governed along two key lines: of VTB24 Management Board, Head of VTB24 Retail Andrei Puchkov — Deputy President and Chairman Business Department; of VTB Bank Management Board; VTB Annual Report 2013 6. Corporate social responsibility

114 115 Alexander Yastrib — First Deputy President and corporate governance specialists from across VTB Group Chairman of the Bank of Moscow Management Board; companies coordinate and interact. 6. Corporate social responsibility

Konstantin Vaisman — Chairman of the Management In the reporting period, centralising responsibility Board of PJSC VTB Bank (Ukraine). and integrating management of the key support and control functions continued to be strengthened, GMC meetings and the Presidium are held regularly primarily the management of risks, finance, IT and on the basis of quarterly work plans. In 2013, the operational activities. In particular, a network of VTB Group is one of the largest financial institutions As of 31 December 2013, VTB Group employed GMC and Presidium of VTB held 24 meetings. management committees was set up corresponding in Russia and in many other regional markets. 103,808 people, compared to 80,860 employees to the various functions. Due to the scale of its operations, the Group has a at the end of 2012. In order to discuss VTB Group performance, the significant economic and social impact on the regions Management Committee has set up 12 Coordination The management system that has been introduced by of its presence. VTB is fully aware that achieving a Appraisal Commissions along the Bank’s main business lines the Group enables the Bank to reduce risks, develop high level of operating and financial performance and (corporate and investment business, retail business, a major global mechanism for corporate banking, fulfilling its strategic targets is impossible without VTB has implemented a modern and effective business with financial institutions, internal control closely coordinate the work of every business line in aligning the Bank’s objectives with the expectations system of personnel assessment, which combines and audit, compliance and internal control for the all the regions the Bank operates in, and to increase of all its stakeholders. Therefore, the Group maintains all assessment techniques currently available in prevention of money laundering and the financing of profitability through synergies between business strong relationship with all stakeholders and strives the market. This system selects both external and terrorism, branding and marketing communications, lines and best practices. It also enables the Group to consider their interests in all aspects of the internal candidates, determines employees’ training personnel, property management, IT, security to cut costs by sharing infrastructure and resources Bank’s operations, thereby ensuring the sustainable requirements, and creates development schemes and corporate governance). The Commissions are more extensively among the companies of the development of the business. to identify the most promising employees to then managed by the heads of the relevant divisions of Group. Furthermore, the new system is a platform to form a key personnel pool. The system also assesses the Bank. Members of the Commissions are experts effectively integrate assets acquired by VTB Group. employees performance. drawn from all of the Companies of the Group. 6.1. Personnel VTB Group governance system is designed to comply In 2013, personnel assessment tools were used The Commissions are responsible for identifying best fully with the corporate and antimonopoly legislation VTB Group has been consistently developing all during the process of reforming VTB regional network, practices and finding ways to implement them, which of the countries in which the companies of the functional areas of human resources. In 2013, as well as in the merger of TransCreditBank, with are then considered by VTB General Management Group operate, and undergoes continual review and the Group paid particular attention to increasing employees being transferred to the companies of Committee. improvement so that it remains compliant. In particular, motivation, boosting its team’s professional the Group. The tools also help VTB to solve everyday the regulations of the VTB Group Management potential, improving work efficiency and developing operational tasks. In December 2013, a Coordination Commission on Committee ensure that it cannot make decisions that corporate culture based on the Group’s core values. corporate governance was created within VTB Group would in any way limit competition in the markets The competency model plays a significant role in Management Committee. The Commission was set up in which VTB Group companies operate or would To achieve its business objectives for 2013, the appraisal system of VTB employees, defining the following changes to Russian legislation on banks and violate legislative norms or the statutory documents VTB Group implemented a number of projects criteria for personnel selection. These evaluation banking activity (Federal Law No. 146). The changes of those companies. Also, in accordance with civil law aimed at transforming and modifying personnel procedures are used in the banks of the Group in include broadening the responsibility of a parent requirements, VTB Group governance system is based management systems, with a constant focus on Russia, the CIS, Europe and Asia. The model reflects organisation within a banking group and activating the on the principle of protecting the independence of each common principles and unified approaches to VTB Group values and enables employees to better Bank of Russia’s oversight on corporate governance of the legal entities within the Group. business processes. understand corporate standards of business ethics issues. The Commission’s work ensures that the and receive feedback on their performance. principle of common functional coordination of corporate In the reporting period, the Bank continued to work governance is adhered to and that the effectiveness of on building and developing teams of professional, Developing and implementing the competency interaction across VTB Group on this issue continually best in class managers and specialists. The Group model in VTB Group new companies, such as at the improves. The Commission’s aims are to ensure that partially renewed the management teams of a Group’s new retail bank, Leto Bank, was a particularly corporate governance is developed effectively, that best number of its companies. In addition, a number of important task in 2013. practices and unified standards are developed and that events were organised to attract talented employees who share VTB Group values. VTB Annual Report 2013 6. Corporate social responsibility

116 117 The proportion of functional training programmes total remuneration. The right to receive share options banking and mortgage and credit operations. contributes to raising environmental awareness in to the total number of training programmes depends on an employee’s performance, assuming The heads of the retail departments also participated the business community. VTB also provides financial at VTB Bank, % his/her continued employment with one of the VTB as trainers. support to projects promoting environmental Group companies for the duration of the programme. protection. 58 VTB pays particular attention to educating employees During the reporting period, the Group dedicated a on customer service standards as part of its training. Resource and energy saving lot of effort to updating and improving the incentive During the period, over 40% of the business units systems across all countries where the Group was and operational support divisions employees Environmental efficiency is among VTB Group key present in accordance with global best practice and received relevant training. priorities. VTB is constantly monitoring its resource taking into account changes in local legislation and and energy consumption and improving the efficiency 43 regulatory requirements. Corporate culture of its property management system.

Training and development In 2013, VTB continued to develop initiatives Any negative impact VTB Group has on the to improve its corporate culture and internal environment is mainly connected with operating 32 The success of the Group largely depends upon communications. In particular, staff meetings were its properties, using consumables and travelling its employees, which is why VTB pays particular held with VTB top managers. Four issues of the Team on business trips by car or airplane. The Group attention to staff training and development. In Energy corporate newspaper were published. They seeks to minimise this impact by using resources 2013, the main focus in this area was to improve the covered the most significant events happening within responsibly and recycling. With this objective in efficiency of all business divisions. the Group and communicated VTB key strategic mind, the companies of the Group have implemented priorities. campaigns aimed at reducing consumption of fuel,

2011 2012 2013 To achieve this objective, special emphasis was paper, water, electricity and heat in the offices of the placed on “public educational programmes”, which Large-scale engagement surveys were carried out Bank and its subsidiaries. are training activities aimed at developing all the internally at VTB Group. In 2013, such studies were Incentive and remuneration system core competencies of managers and employees. The organised in all the key divisions of the Group, In 2013, VTB Bank introduced an electronic document programmes were offered on a full-time or distance covering more than 50,000 people. solution in 2013, which has helped to substantially One of the focuses of VTB Group human resources learning basis using both external consultants and reduce paper consumption in its headquarters. team has traditionally been creating an effective, internal trainers. A new multimedia adaptation In order to preserve and develop its corporate Installing cardboard and paper compression machine transparent and balanced incentive system for its staff. course was developed specifically for VTB Group traditions, VTB organised a range of events, including in VTB Bank building at Vorontsovskaya Street, new employees, an online version of which is also family and sports events, volunteering campaigns 43, bldg.1 will enable the Bank to reduce costs for In 2013, the Group implemented a new policy of available for iOS-based tablet devices. and donor days, as well as motivational programmes transporting paper to the recycling plant and increase setting and monitoring key performance indicators for its best employees. VTB Group 8th Spartakiad was the amount of paper sent for recycling. for managers of the companies of the Group, as During the reporting period, the Group launched the held in September 2013 in Moscow. The event was well evaluating how well they are met. Throughout “New energy of leadership” programme in order to truly international with 30 teams from 14 countries Despite the significant growth of the business of the year, the Bank used the new policy to assess form a unified management culture in VTB Group representing VTB Group companies in sports the Group, energy consumption figures in 2013 its employees performance, which was taken into and to develop employees leadership skills and key competitions. remained flat compared to the previous year. This account when reviewing employees remuneration. managerial competences. It was designed to form a largely attributable to VTB managing its real estate new management culture at VTB and to facilitate its portfolio more efficiently by continuing to consolidate One of the key initiatives of 2013 was the further implementation at the cross-functional and cross- 6.2. Responsible resource the Group’s large facilities which use high amounts of development of VTB long-term incentive programme cultural levels of the global matrix company. management energy and are expensive to run. In addition, during (share options) which was launched in the previous the reporting period, the Bank continued to close year. VTB Capital has implemented the VTB shares In 2013, the percentage of functional training in down its underperforming real estate assets by either incentive programme in Russia and abroad and VTB Bank was 58% of the total number of training One of VTB Group main priorities is a responsible closing the offices, or by optimising the internal includes several hundred employees from top programmes. The Bank formed a pool of internal approach to the consumption of natural resources. layout to ensure that employees of VTB Bank and managers to specialists. Receiving options is not an trainers which comprised leading experts in the VTB Group is not only improving its resource and the companies of the Group are situated in the most additional reward, but is integrated into employees various areas of business, including transactional energy consumption management system, but also efficient and compact places in the buildings. VTB Annual Report 2013 6. Corporate social responsibility

118 119 In 2014, the Group plans to continue implementing Dynamo Moscow Football Club In the reporting period, Moscow’s first public bicycle The Bank of Moscow has been supporting the largest measures to reduce its energy and water VTB United League rental system, Velobike, was launched with the international military music festival, Spasskaya consumption. During its search for new solutions United Hockey Club Dynamo support of the Bank of Moscow. The project is Tower, since 2011. Units of the State Honour Guards and with its desire to implement the most advanced Futsal Club Dynamo a 24-hour automated bicycle rental system, which and the leading Russian and foreign military music and energy smart technologies, VTB is motivated Russian Basketball Federation aims to reduce traffic in the capital, improve the bands participated in the festival. In 2013, to minimise the financial costs and free up its Russian Gymnastics Federation environment and promote a healthy lifestyle. Last the festival coverage, including TV broadcasts, employees for servicing the Bank’s clients, while KAMAZ-Master rally team year, over 72,000 bike rides were made on Velobike exceeded 100 million people worldwide. simultaneously reducing waste generation and Volleyball Federation of Russia bicycles by Muscovites and visitors to the capital. electricity and heat consumption. International Association of Athletics Federations (IAAF) VTB Group is also a long-standing partner of the International Gymnastics Federation (FIG) Arts and culture Russian film and TV industry. In the reporting period, Supporting ecological projects Russian Mountain Ski and Snowboarding Federation the Group gave financial support to a number of One of the main areas of the Bank’s social policy is cultural events, including the national Golden Eagle In 2013, VTB Group supported several important VTB Group has been a sponsor of the International to support cultural institutions. The Bank is actively Awards and the 35th Moscow International Film environmental protection projects. VTB Bank Association of Athletics Federations (IAAF) since involved in the cultural life of Moscow and St. Festival. The Bank also supported Russia’s first 3D participated in financing the “Preservation of 2007. In 2013, VTB Bank acted as an official partner Petersburg, facilitating the promotion of significant film project “Stalingrad”. the large cat population in the Russian regions” of the XIV World Championship in Athletics, which projects in the Russian regions and helping to programme, which is being implemented by the took place in Russia for the first time. The Bank develop cultural ties with other countries. Social investments World Wildlife Fund (WWF). The main aim of the supported the official competition, and also helped project is to improve the environmental sustainability to organise entertainment for spectators. VTB Group continuously supports Russia’s leading VTB Group offers consistent, targeted support to of the natural ecosystems of the Far East, Altai, art museums, including the State Tretyakov Gallery, organisations which implement projects in the social Sayani and the North Caucasus in order to preserve During the reporting period, the Bank continued to the State Hermitage Museum and The Pushkin State and humanitarian spheres. and expand the habitat of Amur tigers, Far Eastern, sponsor the KAMAZ-Master rally team. In 2013, the Museum of Fine Arts. These museums have organised Persian and snow leopards. team celebrated its 25th anniversary. The team’s a number of significant exhibitions and cultural For the last ten years, the Bank has been developing achievements include three World Cups and 11 wins events with the Group’s support. the charity programme “World Without Tears” which in the super marathon, the Dakar Rally. is aimed at providing support to children’s healthcare 6.3. Social programmes VTB Bank signing a cooperation agreement with institutions. With VTB’s help, the children’s In 2013, the Bank of Moscow continued supporting the State Hermitage Museum was a highlight of the healthcare institutions are able to purchase medical VTB Group seeks to not only achieve its business the Kremlin Cup, which is the only large international reporting period, which coincided with the museum’s equipment and pharmaceuticals. The programme’s goals, but also to promote the harmonious tennis tournament in Russia. The Bank of Moscow anniversary; in 2014, the museum will celebrate uniqueness is that medical institutions can purchase development of society by implementing social does not only provide the prize fund for the its 250th anniversary. As part of the agreement, the everything they need directly from suppliers, without charity programmes. The programmes include tournament, but also strives to make the tournament Bank will help the museum to organise anniversary intermediaries. In 2013, the programme covered 15 supporting health, sports, education, science, accessible for spectators. For example, the bank exhibitions, contribute more works of art to the regions of Russia, while its annual budget reached culture and art initiatives, as well as aid to offers free tickets to children from orphanages and museum’s collection and will also support other RUB 30 million. vulnerable groups within society and to improve organises transport to the tournament. projects. people’s financial literacy in the countries where VTB traditionally supports the development of higher the Group operates. In Moscow, VTB Group finances the “VTB Arena Park” VTB Bank has traditionally supported theatres. education in Russia. The companies of the Group project, which is aimed at a fully redeveloping the The Bank is a long-standing partner of the Bolshoi provide scholarships to students of the country’s Sports Dynamo stadium and the surrounding area. As part Theatre, the Mariinsky Theatre and Pyotr Fomenko best universities, sponsor the development of new of the project, there are plans to expand the stadium Workshop Theatre. Therefore, the Bank sponsored educational programmes and also organise lecture The key priorities of the social activity of the VTB capacity to 26,319 seats, create green spaces and the opening night of the new ballet “Onegin” at the series. As a result, students of the Moscow State Group include supporting high-level sporting build residential complexes. The project aims to build Bolshoi Theatre and opened the new stage at the University for Foreign Affairs (MGIMO) and achievements, investing in sports infrastructure new sports infrastructure, which would harmoniously Mariinsky theatre. With the Bank’s support, online St. Petersburg State University were able to attend a facilities and promoting a healthy lifestyle. In 2013, blend into the city space and be convenient for local broadcasts of Pyotr Fomenko Workshop Theatre lecture of the world’s leading economists and Nobel the Group gave financial support to various Russian residents. continued, aiming to increase the accessibility of Prize winners in the reporting period thanks to VTB and international sports organisations, including: productions of the theatre. support. Formula for finding mineral deposits

where: i — 1, 2, 3 ...;

Ti — time interval for running window;

fi — dominant frequency of quasi-harmonic signals of the induced seismic acoustic emission. Profound research for new large-scale developments VTB Annual Report 2013 7. Management responsibility statement

122 123 In 2013, VTB developed an exemplary educational made donations to the first hospice for children with programme, which provides a two-year course of cancer, to the charities the “Gift of Life” and “There 7. Management responsibility statement master classes. The main aim of the programme is is no such thing as other people’s children”, and to improve students’ financial literacy and develop to non-governmental organisations working with their financial management skills. Master classes are disabled people and veterans. In addition, in 2013, held at Russia’s leading universities in Moscow and the Group assisted regions affected by flooding in regions. Over 600 students, PhD candidates and MBA the Far Eastern Federal District of Russia. With VTB students attended these master-classes. financial support, works on restoring the VIII special VTB Management is responsible for preparing the State whether applicable accounting standards have (correctional) boarding school type No. 5, schools Annual Report and the Group consolidated financial been followed, with any material deviations from During the reporting period, VTB Group continued and kindergartens in Belgo village, as well as the statements in accordance with applicable laws the standards being disclosed and explained in the to assist people in need of social protection. VTB “Teremok” kindergarten in Kasatkino village started. and regulations. The management responsibility statements; statement forms an integral part of the Annual Report and is prepared in accordance with the requirements Prepare consolidated financial statements on a going of the UK Financial Conduct Authority (FCA). concern basis, unless it is inappropriate to presume that the Group will continue its business activity in VTB Group internal regulations require its the near future. management to prepare the consolidated financial statements in accordance with International Financial VTB Management is responsible for keeping proper Reporting Standards (IFRS) and applicable laws and accounting records which enable them to disclose regulations. with reasonable accuracy at any time the financial position of the Group and to ensure that the accounts The consolidated financial statements, as required comply with the Companies Act 1985. They are by law and IFRS, present a true and fair view of the also responsible for safeguarding the assets of Group’s state of affairs and profit. the Group and, hence, taking reasonable steps for the prevention and detection of fraud and other In preparing the consolidated financial statements, irregularities. VTB Management is required to:

Select suitable accounting policies and then apply them consistently; VTB Bank President and Chairman Make judgments and estimates that are reasonable of the Management and prudent; Board Andrey Kostin VTB Annual Report 2013 8. Summary consolidated financial statements in accordance with IFRS

124 Independent auditors’ report 125 8. Summary consolidated financial statements in accordance with IFRS

Summary consolidated financial statements derived from the audited To the Supervisory Council and Shareholders Management responsibility for the summary consolidated financial statements and independent auditors’ report. of VTB Bank: consolidated financial statements For the years ended 31 December 2013 and 2012. The accompanying summary consolidated Management is responsible for the preparation of financial statements which comprise the summary a summary of the audited consolidated financial consolidated statements of financial position as statements on the basis described in the footnote to at 31 December 2013 and 2012, the summary the summary consolidated financial statements. consolidated income statements, summary consolidated statements of comprehensive income, Auditors responsibility summary consolidated statements of cash flows and summary consolidated statements of changes Our responsibility is to express an opinion on the in shareholders equity for the years then ended, summary consolidated financial statements based on are derived from the audited consolidated financial our procedures, which were conducted in accordance statements of VTB Bank and its subsidiaries with International Standard on Auditing (ISA) 810 (together “the Group”) for the years ended 31 Engagements to Report on Summary Financial December 2013 and 2012. We expressed an Statements. unmodified audit opinion on those consolidated financial statements in our auditors’ report dated Opinion 31 March 2014. In our opinion, the summary consolidated financial The summary consolidated financial statements statements derived from the audited consolidated do not contain all the disclosures required by financial statements of the Group for the years ended International Financial Reporting Standards. Reading 31 December 2013 and 2012 are consistent, in all the summary consolidated financial statements, material respects, with those audited consolidated therefore, is not a substitute for reading the audited financial statements, on the basis described in the consolidated financial statements of the Group. footnote to the summary consolidated financial statements.

31 March 2014 VTB Annual Report 2013 8. Summary consolidated financial statements in accordance with IFRS

Summary consolidated statements of financial position as at 31 December (in billions of Russian Roubles) 126 127 Summary consolidated statements of financial position as at 31 December (in billions of Russian Roubles) (continuation)

2012 2012 Assets 2013 (restated) Equity 2013 (restated) Cash and short-term funds 354.3 569.0 Share capital 138.1 113.1 Mandatory cash balances with central banks 58.7 63.8 Share premium 433.8 358.5 Financial assets at fair value through profit or loss 411.1 528.8 Perpetual loan participation notes 73.6 68.3 Financial assets pledged under repurchase agreements 466.6 302.9 Treasury shares and perpetual loan participation notes (3.6) (13.7) Due from other banks 443.4 358.6 Other reserves 35.6 33.9 Loans and advances to customers 5,969.0 4,761.5 Retained earnings 262.0 193.7 Assets of disposal group held for sale 36.7 15.3 Equity attributable to shareholders of the parent 939.5 753.8 Investment financial assets – available-for-sale 135.4 97.4 Non-controlling interests 7.6 12.3 – held-to-maturity 0.7 0.9 Total equity 947.1 766.1 Investments in associates and joint ventures 87.6 32.8 Total liabilities and equity 8,768.5 7,415.7 Land, premises and equipment 170.3 142.5 Investment property 160.7 148.0 Goodwill and other intangible assets 162.5 152.8 Deferred income tax asset 45.5 42.9 Approved for issue and signed on 31 March 2014. Other assets 266.0 198.5 Total assets 8,768.5 7,415.7 Liabilities Due to other banks 666.6 759.9 A.L. Kostin Customer deposits 4,341.4 3,813.4 President — Chairman of the Management Board Liabilities of disposal group held for sale 20.7 6.1 Other borrowed funds 1,485.9 806.2 Debt securities issued 738.2 753.9 Deferred income tax liability 15.0 12.3 Other liabilities 262.6 212.0 Total liabilities before subordinated debt 7,530.4 6,363.8 Herbert Moos Subordinated debt 291.0 285.8 Chief Financial Officer — Deputy Chairman of the Management Board Total liabilities 7,821.4 6,649.6

These summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards (IFRS), These summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards (IFRS), namely summary of principal accounting policies and other explanatory information as presented in the audited consolidated financial statements of namely summary of principal accounting policies and other explanatory information as presented in the audited consolidated financial statements of VTB Bank and its subsidiaries (together “the Group”) prepared in accordance with IFRS for the years ended 31 December 2013 and 2012. For a better VTB Bank and its subsidiaries (together “the Group”) prepared in accordance with IFRS for the years ended 31 December 2013 and 2012. For a better understanding of the Group’s financial position, its financial performance and its cash flows, these summary consolidated financial statements should understanding of the Group’s financial position, its financial performance and its cash flows, these summary consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Group from which these summary consolidated financial statements be read in conjunction with the audited consolidated financial statements of the Group from which these summary consolidated financial statements were derived. Copies of audited consolidated financial statements can be obtained from VTB Bank. were derived. Copies of audited consolidated financial statements can be obtained from VTB Bank. VTB Annual Report 2013 8. Summary consolidated financial statements in accordance with IFRS

Summary consolidated statements Summary consolidated income statements of comprehensive income for the years for the years ended 31 December ended 31 December (in billions of Russian Roubles) (in billions of Russian Roubles) 128 129

2013 2012 2013 2012 Interest income 686.3 555.7 Net profit 100.5 90.6

Interest expense (363.3) (309.7) Other comprehensive income:

Net interest income 323.0 246.0 Other comprehensive income to be reclassified to profit or loss in subsequent periods: Provision charge for impairment of debt financial assets (96.9) (59.4) Net result on financial assets available-for-sale, net of tax (1.0) (3.4) Net interest income after provision for impairment 226.1 186.6 Share of other comprehensive income of associates and joint ventures – (0.2) Net fee and commission income 55.4 48.3 Effect of translation. net of tax 3.9 (2.1) Gains less losses arising from financial instruments at fair value through profit or loss 13.2 10.1 Total other comprehensive income to be reclassified to profit or loss in subsequent periods 2.9 (5.7) Gains less losses from available-for-sale financial assets 7.3 4.9 Other comprehensive income not to be reclassified to profit or loss in subsequent periods: (Losses net of gains) / gains less losses arising from foreign currencies (8.7) 6.8 Actuarial losses net of gains arising from difference between pension plan assets and obligations (0.2) – Gains on initial recognition of financial instruments, restructuring and other gains on loans 9.1 17.2 and advances to customers Land and premises revaluation, net of tax – 9.9

Share in profit of associates and joint ventures 2.2 1.2 Effect of changes in tax rates recognized in land and premises revaluation reserve – 0.2

Gain from disposal of subsidiaries and associates 2.8 1.1 Total other comprehensive income not to be reclassified to profit or loss in subsequent periods (0.2) 10.1

Net insurance premiums earned 29.4 17.8 Other comprehensive income, net of tax 2.7 4.4

Net insurance claims incurred and movement in liabilities to policyholders (16.4) (9.8) Total comprehensive income 103.2 95.0

Revenue from non-banking activities 34.2 39.4 Total comprehensive income attributable to:

Cost of sales and other expenses from non-banking activities (36.1) (29.7) Shareholders of the parent 103.7 90.0

Losses net of gains arising from extinguishment of liability (3.7) (1.8) Non-controlling interests (0.5) 5.0

Provision charge for impairment of other assets. credit related commitments and legal claims (2.3) (2.7)

Excess of fair value of acquired net asset over cost 8.0 –

Impairment of goodwill – (1.5)

Other operating income 9.6 8.7

Net non-interest income 104.0 110.0

Operating income 330.1 296.6 Staff costs and administrative expenses (210.9) (181.2)

Profit before tax 119.2 115.4 Income tax expense (24.1) (24.8)

Net profit after tax 95.1 90.6

Profit after tax from subsidiaries acquired exclusively with a view to resale 5.4 – Net profit 100.5 90.6

Net profit attributable to: Shareholders of the parent 101.5 85.8

Non-controlling interests (1.0) 4.8 These summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards (IFRS), Basic and diluted earnings per share (expressed in Russian Roubles per share) 0.00805 0.00817 namely summary of principal accounting policies and other explanatory information as presented in the audited consolidated financial statements of VTB Bank and its subsidiaries (together “the Group”) prepared in accordance with IFRS for the years ended 31 December 2013 and 2012. For a better Basic and diluted earnings per share before profit after tax from subsidiaries acquired exclusively with a view to resale 0.00760 0.00817 understanding of the Group’s financial position, its financial performance and its cash flows, these summary consolidated financial statements should (expressed in Russian Roubles per share) be read in conjunction with the audited consolidated financial statements of the Group which these summary consolidated financial statements were derived from. Copies of audited consolidated financial statements can be obtained from VTB Bank. VTB Annual Report 2013 8. Summary consolidated financial statements in accordance with IFRS

Summary consolidated statements of cash flows for the years ended 31 December (in billions of Russian Roubles) Summary consolidated statements of cash (continuation)

flows for the years ended 31 December 2013 2012 (in billions of Russian Roubles) Proceeds from sale of investment property 7.5 3.2 Purchase of intangible assets (5.1) (4.1) 130 Proceeds from sale of intangible assets 0.1 0.7 131 2013 2012 Net cash (used in) / from investing activities (129.1) 62.9 Cash flows from financing activities Cash flows from operating activities Dividends paid (16.8) (10.8) Interest received 678.0 561.2 Interest paid (329.3) (292.5) Proceeds from issuance of bonds at local bonds 96.3 121.6 Income received / (loss incurred) on operations with financial assets at fair value through profit or loss 14.0 (30.4) Repayment of local bonds (76.6) (14.0) Income received from extinguishment of liability – 2.2 Buy-back of local bonds (54.6) (20.0) Income received on dealing in foreign currency 3.7 16.6 Proceeds from sale of previously bought-back local bonds 28.4 13.9

Fees and commissions received 71.5 59.0 Proceeds from issuance of Eurobonds 48.2 138.6

Fees and commissions paid (15.0) (12.5) Repayment of Eurobonds (71.8) (77.7) Other operating income received 6.8 4.5 Buy-back of Eurobonds (8.3) (82.0) Staff costs, administrative expenses paid (184.2) (151.5) Proceeds from sale of previously bought-back Eurobonds 17.0 108.0 Income received from non-banking activities 37.9 16.3 Proceeds from syndicated loans 66.9 7.2 Expenses paid in non-banking activities (41.7) (20.4) Repayment of syndicated loans (0.1) (12.2) Insurance premium received 32.0 21.5 Net insurance claims paid (16.4) (7.8) Buy-back of syndicated loans – 5.9 Income tax paid (18.1) (21.5) Proceeds from other borrowings and funds from local central banks 3,361.5 1,387.7

Cash flows from operating activities before changes in operating assets and liabilities 239.2 144.7 Repayment of other borrowings and funds from local central banks (2,798.3) (1,371.7) Net decrease (increase) in operating assets Proceeds from subordinated debt 4.1 46.4 Net decrease in mandatory cash balances with central banks 5.1 8.0 Repayment of subordinated debt (7.2) (3.3) Net increase in restricted cash (0.1) (0.7) Buy-back of subordinated debt (0.8) (4.6)

Net decrease in correspondent accounts in precious metals 2.5 2.1 Proceeds from sale of previously bought-back subordinated debt 0.8 0.8

Net decrease in financial assets at fair value through profit or loss 11.2 43.8 Proceeds from share issue, less transaction costs 100.3 – Net (increase) / decrease in due from other banks (31.8) 45.0 Cash received from sale of treasury shares 36.8 0.5 Net increase in loans and advances to customers (1,321.5) (600.0) Cash paid for treasury shares (34.4) (13.7) Net (increase) / decrease in other assets (16.8) (31.6) Share issue to non-controlling interests 0.5 – Net (decrease) increase in operating liabilities Purchase of non-controlling interests (1.3) (24.0) Net (decrease) / increase in due to other banks (117.9) 42.6 Net increase in customer deposits 464.1 167.2 Proceeds from sale of non-controlling interests in subsidiaries – 0.2 Net (decrease) / increase in debt securities issued other than bonds issued (19.4) 7.1 Proceeds from issue of perpetual loan participation notes less transaction costs – 71.6 Net (decrease) / increase in other liabilities (5.9) 15.5 Purchase of perpetual loan participation notes (5.1) (10.5) Net cash used in operating activities (791.3) (156.3) Proceeds from sale of perpetual loan participation notes 5.0 10.5

Cash flows from / (used in) investing activities Interest paid on perpetual loan participation notes (7.0) (1.3) Dividends and other distributions received 1.3 2.4 Net cash from financing activities 683.5 267.1

Proceeds from sales or maturities of financial assets available-for-sale 131.2 141.1 Effect of exchange rate changes on cash and cash equivalents 25.5 (9.9)

Purchase of financial assets available-for-sale (184.6) (69.5) Effect of hyperinflation (0.9) (0.4) Purchase of subsidiaries, net of cash (80.6) (2.7) Net (decrease) / increase in cash and cash equivalents (212.3) 163.4 Disposal of subsidiaries, net of cash 41.5 1.2 At the beginning of period 560.9 397.5 Purchase of and contributions to associates and joint ventures (1.8) (15.8) At the end of period 348.6 560.9 Proceeds from sale of share in associates 2.8 – Purchase of investment securities held-to-maturity – (1.2) These summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards (IFRS), Proceeds from redemption of investment securities held-to-maturity 0.3 32.1 namely summary of principal accounting policies and other explanatory information as presented in the audited consolidated financial statements of Purchase of land, premises and equipment (31.7) (26.3) VTB Bank and its subsidiaries (together “the Group”) prepared in accordance with IFRS for the years ended 31 December 2013 and 2012. For a better Proceeds from sale of land, premises and equipment 4.6 10.5 understanding of the Group’s financial position, its financial performance and its cash flows, these summary consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Group which these summary consolidated financial statements were Purchase or construction of investment property (14.6) (8.7) derived from. Copies of audited consolidated financial statements can be obtained from VTB Bank. VTB Annual Report 2013 8. Summary consolidated financial statements in accordance with IFRS

Summary consolidated statements of changes in shareholders equity for the years ended 31 December 132 (in billions of Russian Roubles) 133

Attributable to shareholders of the parent Non- Total Share capital Share premium Perpetual loan Treasury shares Other reserves Retained earnings Total controlling equity participation notes and perpetual loan interests participation loan notes

Balance at 1 January 2012 113.1 358.5 – (0.6) 30.3 102.2 603.5 21.6 625.1 Net result from treasury shares transactions – – – (13.1) – 0.3 (12.8) – (12.8) Profit for the period – – – – – 85.8 85.8 4.8 90.6 Other comprehensive income – – – – 4.1 0.1 4.2 0.2 4.4 Total comprehensive income for the period – – – – 4.1 85.9 90.0 5.0 95.0 Transfer of premises revaluation reserve upon disposal or depreciation – – – – (0.4) 0.4 – – – Share-based payments – – – – – 1.3 1.3 – 1.3 Acquisition of subsidiaries – – – – – – – 0.2 0.2 Disposal of subsidiaries – – – – – – – (0.1) (0.1) Increase in share capital of subsidiaries – – – – – (0.2) (0.2) 0.8 0.6 Acquisition of non-controlling interests and other capital transactions – – – – (0.1) 11.3 11.2 (13.5) (2.3) Issuance of perpetual loan participation notes – – 71.7 – – – 71.7 – 71.7 Foreign exchange translation of perpetual loan participation notes – – (3.4) – – 3.4 – – – Transaction costs on perpetual loan participation notes issuance – – – – – (0.1) (0.1) – (0.1) Amounts due on perpetual loan participation notes – – – – – (1.3) (1.3) – (1.3) Tax effect recognised on perpetual loan participation notes – – – – – (0.4) (0.4) – (0.4) Dividends declared – – – – – (9.1) (9.1) (1.7) (10.8) Balance at 31 December 2012 113.1 358.5 68.3 (13.7) 33.9 193.7 753.8 12.3 766.1 Share issue 25.0 75.3 – – – – 100.3 – 100.3 Net result from treasury shares transactions – – – 10.2 – (7.5) 2.7 – 2.7 Net result from treasury perpetual loan participation notes transactions – – – (0.1) – – (0.1) – (0.1) Profit for the period – – – – – 101.5 101.5 (1.0) 100.5 Other comprehensive income – – – – 2.3 (0.1) 2.2 0.5 2.7 Total comprehensive income for the period – – – – 2.3 101.4 103.7 (0.5) 103.2 Transfer of premises revaluation reserve upon disposal or depreciation – – – – (0.7) 0.7 – – – Share-based payments – – – – – 0.8 0.8 – 0.8 Increase in share capital of subsidiaries – – – – – – – 0.4 0.4 Acquisition of subsidiaries – – – – – – – (1.2) (1.2) Disposal of subsidiaries – – – – – 0.5 0.5 (1.6) (1.1) Acquisition of non-controlling interests – – – – 0.1 (2.9) (2.8) 0.1 (2.7) Amounts paid on perpetual loan participation notes – – – – – (7.0) (7.0) – (7.0) Foreign exchange translation of perpetual loan participation notes – – 5.3 – – (5.3) – – – Tax effect recognized on perpetual loan participation notes – – 2.5 2.5 – 2.5 Dividends declared – – – – – (14.9) (14.9) (1.9) (16.8) Balance at 31 December 2013 138.1 433.8 73.6 (3.6) 35.6 262.0 939.5 7.6 947.1

These summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards (IFRS), understanding of the Group’s financial position, its financial performance and its cash flows, these summary consolidated financial statements should namely summary of principal accounting policies and other explanatory information as presented in the audited consolidated financial statements of be read in conjunction with the audited consolidated financial statements of the Group which these summary consolidated financial statements were VTB Bank and its subsidiaries (together “the Group”) prepared in accordance with IFRS for the years ended 31 December 2013 and 2012. For a better derived from. Copies of audited consolidated financial statements can be obtained from VTB Bank. VTB Annual Report 2013 9. Other Group information

134 9. Other Group information 135

9.1 Details of JSC VTB Bank 9.2 Contact information Holding VTB Capital Address: Federation Tower West, 12, Presnenskaya Emb., Banks and financial companies Moscow 123100 General information of VTB Group in Russia Phone: +7 (495) 960-99-99 Full name VTB Bank (joint stock company) Fax: +7 (495) 664-47-00 General Banking Licence No.1000 VTB Bank Website: www.vtbcapital.com

Legal address 29, Bolshaya Morskaya St., St. Petersburg 190000 Email: [email protected]

Postal address Address: 29, Bolshaya Morskaya St., St. Petersburg 190000 VTB Insurance for Russian mail 37, Plyushchikha St., Moscow 119121 Phone: 8-800-200-77-99 (toll-free in Russia); Address: 2/4 bldg 1, Turgenevskaya Sq., for international mail 43, Vorontsovskaya St., Moscow 109044 +7 (495) 739-77-99 Moscow 101000 8-800-200-77-99 (Russian toll-free) Call centre (495) 739-77-99 Fax: +7 (495) 258-47-81 Phone: +7 (495) 580-73-33; +7 (495) 644-44-40; Website: www.vtb.ru 8-800-100-44-40 (toll-free in Russia) Fax (495) 258-47-81 Email: [email protected] Fax: +7 (495) 589-24-08 [email protected] (for queries and proposals) Email address [email protected] (for insiders) Website: www.vtbins.ru

Website http://www.vtb.ru/ Bank VTB24 Email: [email protected] Address: 35, Myasnitskaya St., Moscow 101000 Phone: 8-800-100-24-24; +7 (495) 777-24-24 VTB Leasing Fax: +7 (495) 980-46-66 Address: 10, 2nd Volkonskiy Per., Moscow 127473 Details Website: www.vtb24.ru Phone: +7 (495) 514-16-51 OKPO code 00032520 Email: [email protected] Fax: +7 (495) 514-16-50 TIN 7702070139 Website: www.vtb-leasing.com Correspondent account with Operations Department of the Central Bank Bank of Moscow Email: [email protected] of the Russian Federation, Main Branch for the Central Federal District, 30101810700000000187 Address: 8/15 bldg 3, Rozhdestvenka St., Moscow Moscow 107996 VTB Factoring Russian BIC 044525187 Phone: +7 (495) 925-80-00 Address: 52 bldg 1, Kosmodamianskaya Emb., All-Russian Classifier of Political Subdivisions 40262563000 Fax: +7 (495) 795-26-00 Moscow 115054 Taxpayer Record Validity Code 997950001 Website: www.bm.ru Phone: +7 (495) 783-35-34 TELEX 412362 BFTR RU Email: [email protected] Fax: +7 (495) 783-35-34 SPRINTMAIL PROTOCOL / MOSVTB0 / CEA Website: www.vtbf.ru VTBRRUMM Leto Bank Email: [email protected] VTBRRUMM SEC SWIFT Address: 8, Preobrazhenskaya Sq., Moscow 107061 VTBRRUMM CSD (depository) Phone: 8-800-510-95-10 VTB Registrar Fax: +7 (495) 646-58-14 Address: 23, Pravdy St., Moscow 125040 Website: www.letobank.ru Phone: +7 (495) 787-44-83 Email: [email protected] Fax: +7 (499) 257-17-00 Website: www.vtbreg.ru Email: [email protected] VTB Annual Report 2013 9. Other Group information

136 137 VTB Specialized Depository VTB Bank (Austria) VTB Bank (Belarus) Vietnam-Russia Joint Venture Bank Address: 35, Myasnitskaya St., Moscow 101000 Address: Postfach 560, Parkring 6, Wien A-1010, Austria Address: 14, Moskovskaya St., Minsk 220007, Belarus Address: 1st & 2nd Floor, Yet Kieu Str., Hoan Kiem Dist., Phone: +7 (495) 956-30-70 Phone: + (431) 515-35-226 Phone: + (37-517) 309-15-15 Hanoi, Vietnam Fax: +7 (495) 956-30-71 Fax: + (431) 515-35-316 Fax: + (37-517) 309-15-30 Phone: + (844) 3942-66-68 Website: www.odk.ru Website: www.vtb-bank.at Website: www.vtb-bank.by Fax: + (844) 3942-66-69 Email: [email protected] Email: [email protected] Email: [email protected] Website: www.vrbank.com.vn Email: [email protected] VTB Pension Fund VTB Bank (France) VTB Bank (Armenia) Address: 52 bldg 5, Kosmodamianskaya Emb., Address: 79/81, Boulevard Haussmann 75382, Address: 46, Nalbandyana St., Yerevan 0010, Armenia Branches and representative offices abroad Moscow 115054 Paris Cedex 08, France Phone: + (37-410) 56-58-60 Phone: +7 (495) 228-09-89 Phone: + (331) 4006-4321 Fax: + (37-410) 56-55-78 VTB Bank branch in Shanghai (China) Fax: +7 (495) 228-09-89 Fax: + (331) 4006-4848 Website: www.vtb.am Address: offices 1101A -1103, Plaza 66, 1266, Website: www.vtbnpf.ru Website: http://france.vtb.com Email: [email protected] Nanjing Xilu, Shanghai municipality 200040, Email: [email protected] the People’s Republic of China VTB Bank (Deutschland) VTB Bank (Azerbaijan) Phone: + (86 21) 6136-6236, + (86-21) 6136-6263 VTB Real Estate Address: Rüsterstraße 7-9, 60325, Frankfurt-am-Main, Address: 38, Khatai Avenue, Baku AZ1008, Azerbaijan Fax: + (86-21) 6136-6265 Address: 70, Mosfilmovskaya St., Moscow 119590 Germany Phone: + (99-412) 492-00-80; + (99 412) 437-71-20 Email: [email protected] Phone: +7 (495) 925-45-70 Phone: + (49-69) 216-82-08 Fax: + (99-412) 437-71-21 Fax: +7 (495) 925-45-70 Fax: + (49-69) 216-83-89 Website: www.vtb.az VTB Bank branch in New Delhi (India) Website: www.vtbr.ru Website: www.vtb.de Email: [email protected] Address: Taj Mahal Hotel, 1 Mansingh Road, Email: [email protected] Email: [email protected] New Dehli 110011, India VTB Bank (Kazakhstan) Phone: + (91-11) 6622-1000 MultiCarta RCB Bank (Cyprus) Address: 28B, Timiryazeva St., Almaty 050040, Fax: + (91-11) 6622-1024 Address: 43, Vorontsovskaya St., Moscow 109147 Address: 2, Amathuntos St., P.O. Box 56868, Kazakhstan Email: [email protected] Phone: +7 (495) 784-60-55; +7 (495) 785-15-15 Limassol 3310, Cyprus Phone: + (77-27) 330-50-50 Fax: +7 (495) 785-12-24 Phone: + (357) 25-837-300 Fax: + (77-27) 330-40-50 VTB Bank representative office in Beijing (China) Website: www.multicarta.ru Fax: + (357) 25-342-192 Website: www.vtb-bank.kz Address: 18BC, CITIC bldg, 19, Email: [email protected] Website: www.rcbcy.com Email: [email protected] Jianguomenwai dajie, Beijing 100004, China Email: [email protected] Phone: + (86-10) 8526-2800 VTB DC VTB Bank (Georgia) Fax: + (86-10) 8526-2810 Address: room 47, office XIV, 8, Brestskaya St., VTB Bank (Belgrade) Address: 37, D. Uznadze St., Tbilisi 0102, Georgia Email: [email protected] Moscow 125047 Address: 2 Balkanska St., Belgrade 11000, Serbia Phone: + (99-532) 50-55-05 Phone: +7 (495) 795-00-42 Phone: + (381) 11-395-22-00 Fax: + (99-532) 99-91-39; + (99-532) 95-60-85 VTB Bank representative office in Milan (Italy) Fax: +7 (495) 795-00-44 Fax: + (381) 11-395-22-40 Website: www.vtb.com.ge Address: 8, Piazzale Principessa Clotilde, Website: www.vtbbanka.rs Email: [email protected] Milan 20121, Italy VTB Group banks and financial companies E-mail: [email protected] Phone: + (39-02) 2901-3278 outside of Russia Banks and financial companies in Asia and Africa Fax: + (39-02) 2906-0007 Banks in the CIS and Georgia Email: [email protected] Banks and financial companies in Europe Banco VTB Africa VTB Bank (Ukraine) Address: 22, Rua da Missao, Luanda, Angola VTB Capital Plc Address: 8/26, Taras Shevchenko Blv./ Pushkinskaya Phone: + (244) 222-390-307, + (244) 222-392-227 Address: 14, Cornhill, London EC3V 3ND, St., Kiev 01004, Ukraine Fax: + (244) 222-395-889 United Kingdom Phone: + (380-44) 391-54-09, + (380-44) 239-35-39 Email: [email protected] Phone: + (44-20) 3334-80-00 Fax: + (380-44) 391-54-09 Fax: + (44-20) 3345-89-00 Website: www.vtb.com.ua Website: www.vtbcapital.com Email: [email protected] VTB Annual Report 2013 10. Shareholders information

138 Shareholders % of the total (31 December 2013) 139 10. Shareholders information Norges Bank (Central Bank of Norway) 4.27777% The State Oil Fund of Azerbaijan 2.94674% Credit Suisse AG 2.94713% Onexim Holdings Limited 2.43036% Olybrius Limited 2.35875%

Share capital of Global Depositary Receipts (GDRs). On 28 February 2013, the Bank shares were VTB Bank issued 2,500,000,000,000 ordinary shares Ballot papers are sent to shareholders by post no As at 31 December 2013, the authorised transferred to the top Quotation List “A” Level 1 during its additional share issue. The additional later than 20 days prior to the Meeting. share capital of VTB Bank amounted to RUB of the Moscow Exchange. shares were placed in May 2013 and the total amount 129,605,413,373.38 and was divided into raised was RUB 102.5 billion. The shares were Materials related to the General Shareholders 12,960,541,337,338 shares. All shares are ordinary Each VTB GDR is equivalent to 2,000 ordinary shares. purchased by the existing shareholders of the Bank, Meeting are available to shareholders at registered shares issued in non-documentary form The Bank of New York International Nominees is the as well as the largest sovereign wealth fuds of Shareholders Support Centres or on the official with a par value of RUB 0.01 each. In accordance with depositary bank for the VTB GDR Programme. Norway, Azerbaijan, Qatar and other countries. corporate website www.vtb.ru. VTB Bank GDR holders the Bank Charter, it has the right to issue a maximum On 31 December 2013, GDRs accounted for 13.1% As of 31 December 2013, the largest shareholders who wish to participate in voting on the agenda of number of 14,000,000,000,000 ordinary shares of the Bank’s share capital. of the Bank, excluding the Russian Federation the AGM should contact the depositary bank for the with a par value of RUB 0.01 each, in addition represented by the Federal Agency for State Property GDR programme (The Bank of New York International to the shares already placed. Management, are as follows: Nominees). The depositary bank contact details can Shareholder structure be found below. As of 31 December 2013, there were no outstanding As of 22 May 2013, VTB shares were owned preferred shares of VTB Bank. The Bank majority shareholder is the Russian by 105,418 shareholders, including 103,904 Information about the 2013 Annual General Meeting Federation, represented by the Federal Agency for individuals. of Shareholders can be found in the Corporate The state registration number of VTB Bank outstanding State Property Management. As of 31 December Governance section of this report. ordinary shares is 10401000B. The record date for the 2013, its share in the Bank was 60.93%, down VTB Bank is not aware of any shareholders owning state registration of the additional issue of VTB Bank from 75.5%, following the additional share issue. more than 1% of the Bank’s authorised share capital, ordinary shares is 29 September 2006. The Russian Federation represented by the Federal except those mentioned above. Information on the Dividend policy Agency for State Property Management, does not participation of members of the Supervisory Council and VTB Bank shares are traded on the Moscow Exchange have a special right to manage VTB Bank (by means the Management Board in VTB share capital is available One of the main rights of VTB shareholders is the and on the London Stock Exchange (LSE) in the form of “golden share”). in the Corporate Governance section of this report. right to receive a share of the Bank’s net profit in the form of dividend payments. Dividend payments Shareholder structure are approved by the Annual General Shareholders The General Shareholders Meeting Meeting of VTB Bank, following recommendations Shareholders 26 April 2012 13 May 2013 31 December 2013 made by the Supervisory Council. The Supervisory Russian Federation, represented by the Federal 7 897 477 400 292 7 897 477 400 292 7 897 477 400 292 The General Shareholders Meeting is VTB Bank Council bases its recommendations as to the size of Agency for State Property Management (75.50%) (75.50%) (60.93%) highest governing body and is held annually. The the dividend payment on the Bank’s net profit. date of the meeting is set by the Supervisory Council. Free float of GDRs (Bank of New York 1 707 831 019 875 1 632 984 113 875 1 697 687 102 09217 international Nominees)17 (16.33%) (15.61%) (13.10%) VTB Strategy and Corporate Governance Committee

616 472 834 500 651 572 491 288 The Bank notifies its shareholders about the General recommended to the Supervisory Council that Other institutional investors (5.89%) (6.23%) 3 365 376 834 954 Shareholders Meeting by a notice published in dividend amounts for 2010–2013 should be between 238 760 082 671 278 507 331 883 (25.97%) Rossiyskaya Gazeta and on the official website of 10% and 20% of the full year net profit, as shown Individual investors (2.28%) (2.66%) the Bank no later than 30 days prior to the Meeting. in VTB Group IFRS financial results for the reporting 10 460 541 337 338 12 960 541 337 338 Decisions taken at the Annual General Meeting years of 2010, 2011, 2012 and 2013. Total (100%) (100%) of Shareholders and the results of voting are communicated to shareholders in the same manner. 17 In accordance with changes in legislation as of 2013, the Bank of New York International Nominees, the depositary bank for the VTB GDR Programme, is required to disclose the ultimate owners of the shares. In this context information on the number of shares and percentage of GDR holders as at 31.12.2013 is presented for reference, in sum of all VTB Bank GDR holders. VTB Annual Report 2013 10. Shareholders information

140 141 The size of the dividend payment per share, as well transfer to the shareholders accounts at their request profits, allocated for dividend payment, significantly income in the form of dividends that VTB Bank has as the period and form of payment are determined (an appropriate application form is required for this). increased to 16.5%. earned from its investments in other companies. at the Annual General Meeting of Shareholders. Shareholders whose rights are registered via nominal The size of the dividend payment cannot exceed the shareholders shall receive dividends in monetary The amount of dividend payments for 2013 will If a double taxation agreement applies, tax payments amount recommended by the Supervisory Council. form in accordance with the procedure stipulated in be approved at the Annual General Shareholders are made in accordance with the rate specified in the The amount of accrued dividends per VTB share is Russian laws on securities. The current legislation, Meeting in June 2014. The record of dividend agreement, taking into account Russian legislation. calculated to the nearest kopeck. The rounding of which was amended on 1 January 2014, does not payments for the years 2007–2012 is set out figures is based on mathematical rounding rules. provide for cash dividend payments. in the table on p. 140. Disclosure As a result of amendments made to the Federal Law Any dividends accrued, but unclaimed by of 26.12.1995 No. 208-FZ On Joint Stock Companies, shareholders within a period of three calendar years, Dividend taxation VTB Bank adheres to the principle of providing the procedure and form of dividend payment were are subject to allocation back to the profit of the shareholders, potential investors and professional changed, effective from 01.01.2014. Bank. Therefore, if a shareholder does not claim As a tax agent, VTB Bank calculates and deducts tax market participants with reliable information about his or her accrued dividends within three years, from the dividend payments it makes at the year-end. the Bank’s operations, which may be useful for The amendments to this law state that the date when he or she loses the right to receive them. This rule Since 1 January 2014, when income is distributed in making investment and management decisions. the list of persons entitled to a share of the bank’s does not apply to shareholders, who receive their the form of dividends on shares issued by a Russian net profit is compiled should be determined at the dividends by bank transfer, as the transfer of funds organisation, a tax agent can be considered not VTB Bank discloses its information in the form of annual General Shareholders Meeting, but can be no sooner to a shareholder’s account is considered sufficient only an issuer of these shares, but also, in cases report, quarterly reports, lists of affiliates, material facts than 10 days before the date when the decision to evidence of a dividend payment. stipulated by law, a trustee, a depository etc. and announcements on events, which are required for pay dividends is due to be made and no later than disclosure in Russia and abroad, listing prospectus, 20 days following such a decision. Given the above, and taking into account that the annual financial statements and other information, Dividend payments income tax is calculated and withheld by a tax agent, which is mandatory for a joint stock company to disclose. Prior to that amendment, dividend payments were mutual funds, foreign institutional and individual made within 60 days following the decision of the JSC VTB Bank Annual General Shareholders Meeting, investors can apply for a tax exemption or a reduced VTB pays particular attention to ensuring that any Annual General Meeting. Now the timeframe depends held on 28 June 2013, approved the decision to pay tax rate on dividends received by submitting to relevant information is available simultaneously to on the type of registered shareholder. dividends for 2012 in the amount of RUB 0.00143 the Bank registrar, CJSC VTB Registrar, or to a all shareholders and analysts in accordance with per ordinary share with a par value of RUB 0.01. The depositary, where his or her shares are registered, principles of openness and transparency. The Bank Dividend payments to nominal shareholders and dividend payout increased by 62.5% year on year (the documents that demonstrate that they have the right strives to maintain the highest level of transparency trustees listed on the shareholder register must increase for 2011 was 52%). to preferential tax treatment. In the case of share in relation to its activities, and discloses a wide be made within 10 working days, while dividend transfer to beneficial ownership, documents should range of information. The publication of information payments to other registered shareholders must be Dividend payments to shareholders were made within be submitted to a trust manager. A complete list of that has to be disclosed in accordance with the made within 25 working days of the date when the the 60-day period in accordance with legislation. The the required documents can be found in the Investor requirements of the Central Bank of the Russian list of persons entitled to dividends is compiled. total funds allocated for dividend payment amounted Relations section of www.vtb.ru. Federation and in accordance with the Federal Law on to RUB 14,959 million. The dividend payout ratio as the Securities Market, the Regulation on Information Shareholders whose shares are in the shareholder a percentage of net profit under RAS reached a record The dividend tax rate for individuals and companies Disclosure by Issuers of Securities (approved by register are paid dividends by postal order or bank 82.66%. In addition, the share of VTB Group IFRS who are residents of the Russian Federation is 9%, Decree No. 11-46/pz-n of the Federal Financial and for non-residents the rate is 15%. In accordance Markets Service (FFMS) on 4 October 2011) and with tax legislation, a 30% tax rate is applied to the Bank’s Charter is conducted through authorised Dividend payments dividends paid to GDR holders; information on these news agencies, Interfax disclosure portal www.e- GDR holders has not been submitted to the tax agent disclosure.ru/portal/company.aspx?id=1210 and the 2007 2008 2009 2010 2011 2012 in accordance with Russian legislation. The rate Bank corporate website at www.vtb.ru/ir/disclosure. Net profit in accordance with RAS (RUB million) 17,978 26,894 23,752 43,343 24,406 18,096 is applied to the taxable dividend amount, which VTB Bank has the Regulation on Information Policy Dividend amount per ordinary share (RUB) 0.00134 0.000447 0.00058 0.00058 0.00088 0.001430 can, in some cases, be less than the total dividends in place to ensure transparency which is available on Total amount of dividend payments (RUB million) 9,010 3,006 6,067 6,067 9,205 14,959 payable, as tax has already been withheld from VTB website at: www.vtb.ru/group/documents/. Dividend payout ratio 50.12 11.18 25.54 14 37.72 82.66 (% of net profit in accordance with RAS) VTB Annual Report 2013 10. Shareholders information

142 143 VTB publishes its audited consolidated financial An electronic version of the Annual Report is Contact information Registrar statements under IFRS together with the auditor’s uploaded onto the Bank corporate website, report at the end of the fiscal year on www.vtb.ru/ir/ www.vtb.ru/ir/disclosure/fannual/ and the Interfax JSC VTB Bank CJSC VTB Registrar disclosure/fannual/ and via the Interfax disclosure disclosure portal at www.e-disclosure.ru/portal/ portal www.e-disclosure.ru/portal/company. company.aspx?id=1210. Hard copies of the Annual Legal address: Legal address: aspx?id=1210. In addition, the Bank discloses Report are available at Shareholders Support 29, Bolshaya Morskaya St., St. Petersburg 23, Pravdy St., Moscow 125040, Russia its condensed, unaudited consolidated financial Centres or can be requested by sending an email to 190000, Russia statements at the end of the first, second and third [email protected]. VTB Bank also discloses Postal address: quarters. VTB places announcements of its financial the list of affiliated persons quarterly, or as it Postal address: P.O. Box 54, Moscow 127137, Russia results on the website of the London Stock Exchange changes, on its corporate website at www.vtb.ru/ 37, Plyushchikha St., Moscow 119121, Russia Phone/Fax: +7 (495) 787-44-83 via the RNS information distribution system, followed ir/disclosure/affiliated/, as well as via the Interfax by the publication of press releases on the corporate disclosure portal: www.e-disclosure.ru/portal/ General enquiries: Chief of staff of the Supervisory Council — website and their dissemination to the media. company.aspx?id=1210. Phone: +7 (495) 739-77-99, 8-800-200-77-99 Corporate Secretary The quarterly financial results of the Bank are also E-mail: [email protected] posted on the Moscow Exchange website. Evgeniy Ignatiev Auditor Phone: + 7 (495) 775-70-88 E-mail: [email protected] CJSC Ernst & Young Vneshaudit 77, bldg 1, Sadovnicheskaya Emb., Investor Relations Department Moscow 115035, Russia (institutional investors and analysts) Phone: +7 (495) 755-97-00 Phone: +7 (495) 775-71-39 Depositary bank for VTB GDR programme E-mail: [email protected]

The Bank of New York International Nominees Shareholder Relations Department (individual shareholders) Legal address: One Wall Street, New York, NY 10286, USA Phone: +7 (495) 258-49-47 E-mail: [email protected] Postal address: BNY Mellon, Depositary Receipts Division Shareholders Consultative Council 101 Barclay Street — 22nd Floor New York, NY 10286, USA Website: www.vtb.ru/ir/sovet; www.facebook.com/ksavtb; www.twitter.com/ksavtb Phone: +7 (985) 774-31-55 E-mail: [email protected] For notes