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.