5.10 Tinkoffbank

DEEP DIVE

Strategy Teardown by o Russian Banking Market WhiteSight o Company Overview o Executive Team o Product Stack o Customer Acquisition o Lifestyle Banking o Customer Engagement o Funding & Valuation o Financials o Unit Economics

Disclaimer: This is not a commissioned report. All data used for analysis has been taken from Tinkoff Group’s annual reports & other publicly available sources.

Image Credits: behance.net/Michail_Pchelkin RUSSIAN BANKING MARKET

The banking sector of Russia is predominantly commanded by public banks. Tinkoff Bank, a digital challenger bank, made an impact in the credit card market with a focused offering from the get go and is now the 2nd largest provider in the credit cards space.

TOTAL ASSETS OF RUSSIAN BANKS (JUNE 2020) CREDIT CARD MARKET SHARE OF RUSSIAN BANKS (JAN 2020)

LARGEST PUBLIC BANKS TOTAL ASSETS $453 B 20.4% $228 B Sberbank

$99 B Tinkoff Bank 43.9% LARGEST PRIVATE COMMERCIAL BANKS 4.9% Alfa Bank $25.5 BILLION $55 B VTB 6.7% CREDIT CARDS MARKET $39 B Russian Standard Bank $38.5 B 10.8% Others DIGITAL-ONLY BANKS $9.4 B 13.3% N/A

Conversion rate used: RUB 1 = USD 0.014 (June 2020)

Business Overview

Founded: 2006 Headquarters: Moscow, Russia Company Stage: Public (Listed on LSE)

Launched: April 2007 Geographies Total Funding: $1.6 Bn Served: Russian Federation Founder: Oleg Tinkov Latest Funding: $300 Mn (Secondary Public Offering in 2019) Total Customers: 11.2 Mn + (June 2020) Licenses: Banking & Insurance, Valuation: $5.5 Bn Brokerage & Depository Customer Retail Individuals Services, Segments: & Businesses Acquisitions: Kassir.ru Capital Management CloudPayments Employees: 24700 (Dec 2019) MyPocket App

Key Pivots in the Tinkoff Journey

2006 2007 2008 2013 2015 2017 2019 2020 Oleg Tinkov Tinkoff Credit Launches TCS debuts on TCS renamed Begins Launches Tinkoff to be acquires Systems issues Internet London Stock as Tinkoff diversifying Russia’s first acquired by Khimmashbank first credit Bank Exchange with Bank into lifestyle ‘Super App’ Yandex* to start Tinkoff card $1.1B IPO products Credit Systems *Deal called off as of October 2020 (TCS) @whitesight_ © 2020 WhiteSight. All rights reserved. 2 EXECUTIVE TEAM

Tinkoff’s executive team has an average experience of 18 years and 64% hail from incumbent financial institutions. The average age of employees at Tinkoff is 28 years and 70% of the employees are IT & math specialists.

Person (� indicates female execuves) Position Joined Previous Experience Company Before Tinkoff Oliver Hughes CEO - Group 2007 15 years - Finance Visa

Stanislav Bliznyuk Chairman of Board of Directors 2006 05 years - Finance Raiffeisen Bank

Ilya Pisemskiy Chief Financial Officer 2008 11 years - Finance Bank SOYUZ Viacheslav Tsyganov Chief Information Officer 2006 Information Technology N/A

Pavel Khristolyubov Chief Operating Officer 2020 25 years - Information Technology Luxoft

Valeria Pavlukova � Chief Legal Officer 2017 13 years - Law, Finance Sberbank

Natalia Izyumova � Chief Accountant 2011 14 years - Finance Bank Sovetsky Sergei Pirogov Head of Corporate Finance 2010 08 years - Finance Citigroup

Anatoly Makeshin Head of Payment Systems 2006 Finance N/A

Evgeny Ivashkevich Risk Director 2007 05 years - Finance Renaissance Capital Bank Artem Yamanov Public Relations Director 2019 04 years - Finance Raiffeisen Bank

Nadezhda Serova � Human Resource Director 2018 13 years - Human Resources Yandex.Market Danil Anisimov VP Product Development 2010 03 years - Telecommunications MegaFon

George Chesakov CEO - Tinkoff Mobile 2016* 18 years - Finance OTP Bank

Current Suite of Products

Tinkoff that started of with credit cards as its core offering, has built up a financial CREDIT BUSINESS BANK services and lifestyle products moat around its company. • Credit Cards • Checking Accounts • The push into lifestyle banking from 2017 onwards with its own mobile network, online • Cash Loans Overdraft & Loans • Rewards • Acquiring travel agency & super app has enabled the neo-bank to reach a broader audience. • Sales MOBILE BANK • Business Tools • Current Account Tinkoff Bank Product Ecosystem INVESTMENTS Travel • Debit Cards • Stock Trading Entertainment • Deposits Financial Products • ETFs, Bonds Lifestyle Products Entertainment Mobile INSURANCE • Social Trading Network Includes Partner Products Mobile • Accident (MVNO) Network • Property KIDS BANKING (MVNO) Kids Banking • Travel • Debit card • Motor • Investments Investments Savings Account

Business Business Business MVNO ENTERTAINMENT Banking Banking Banking • Telecommunication • Cinema Mortgage Mortgage MortgageDiscontinued • International Roaming • Restaurants • Virtual Numbers • Concerts Insurance Insurance Insurance Insurance • Streaming Services • Theatre Internet & Internet & Internet & Internet & Internet & • Sports TRAVEL Internet Bank Mobile Bank Mobile Bank Mobile Bank Mobile Bank Mobile Bank • Travel Bookings Credit Credit Credit Credit Credit Credit Credit • Hotels & Rentals • Tour Packages 2007 2009 2011 2013 2015 2017 2019 • Cashback @whitesight_ © 2020 WhiteSight. All rights reserved. 4 CUSTOMER ACQUISITION

Tinkoff’s customer acquisition and retention has been thoroughly facilitated by its Tinkoff Bank Active Users ecosystem of interconnected products and applications. Monthly and daily active 2017 2018 2019 H1 2020 users in H1 2020 have seen an average 23.5% growth since FY19. Monthly 1.7M 3.7M 5M 6.1M Active Users Daily (As of H1 2020) 1M 1.1M 1.6M 2M Tinkoff Bank Customer Base Active Users 11.2M Total Customers Avg. customer age Segment Wise: � 36 years 2017 onwards June 2020 6.8M Credit Customers Expansion into Avg. income lifestyle products 11.2M 12 9.3M Current A/c Customers USD 1140 (RUB 87k) 2016 � Launch of 13 months 10M 1.2M Investment Customers Tinkoff 10 Male / Female ratio 1.25x Investments 8M 565K SME Customers ⚤ 63% : 37% 2015 25 months 8 Launch of 2013 Tinkoff 2x 2011 TCS goes Business 6 Apr 2007 Launch of public Tinkoff Credit Mobile Bank 36 months 4M Systems issues 4 first credit card 18 months 2x 13 months 2M of Number customers (Mn) 24 months 1M 500K 2x 2 100K 2x 5x 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 @whitesight_ © 2020 WhiteSight. All rights reserved. 5 LIFESTYLE BANKING

Tinkoff began diversifying into non-financial services segment with an aim to create revenue streams other than credit. These services have helped the neo-bank acquire new customers and also provide existing ones with value-added lifestyle services.

Tinkoff’s Journey Towards Lifestyle Banking

• Creation for a 360° lifestyle platform for customers 2017 2019 SUPER APP MOBILE NETWORK • Marketplace for external partner integrations

• MVNO in partnership with Tele2 Russia Tinkoff Super App Ecosystem • Cost synergies to reduce servicing expenses

Lifestyle Rewards & Marketplace 2017 ENTERTAINMENT Products Bonuses

• Partnership with varied entertainment service providers Investments Business • Source for commission income

2019 ONLINE TRAVEL AGENCY Banking Payments Insurance

Using data analytics & machine learning Tinkoff provides customers with personalised services that are automated & help keep up customer engagement. As of December 2019, users conduct over 100 million sessions per month across its 9 mobile apps.

Catalysts To Customer Engagement Tinkoff Stories (2017) Voice Assistant Oleg (2019) Tinkoff Messenger (2020)

A social & informative feature for personalised AI-enabled assistant integrated with all A financial messenger for users to interact and user statistics, lifestyle advertising, financial ecosystem products, Oleg acts as a personal transact with friends. Future iterations to literacy & app features finance advisor to users. include P2M communications.

Tinkoff Group witnessed a rough downturn due to the Russian Financial Shareholding Pattern Crisis of 2014-2016. However, the stock has recovered since and holds a 40.4% 6.5% 53.1% market capitalisation of $5.6 Bn as of November 2020. Tinkov Family Trust Management Public Investors Funding Trends Market Capitalisation Trends Sep 2020 2008-12 Valued at $5.5Bn by 6 Pre-IPO Equity Funding Yandex for acquisition* $140 Mn raised 5

Oct 2013 2013 TCS shares Tinkoff lists on London Stock Exchange listed at 4 $18.15 $1.1 Bn raised

3 2019

Secondary Public Offer 2014-2016 Decline due to Russian Covid-19 2

$300 Mn raised CapitalisationMarket in $ Bn Financial Crisis Pandemic Key Investors Pre-IPO: 1

0 2013 2014 2015 2016 2017 2018 2019 2020

Tinkoff has been profitable in its operations since 2009 and has witnessed steady growth in income with a healthy cost to income ratio. In recent years its goal has been to diversify its revenue streams and generate income from its subsidiaries.

Tinkoff Bank Income Statement Metrics ($ Mn) Revenue Streams Distribution

Revenue Operating Expenses 2474 2500 50% 10% Interest Income Profit After Tax Cost to Income 5% 44% 45% Fee Income 2000 43% 42% 1688 20% H1 2020 40% Insurance Premium 38% 37% 1443 65% 1500 36% 35% Other Income 1167 32% 30% 1000 29% 864 656 532 592 542 25% Segment-Wise Revenue Distribution 500 407

Amount in $ M 285 289 20% 1% 165 Retail Banking 86 51 28 7% 0 15% 10% FY13 FY14 FY15 FY16 FY17 FY18 FY19 H1-20 Insurance 10% H1 2020 -150 -155 -168 Business Banking -500 -266 -402 -368 -554 5% 82% -743 MVNO Services -1000 Conversion rate used: RUB 1 = USD 0.015 0% @whitesight_ © 2020 WhiteSight. All rights reserved. 9 ASSETS & LIABILITIES METRICS

While credit cards still remain a core product of Tinkoff, current accounts & deposits have taken over the liabilities side of the balance sheet. The net interest margin has been narrowing over recent years as deposits have grown more than loans & advances.

Deposits & Loan Book ($ Bn) Credit Funding Sources

Customer Deposits Loans & Advances to Customers Risk-adjusted Net Interest Margin 1.5% Conversion rate used: RUB 1 = USD 0.015 5%4% Retail Current Accounts 10 23.1% 25% 11% Retail Deposits 21.1% 19.4% 18.9% Legal Entities 20% H1 2020 51% Debt Securities in Issue 8 16.9% 14.9% 7.1 27% Subordinated Debt 15% Due to Banks 6.2 10.1% 6 8.7% 10% 4.94 4.86 Distribution of Credit Business 4.2 5% 0.4%

Amount in $ Bn 4

2.98 Margin Interest Net Credit Card Loans 2.7 7% 0% 7% 2.10 Cash Loans 1.9 10% 2 1.54 Secured Loans 1.31.23 H1 2020 1.11 1.12 -5% POS Loans 0.6 0.7 15% 61% Car Loans 0 -10% SME Loans FY13 FY14 FY15 FY16 FY17 FY18 FY19 H1 2020 @whitesight_ © 2020 WhiteSight. All rights reserved. 10 UNIT ECONOMICS

Tinkoff enjoys a favourable unit economics given its profitability Customer Acquisition Costs Conversion rate used: RUB 1 = USD 0.015 and cost metrics. Marketing Costs Staff Costs Other Acquisition costs Number of Customers (RHS) Having built an interconnected product stack helps the neo- 30 $26 12 $24 $23 bank reduce customer acquisition costs for new products while 25 $21 10 $19 $20 increasing lifetime value steadily. 20 $17 8 15 6 Customer Lifetime Value Metrics Conversion rate used: RUB 1 = USD 0.015 10 4 CAC per customer ($) per CAC 5 2 Revenue per customer Contribution margin per customer Number of Number Customers (Mn) Direct Expenses per customer Number of customers 0 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 300 12

$231 $240 $219 $226 10 Customer Servicing Costs $199 200 $175 $168 $173 $167 $174 Staff Costs Other Administrative Expenses Number of Customers $147 $147 8 50 12 $119 $124 $39 $41 $41 $38 10 100 6 40 $34 $34 $35 8

Amount in $ 30 4 6 0 20 CSC customer ($) per 4 2 10 2 ($51) ($43) ($51)

($54) of Number Customers (Mn) ($56) ($66) -100 ($79) 0 0 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY13 FY14 FY15 FY16 FY17 FY18 FY19 @whitesight_ © 2020 WhiteSight. All rights reserved. 11 Uncover Whitespaces. Lead Change.

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