MAINTAINING A BALANCE OF INTERESTS ANNUAL REPORT | 2019 The draft of the Annual Report is the subject of review by VTB Bank's Supervisory Council and further approval by the Annual General Meeting of Shareholders in accordance with the time limits set by the law of the Russian Federation. Contents VTB Group Today 4 Corporate Governance 98 Values 5 Overview of the Corporate Governance System 98 VTB Group at a Glance 5 General Meeting of Shareholders 103 VTB Group’s Presence 6 Supervisory Council 106 VTB Group’s Structure 8 Management Board 132 VTB Group’s Competitive Advantages 10 Control and Audit 140 Ownership Structure 12 Investor Relations 150 Stock Exchange Listings 13 Disclosure Policy 159 Key Financial Highlights 14 Sustainable Development 162 Statement of the Chairman Personnel 162 of the Supervisory Council 16 Responsible Resource Management 164 Social Projects 166 Statement of the Financial Statements 170 President and Chairman of the Management Board 18 Responsibility Statement 170 Consolidated Financial Statements under IFRS 171 Management Report 22 Annexes 182 Russian Economy and Banking Sector 22 Share Capital 182 2019 Key Events 26 Dividends 183 Strategy 34 Report on Compliance with the Principles Results Overview 41 and Recommendations of the Corporate Risk Management 82 Governance Code 186 Digital Transformation 94 Bank Details and Contacts 214 1 THE SCALE OF FORWARD-LOOKING SOLUTIONS 18 countries PRESENCE OF VTB GROUP BANKING AND INVESTMENT-BANKING BUSINESS 1.7 thousand VTB GROUP BRANCH NETWORK IN RUSSIA Annual Report / 2019 1 2 3 4 5 6 7 8 VTB Group Today VTB Group Today VALUES WE VALUE WE WORK WE ARE WE ARE WE CONTINUOUSLY OUR CUSTOMERS AS A TEAM RESPONSIBLE PROACTIVE IMPROVE FOR OUR RESULTS OUR PERFORMANCE We put We respect We are result-, We are not indifferent We are open our customer and trust not process-oriented. to what we are doing. to change. needs first. each other. Each of us We contribute We start change We trust We support is responsible proactively with ourselves. our customers each other for our contribution when dealing with We have no fear and strive to earn and help to the common shared tasks. to experiment. MISSION their trust. our colleagues goals. We go beyond We listen grow. We openly discuss our formal duties. We help people to make their plans a reality by creating to our customers We achieve our successes the best financial solutions. We are a team of professionals, working and act upon common goals. and failures. for the benefit of our customers and the country as a whole. their feedback. Credit ratings VTB GROUP AT A GLANCE 2019 of VTB Bank IDENTITY VTB Group is the leading Russian financial institution with a strong presence in key international markets. 18 countries 1.7 thousand 14 million VTB Group worldwide branch network in Russia clients in Russia BBB– 61 % 159 thousand 82 thousand ordinary shares individual employees VISION held by the Russian shareholders Federation A universal financial group that is developing both dynamically and sustainably, one that is focused on being the first-choice Вaa3 financial partner for its customers, and which provides the most convenient and cutting edge solutions to their needs. No. 1 No. 1 18 thousand best investment bank best broker ATMs in Russia in Russia in Russia ruAAA 4 5 Annual Report / 2019 1 2 3 4 5 6 7 8 VTB Group Today VTB GROUP’S PRESENCE VTB Group includes Russian and foreign commercial banks as well as financial companies. VTB Group is structured as a holding company, which envisages a unified strategy for the development of Group companies, a single brand, centralised financial management and risk management and unified control systems. Russia In Russia, the Group performs banking operations through a parent company (VTB Bank) and a number of subsidiary banks – Vozrozhdenie Bank, West Siberian Commercial Bank, Belarus Sarovbusinessbank – as well as through United Kingdom the Post Bank joint venture. Germany Kazakhstan As of the end of 2019, the Group’s banking Switzerland Austria and investment banking business was active Georgia in 18 countries around the world. Outside Russia, Bulgaria the Group operates through eight subsidiary banks Armenia Italy located in Germany, the United Kingdom, Armenia, Azerbaijan Belarus, Kazakhstan, Azerbaijan, Georgia and Angola and through two representative offices located China in Italy and China, as well as two VTB branches Cyprus VTB GROUP’S GLOBAL NETWORK in China and India, a branch of VTB Bank (Europe) in Austria and a branch of VTB Capital in Singapore. IS UNIQUE TO THE RUSSIAN The Group’s investment banking division conducts BANKING INDUSTRY operations with securities and provides financial India advisory services in Hong Kong, while also Group companies provide services in the CIS, conducting investment banking services in Bulgaria Vietnam Europe and Asia, enabling the Group to facilitate and offering commodities financing in Switzerland. international partnerships and promote Russian The Group also has an associated bank in Cyprus. companies aiming to engage with global markets. In addition, VRB Bank, a joint venture between VTB The Group’s international operations enable and a Vietnamese bank, conducts banking activities diversification and increased profitability from in Vietnam. its transactions in high-margin markets. The Group operates in all major segments Singapore of the financial market. Corporate-Investment AS OF THE END OF 2019, Business, Medium and Small Business and Retail Business are the Group’s global business lines, THE GROUP’S BANKING AND which specialise in servicing various client segments. INVESTMENT BANKING BUSINESS WAS ACTIVE IN Angola COUNTRIES AROUND 18 THE WORLD 6 7 Annual Report / 2019 1 2 3 4 5 6 7 8 VTB Group Today VTB GROUP’S STRUCTURE KEY CHANGES IN THE STRUCTURE OF VTB GROUP IN 2019 According to VTB Bank’s Development Strategy, one of its key priorities is to strengthen the positions of VTB Group banks in the retail banking market VTB GROUP and to attract customer deposits. In an effort to achieve this, VTB Bank acquired West Siberian Commercial Bank and Sarovbusinessbank During the reporting year, VTB Bank worked on the integration VTB BANK in January 2019. of West Siberian Commercial Bank and Sarovbusinessbank, • Sarovbusinessbank is one of the leading as well as Vozrozhdenie Bank, which was acquired in 2018, banks in the Nizhny Novgorod region. into VTB Group. Vozrozhdenie Bank VTB Capital Holding VTB Factoring VTB’s acquisition of Sarovbusinessbank enabled the Group to increase its base of active retail These efforts included the following: clients in the Nizhny Novgorod region (about 183 thousand active retail clients) and to greatly BM-Bank VTB Forex VTB Pension Fund increase its market share in the region in terms of retail deposits and retail lending. • West Siberian Commercial Bank is one of the Technical and legal concepts were prepared leading banks in the Tyumen region and also for the integration; VTB Bank (Belarus) VTB Pension administrator VTB Real Estate has a significant presence in the Yamalo-Nenets and Khanty-Mansi autonomous districts (333 thousand active retail clients). With these acquisitions, VTB Group bolstered its branch VTB Bank (Armenia) VTB DC VTB Specialised Depository network in the Nizhny Novgorod and Tyumen regions, its base of salary clients (more than Corporate actions were taken to buy back shares 314 thousand individual salary clients) and its client from minority shareholders in accordance with base among small and medium-sized enterprises VTB Bank (Kazakhstan) Business-Finance VTB Registrar legal requirements; (SME) (about 24 thousand SME clients). VTB Bank (Azerbaijan) VTB Leasing The management teams at subsidiary banks were strengthened (representatives of VTB Bank joined the banks’ Boards of Directors VTB Bank (Georgia) and Management Boards); VTB Bank (Europe) VTB Group’s standards for client segmentation, financial reporting and business planning were introduced; Banco VTB Africa In January 2019, West Siberian Commercial Bank Sarovbusinessbank and West Siberian Commercial Bank An analysis was carried regarding the support and control were included in VTB Group processes for further alignment with VTB standards. Sarovbusinessbank consolidation perimeter 8 9 Annual Report / 2019 1 2 3 4 5 6 7 8 VTB Group Today VTB GROUP’S COMPETITIVE ADVANTAGES Enable the Group to support and strengthen its market positions VTB GROUP CLIENTS Strong market positions in Russia – With an expansive international Strong relationships with leading Leading positions in retail banking Sizeable capital creates potential 1.9 thousand a leading, systemically important bank, network, the Group has a unique Russian companies in key economy services, a leader in the market for sustainable asset growth groups of companies of holds a significant share of the banking opportunity to serve Russian industries of investment products for individuals and enables the Bank to finance large Corporate-Investment system’s total customer accounts clients across the globe companies Business segment and deposits and total assets 513 thousand companies of Has a large branch network A diversified universal banking Corporate-Investment Business division Brand awareness and state interest A professional team Medium and Small and a broad client base business with significant market VTB Capital provides ensure financial strength with a client-oriented approach Business segment shares in various segments a full range of services and increased customer confidence