vtb annual report 2008

2008

to new heightsFrom solid foundations

Annual Report

Identity

VTB Group is the leading Russian financial institution with global

presence and scale.

Vision

VTB will be a champion in all our target markets.

Mission

To provide world-class financial services for a sustainably

better future for our customers, our shareholders and our

society.

Values

Customer confidence. Our customers’ confidence is our most

important value.

Reliability. Our prominent position in financial markets, our

international expertise and our global scale guarantee our

strength and reliability.

Transparency. Our business is open and transparent with

a focus on partnership and cooperation.

Versatility. Our expertise in different financial areas allows us

to offer to all our customers comprehensive and sophisticated

solutions.

Team spirit. Our dedicated team of professionals has the

advantage of the synergy of knowledge, potential, energy and

creative insight of each team member.

Our Mission

2 Statement of the Chairman of the Supervisory Council

Dear shareholders, clients and partners,

2008 will go down as a year of global financial crisis

unprecedented in both its scale and nature. Last year

began with optimism but ended amidst extremely

uncertain prospects. The growing tendency of capital

outflow from developing markets that started at

the beginning of 2009, combined with the record-

breaking drop in oil prices, indicated that the Russian

economy was not immune to this crisis. The worsening

situation on foreign markets has further exacerbated

the economic fallout from the crisis and it has

impacted all the world’s leading countries without

exception. Given these conditions, the Russian

government began introducing anti-crisis measures

to ease the pressure on the domestic market. These

measures were intended to support liquidity in

the banking sector, the bank loans system and the

operating capacity of business.

The stability of Russia’s financial sector is a key

focus of the government’s anti-crisis policies.

In October 2008, a new law on “Additional

Measures for Supporting the Financial System of

the Russian Federation” was passed to provide

Annual Report 2008

Ph

oto

xp

ress

3

Statement of the Chairman of the Supervisory Council

assistance to the banking sector. With it, the

share of government reserves in the liabilities of

the banking sector has grown from 0.2% to 12%.

In the fourth quarter of 2008, in accordance with

this law, VTB received a subordinated loan of 200

billion roubles. VTB has used these funds to finance

its customers in core industries and to support the

interbank market.

It is this support from the Russian government

that allows VTB to play a key role as a state agent,

providing lending support and maintaining liquidity

in the vital sectors of the Russian economy. From

September to December 2008, the Bank provided

over 800 billion roubles of financing to the real sector

of the economy.

VTB has taken measures to weather the current

downturn, including revising its loan policy, adopting

new risk management protocols and optimising

operations to handle troubled loans.

Throughout the year, the Supervisory Council worked

closely with the Management Board. We particularly

focused on updating our corporate governance

system to reflect international best practice, which

is crucial for the cooperation of all our groups

of shareholders.

In 2008, VTB’s Supervisory Council approved

a Code of Corporate Conduct, a Code of Ethics

and Regulations on Information Policy. The next step

in creating a quality governance system will be the

planned increase of the number of independent

directors on the Supervisory Council from 2

to 4 in 2009. This recommendation will be

proposed at the Bank’s Annual General Meeting

of shareholders.

The economic outlook for the global economy

remains uncertain, with projected negative GDP

growth for 2009 in many economies, including

Russia. VTB remains focused on maintaining its

fundamentals to ensure the Bank’s stability.

I would like to extend our gratitude to our employees,

clients and shareholders for their continued support

and to assure everyone that VTB remains intensely

focused on delivering on its strategy and objectives

in these turbulent times.

Deputy Prime Minister of the Government of the Russian Federation — Finance Minister of the Russian Federation,Chairman of the Supervisory Council of JSC VTB Bank

Alexei Kudrin

4

Annual Report 2008

Dear shareholders, clients and partners,

In 2008, we witnessed fundamental changes in

the global economy. By the second half of the year,

it became clear that the crisis was international and

that Russia would not be immune to it. Massive shifts

in international financial markets and in the banking

sector virtually shut down capital markets, caused an

acute need among Russian companies for short-term

financing and, correspondingly, slowed growth rates.

The banking sector underwent a shift in its priorities,

and many domestic banks found themselves unable

to take on new lending risks. VTB, however, remained

resilient in this difficult environment and maintained

its strategic vision, while simultaneously introducing

significant innovations to its operations.

Despite the extremely negative environment,

the Bank ended 2008 in the black. VTB’s net profit

was US$ 212 million. At the same time, the Group’s

assets grew 36% to US$ 126 billion. All of VTB’s

divisions showed stable growth, confirming the

Group’s status as one of Russia’s leading financial

institutions.

The impressive growth in VTB’s assets was primarily

due to the high growth of its credit portfolio which

increased more than 50% in 2008 to US$ 90.2 billion.

We experienced growth, not only in the relatively

favourable conditions in the first half of the year,

but also during the difficult second half. As a result,

VTB’s market share in Russia’s corporate lending

segment grew from 10.7% to 12.7%. In the retail

segment, VTB showed equally impressive results,

with a market share of 8.8%, compared with 5.9% at

the end of 2007.

Statement of the President and Chairman

5

Statement of the President and Chairman

5Given the limited access to liquidity, one of the

Group’s key goals became attracting client funds

to supplement and expand its deposit base. Thanks

to its strong market position, high brand recognition

and targeting, VTB achieved retail deposits growth of

nearly 13% year-on-year. With this increase, VTB has

strengthened its position as the number two bank

in this market segment in Russia. Retail clients have

confidence in the Bank’s dependability and have

shown a high degree of loyalty to the Bank. This trust

is extremely important to us and we are determined

to justify it by improving the quality and range of our

products and services.

Given the unfolding crisis, the growth in retail

deposits was an affirmation of VTB’s strategy

to develop actively its retail business. By the end

of 2008, the Group’s retail network consisted

of over 500 offices across the country. The process

of expanding our retail network is now complete and

we believe this foundation will help us to expand

our position in this market further.

In the corporate segment, due to the significant

devaluation of the rouble in the second half of 2008

and limited access to funding sources in the market,

there was a slight decline in corporate clients’

deposits. The financing resources made available

through state support of the banking sector, however,

ensured the stability of VTB’s funding sources.

In April 2008, the Group launched an investment

banking division. In less than a year, we have

created an effective investment bank with

a professional team of 500 that offers the full

spectrum of investment banking services. Even

though the crisis has necessitated revisions to its

development plan, it has already become a leading

player in several key market segments. Start-up

expenditures were substantially less than expected

and, given the significant growth in revenues from

this division, we expect to receive a return on our

investment sooner than originally planned.

The high volatility of the financial markets and the

worsening situation among Russian borrowers

has required us to take appropriate and timely

steps to control and minimise risks. Our approach

to lending has changed significantly, with stricter

requirements on new borrowers. Our risk-monitoring

system for existing clients’ liabilities has been

updated, and the process for working with non-

performing debtors has been optimised with

the creation of the Debt Centre, a specialised

company within the Group. We simultaneously

centralised our data collection system, introduced

an early-warning mechanism and sped up the

decision-making process for handling non-performing

assets. These measures have all contributed to the

Group’s current stability.

Reducing costs has become a priority area and is

seen as an important stabilising factor. VTB has

implemented a series of measures to optimise

operating expenses. Specifically, administrative

costs have been reduced and a moratorium

on hiring has been introduced throughout the entire

Group. There have been headcount reductions

at several divisions of VTB. Given the difficult market

conditions, the Bank decided not to pay out bonuses

to the Management Board in 2008. Despite the

investment required to develop our retail network

and launch the investment bank, the Group was

able to improve the ratio of costs to core income

in its primary business, lowering it to 51.9%,

compared with 63.7% at the end of 2007.

2008 tested the strength of the entire Russian

banking system. 2009 will be just as challenging,

with the potential risks of a further deterioration

in the financial situation for companies and an

increase in unemployment. These factors directly

impact our lending risk and the amount of funding

available to the Bank and we have therefore

focused our attention on the issue of capitalisation.

The Russian government has declared its

commitment to increase VTB’s Tier 1 Capital by

6

Annual Report 2008

up to 200 billion roubles as part of its efforts to

recapitalise the banking sector. This will help the

Group expand its loan portfolio and continue to

support the Russian economy. A new share issue

will be considered at the Annual General Meeting

of shareholders in June 2009. We believe that the

process of increasing the Bank’s capital could be

completed by October 2009.

2009 will be a difficult year for the Russian

economy, but we plan to continue financing the real

domestic economy and providing the necessary

liquidity to the market. One of our priorities in 2009

is to preserve our client base and provide support to

clients operating in difficult market conditions. We

shall continue to modernise our risk management

system and concentrate our efforts on controlling

expenses and the quality of assets. I am certain that

the anti-crisis measures that the Bank is adopting

will help us successfully overcome this period of

instability and that, ultimately, we shall emerge from

this crisis stronger than ever.

I would like to express my gratitude to our colleagues

for their professionalism, hard work and cooperation.

I would also like to thank VTB’s shareholders, clients

and partners for their support and I wish you all

success in 2009.

VTB Bank President and Chairman of the Management Board

Andrei Kostin

7

1. VTB Group highlights 2008 10

1.1. Financial and operating highlights 10

1.2. VTB Group's market position in Russia 11

1.3. Key events in 2008 12

2. Overview of the Russian economy and banking sector 13

3. Review of financial performance 16

4. Operating performance in 2008 21

4.1. VTB Group structure 21

4.2. Corporate business division 23

4.3. Retail business division 29

4.4. Investment banking division 35

4.5. Treasury operations 36

4.6. Other financial services 37

4.7. Strategic objectives for the Group 38

5. Risk management and internal controls 40

5.1. Risk management policy, organisation and structure 40

5.2. System of internal controls 46

6. Corporate governance 52

6.1. Overview of the corporate governance system 52

6.2. The Supervisory Council of JSC VTB Bank 54

6.3. The Management Board of JSC VTB Bank 61

6.4. Remuneration of members of the Supervisory Council and the Management Board 66

6.5. The President and Chairman 66

6.6. The Group Management Committee 66

7. Corporate social responsibility 69

7.1. Employees 69

7.2. Health and safety 70

7.3. Customers 70

7.4. Shareholders 70

7.5. Community support 71

8. Management report 74

9. Responsibility statement by management 79

10. Summarised consolidated financial statements in accordance with IFRS 80

11. Summarised financial statements in accordance with RAS 90

12. Transactions of JSC VTB Bank 101

12.1. Major transactions of JSC VTB Bank 101

12.2. Interested party transactions of JSC VTB Bank 101

13. Other Group information 102

13.1. Main correspondent accounts 102

13.2. Licences 102

13.3. Membership of non-profit organisations 103

13.4. Contact information 104

14. Shareholders’ information 110

Contents

From astute insight

8

From astute insight

VTB played a special role in supporting the Russian economy as one of the cornerstone banks. The Bank significantly expanded its volume of lending to strategically important companies. This lending was funded by the State in order to support key sectors of the Russian economy.

to super flight

10

Annual Report 2008

1.1. Financial and operating highlights

1. VTB Group highlights 2008

2004

2005

2007

2006

2008

17,810

36,723

92,609

52,403

125,848

Total assets, US$ million

2004

2005

2007

2006

2008

10,722

20,533

60,021

30,235

90,208

Loans and advances to customers (gross), US$ million

2004

2005

2007

2006

2008

208

511

1,514

1,179

212

Net profit, US$ million

2004

2005

2007

2006

2008

2,709

5,269

16,501

6,992

13,347

Total shareholders’ equity,

US$ million

2004

2005

2007

2006

2008

6,024

12,767

37,098

19,988

37,503

Customer deposits,

US$ million

In 2008, the Group's assets grew 35.9% to US$ 125.8 billion. Total loans up 50.3% year-on-year to US$ 90.2 billion, reflecting strong increases in both corporate and retail lending.

1. Data on VTB Group are presented in accordance with international

accounting standards.

1

11

1. VTB Group highlights 2008

11Key performance indicators

2004 2005 2006 2007 2008

Return on assets (ROA) 1.5% 2.4% 2.6% 2.2% 0.2%

Return on equity (ROE) 8.2% 17.7% 19.7% 12.3% 1.3%

Cost/Income* 65.2% 54.0% 50.8% 53.6% 80.1%

Cost/Core income** 74.6% 68.6% 66.3% 63.7% 51.9%

* Excluding cost/income from non-banking activities.

** Core income includes net interest income and net fee and commission income before provisions and excluding one-off items. Excluding cost from

non-banking activities.

1.2. VTB Group's market position in Russia

2004 2005 2006 2007 2008

Segments Market share Rank Market share Rank Market share Rank Market share Rank Market share Rank

Corporate loans 6.8% 2 9.4% 2 9.0% 2 10.7% 2 12.7% 2

Corporate accounts and deposits 4.5% 2 7.4% 2 8.7% 2 10.2% 2 10.2% 2

Retail loans 1.3% 10 1.5% 6 2.6% 4 5.9% 3 8.8% 2

Retail accounts and deposits 2.8% 2 5.2% 2 4.7% 2 4.8% 2 5.7% 2

Source: VTB Bank estimates are based on RAS financial results of VTB Bank, VTB24 and VTB North-West, Central Bank of Russia data. VTB includes

in its estimates The Societe Generale Group consisting of Bank Societe Generale Vostok, Rosbank, Rusfinans, Deltacredit. Excluding Rosbank from

Societe Generale’s results, VTB ranked 3rd by the size of the retail portfolio in 2006 and 2nd in 2007.

Operational network and personnel, at year end

Long-term credit ratings of VTB Bank

2007 2008

Points of sale in Russia and the CIS 932 1,020

Points of sale in Russia 583 693

of which VTB24 328 504

Employees (total) 35,945 41,992

Employees (in Russia) 29,976 34,189

2004 2005 2006 2007 2008 2009*

Standard and Poor’s BB+ BBB BBB+ BBB+ BBB BBB

Moody’s Investors Service Ba1 Baa2 Baa2 Baa2 Baa1 Baa1

Fitch Ratings BBB– BBB BBB+ BBB+ BBB+ BBB

* as of 20 May 2009

12

Annual Report 2008

1.3. Key events in 2008

January • VTB Bank received an “Elite Quality Recognition Award” from JP Morgan Chase Bank N. A. for the high level

of interbank payments in US dollars made between 2000 and 2006.

• Global Custodian Magazine assigned the highest rating to VTB Bank. The rating is conducted annually according

to clients’ opinions of the quality of services provided by custodians. VTB is the only Russian banking depositary

to have received the highest rating.

February • The Bank opened a representative office in Almaty (the Republic of Kazakhstan) and a branch in New Delhi (India).

• VTB received a banking licence and opened a branch in Shanghai, China, given its experience in cooperation with

Chinese banks and its leading position in servicing foreign trade between Russian and China.

• Euromoney Magazine named VTB the Leading Real Estate Commercial Bank in Russia 2007.

• At the annual ceremony of europaproperty.com, VTB was recognised as “Russian Bank of the Year” for work with the

commercial real estate in 2007.

March • A new branch of Vietnam-Russia Joint Venture Bank (VRB) was opened in Ho Chi Minh (Vietnam).

• VTB Bank launched a new investment bank focusing on debt and equity securities issuance, corporate finance,

direct investments, asset management, M&A and ECM advisory services in Russia and abroad.

April • VTB’s website, devoted to the Bank’s IPO, was recognised as “The Best Corporate Site” at the IPO Olympus 2007

ceremony.

• Global Finance Magazine rewarded VTB for the highest efficiency achieved by Russian banks in the FOREX market.

• VTB Bank was awarded the “Financial Olympus 2007” National Award for the best corporate bank in the category

“Results and Success”.

• VTB received the Moscow Mayor award for active participation in implementing municipal social programmes.

May • The Bank placed the largest single tranche Eurobond issue in the history of VTB, worth US$ 2 billion in

the international capital markets and the largest ever made by a financial institution from the CIS and CEE region.

• VTB Bank won the “Capital Markets Elite” National competition in 2007, organised by the National Association

of Capital Markets Participants, in the “Best Custodian Bank” category.

June • VTB issued a EUR 1 billion Eurobond at a fixed rate of 8.25% maturing in June 2011, which is the largest euro-

denominated issue by an emerging market financial institution.

July • Deutsche Bank AG Awards for the quality of arranging payments in 2007 in two currencies – US dollars and Euros

(US$ “STP Excellence Award” and EUR “STP Excellence Award”).

August • The Republic of Kazakhstan’s Agency for Regulation and Supervision of Financial Markets and Financial

Organisations granted an approval to open VTB Bank (Kazakhstan).

October • VTB Bank completed the 100% consolidation of Bank VTB North-West shares, an important step in the programme

for integrating the bank within VTB Group and developing the banking business in the North-West region.

• VTB Bank and China Exim Bank signed an Individual Loan Agreement exceeding US$ 18.5 million within the

framework of the Third Russian-Chinese Economic Forum. The agreement is designed to develop mutually rewarding

interbank relationships, increase Russia-China trade turnover and enhance the financing of the Russian import of

telecommunications equipment and services from China.

• “The Energy of Success”, VTB’s corporate magazine, was voted “2008 Best Corporate Title for Customers” at the 5th

Anniversary All-Russia Corporate Press Forum, Corpress 2008.

November • VTB Bank signed cooperation agreements with Banco de la Nacion (Peru), Banco de Comercio Exterior (Bancoex,

Venezuela), the Cyprus Stock Exchange and Sumitomo Mitsui Banking Corporation Europe Limited, aimed at further

developing and strengthening foreign trade relationships between Russia and other countries.

• VTB Bank received custodian status for Russian companies under the Bank of New York Mellon GDR Program, thus

becoming a fully-fledged partner of global custodians.

December • “The Energy of Success” was voted the best in the Corporate Newsletter category at the 9th International PROBA-IPRA

Golden World Awards.

• VTB completed the acquisition of a 51% stake in AF Bank (Azerbaijan).

13

2. Overview of the Russian economy and banking sector


In the first half of 2008, high global oil prices fuelled

the growth of the Russian economy which in turn

led to strong growth in industrial production, and

increases in capital investments and consumer

spending. These positive trends began to reverse

however, in the second half of 2008, with the onset

of the global financial crisis.

Despite the impacts of the economic turmoil, Russia

ended 2008 with GDP growth of 5.6% in real terms.

Industrial production peaked in April 2008, but

growth fell to 2.1% for the reporting period of 2008,

led primarily by a reduction in demand from exporters

and a sharp decline in oil and metals prices.

While in the first half of 2008 the rouble strengthened

against the dollar, this trend was reversed in the

second half of the year, resulting in a managed rouble

devaluation. The pressure on the rouble came from

the more than 60% decline in oil prices in the second

half of the year. A hike in inflation resulted from

record mineral resources prices in the first half of the

year and expectations of rouble devaluation in the

second half. According to Rosstat, inflation rose from

11.9% in 2007 to 13.3% in 2008.

The net capital outflow from the Russian private

sector reached US$ 130 billion in 2008, replacing a

record capital inflow of US$ 83 billion in 2007. This

was primarily due to changes in investment sentiment

and the lack of access to international capital markets

for Russian issuers.

In 2008, the federal budget surplus totalled US$ 68

billion (4.1% of GDP). The gross amount of reserves in

the Reserve Fund and Welfare Fund, which were first

established as the Stabilisation Fund, increased from

US$ 157 billion in 2007 to US$ 225 billion in 2008.

According to the Central Bank, Russia's gross foreign

debt increased US$ 19 billion to US$ 484.7 billion

as at 31 December 2008. Government debt declined

US$ 14 billion in 2008 while private sector debt

increased US$ 33 billion. In terms of GDP, gross

foreign debt declined from 36% of GDP in 2007 to

29% of GDP at the end of 2008.

In 2008, the Russian banking sector was hit by

the global financial crisis and faced the problems

of a declining economy, rising credit risk and slowing

growth rates.

World average

Euro area

USA

United Kingdom

Central and

Eastern Europe

Russia

4.9%

1.9%

2.8%

2.8%

5.8%

7.3%

Real growth of Russian GDP compared with other countries during 2004–2008, CAGR

Source: Data of the IMF World Economic Outlook Database

In the first half of 2008, high global oil prices fuelled the growth of the Russian economy. These positive trends began to reverse however, in the second half of 2008, with the onset of the global financial crisis.

14

Annual Report 2008

2008

2007

2006

9.1

2.1

5.6

21.1

6.3

8.1

16.7

6.3

7.7

Capital investments

Industrial production

GDP

Source: Data of the Russian Ministry of Economic Development

Growth of GDP, industrial production and capital investments, %

2008

2007

2006

77.8

88.3

83.7

29.4

44.7

48.4

50.9

37.4

39.0

Total debt

Amount of internal debt

Amount of foreign debt

Source: Data of the Central Bank of Russia and the Ministry of Finance

of the Russian Federation

Russia’s national debt, US$ billion

The banking sector’s total assets increased 39.2%

compared with 43.3% growth in the previous year,

due to the allocation of funds by the Central Bank

of Russia (CBR) and Vnesheconombank (VEB) in the

form of unsecured and subordinated loans.

A significant decrease in the value of the rouble

against the world’s leading currencies had a negative

impact on customers’ account balances at the end of

2008. Corporate deposits increased 24.2%, and retail

deposits were up 14.5%, compared with increases

In 2008, the Russian banking sector was hit by the global financial crisis and faced the problems of a declining economy, rising credit risk and slowing growth rates.

of 76.2% and 36.0% respectively in 2007. The share

of foreign currency deposits increased in 2008 as a

result of significant currency exchange rate changes.

While, in 2007, corporate deposits in foreign

currencies accounted for 29.6% of total deposits and

retail deposits for 13%, in 2008 these figures were

37.3% and 26.7%, respectively.

The liquidity crisis in the international financial

markets in August 2007 affected banks’ ability to

attract relatively low-cost financing from abroad.

At the same time, it was a limiting factor for the

growth of banks’ loan portfolios. In addition, banks

reconsidered their credit assessment approaches

due to the developing negative trends in the Russian

economy, particularly in the construction and

retail sectors. In 2008, loans provided to corporate

customers and to individuals increased 35.6% and

35.2%, respectively.

15


2006

20047,137

947

178

20059,750

1,242

262

14,046

1,693

372

200720,125

2,672

508

200828,022

3,811

409

Assets

Equity

Net profit

Source: Data of the Central Bank of Russia

Banking system indicators, RUB billion

The state has already provided, and continues to

provide further substantial support to the financial

sector in the form of loans to banks and private

institutions.

2008

2007

2005

2006

2004

4,017

13,000

2,971

1,179

9,586

4,275

2,065

619

5,966

3,269

Individual loans

Corporate loans*


Russian banking sector loan portfolio, RUB billion

2008

2007

2005

2006

2004

5,907

8,788

5,159

2,755

7,074

2,721

3,794

1,977

4,015

2,030

Individual deposits

Corporate deposits**


Russian banking sector customer deposits, RUB billion

* Including non-banking financial institution, state financial organisa-

tions and non-budgetary funds, excluding promissory notes.

** Including budgetary funds, state non-budgetary funds, current and

savings accounts of companies and organisations, settlement accounts

and deposits of legal entities, factoring and forfeiting transactions.

16

Annual Report 2008

3. Review of financial performance

Net profit of US$ 212 million.

Total loans up 50.3% year-on-year to US$ 90.2

billion, reflecting strong increases in both corporate

and retail lending

Total customer deposits stable at US$ 37.5 billion,

with retail deposits up 12.8% to US$ 12.1 billion

Core income of US$ 5.2 billion, a 70.9% increase

year-on-year

Net interest margin up to 4.8% from 4.4% in 2007

Provisioning charge, as a proportion of average gross

loan portfolio, up to 3.2% from 1.3% in 2007

Total BIS capital ratio2 at 17.3%1

Net interest income before provisions

Interest income grew 82.1% in 2008 to US$ 9,809

million from US$ 5,387 million in 2007. The main

source of interest income, which accounted for 88.3%

of the total, was loans granted to VTB clients. Income

from loans to VTB customers grew 101.3% year-on-

year to US$ 8,682 million from US$ 4,314 million, due

to an increase in the credit portfolio of the Group as

well as an increase in the weighted average interest

rate from 10.4% to 11.3%. In 2008, interest income

2. Bank for International Settlement capital ratio is the key figure for

international banks. Expressed in %, it is the ratio between their capital

and their risk-weighted position for regulatory purposes.

from loans to customers grew more than twice as fast

as the loan portfolio. Other interest income received

from other banks and securities increased 5.0% to

US$ 1,127 million.

Interest expense increased 85.2% in 2008 to

US$ 5,242 million from US$ 2,831 million in 2007.

The increase in interest expense was mainly due

to the overall deterioration of the economic situation

and, as a result, the higher cost of funding for VTB.

Customer deposits were the main component of

VTB’s interest expense, accounting for 49.7% of the

total. In 2008, interest expense on customer deposits

increased 106.9% year-on-year to US$ 2,608 million

(from US$ 1,260 million). The main driver of the

increase was the higher weighted average interest rate

on deposits, which rose to 6.1% in 2008 from 4.7%

in 2007.

In 2008, interest expense from external borrowing –

debt securities issued (including subordinated debt),

loans due to banks and other borrowed funds –

increased 67.7% to US$ 2,634 million, with 83.1%

growth in the volume of externally borrowed funds.

The cost of external market borrowing remained

practically unchanged in 2008 at 5.7% compared

with 5.6% in 2007, despite worsening economic

conditions in the second half of the year.

As a result, net interest income before provisions

grew 78.7% in 2008, to US$ 4,567 million.

The net interest margin, calculated as a ratio of

net interest income before the provision charge

for impairment to average interest-earning assets,

increased to 4.8% in 2008, compared with 4.4%

in 2007.

17


Net fee and commission income

Total fee and commission income grew 22.3% in 2008

to US$ 779 million from US$ 637 million in 2007.

Fee and commission income was mainly generated

by commissions on settlement transactions, which

accounted for 54% of the total. Income from

commission on settlement transactions grew 34.7%

in 2008 to US$ 419 million. Other major sources of

fee and commission income growth were guarantees

issued and trading finance. The revenue generated

by these items more than doubled in 2008 to US$

145 million (from US$ 66 million in 2007), as a result

of VTB’s efforts to develop its documentary and

guarantee business.

Total fee and commission expense increased 53.8%

in 2008 to US$ 123 million from US$ 80 million in

2007, whereas commission paid by VTB in 2008 on

settlement transactions was US$ 61 million and stood

at US$ 29 million for cash transactions. The increase

in fee and commission expense in 2008 resulted

from the overall growth in the Bank’s operations, in

particular on interbank and currency markets.

Net fee and commission income, excluding the one-

off gain3, increased 17.8% year-on-year in 2008 to

US$ 656 million (from US$ 557 million), mainly due

to the growth of the Bank’s clients’ operations and

the expansion of the client base. 2

Core income

Core income, defined as net interest income

before provisions and net fee and commission

income excluding one-off items3, was up 70.9% to

US$ 5,223 million year-on-year, reflecting strong

top-line growth and improved underlying profitability

in both corporate and retail lending.

3. Depositary appointment fee of US$ 57 million in 2007.

Provision charge for impairment

During the reporting period, VTB Group made

provisions for loan impairment following the

expected worsening economic situation and,

as a consequence, an anticipated increase in

non-performing loans. The Group provisioned

US$ 2.5 billion, or 3.2%, of the average gross loan

portfolio, as compared with 1.3% in 2007.

Gains less losses from financial assets and extinguishment of liabilities

In 2008, the Group received a US$ 41 million

gain from operations with financial assets. This

was primarily as a result of VTB’s effective trading

strategy and risk hedging, as well as the application

of the amendment to IAS 39 “Financial Instruments:

Recognition and Measurement”, which allows the

reclassification of financial assets held for trading to

investment securities held-to-maturity and to loans

and advances to customers or due from other banks,

depending on the availability or lack of active markets

in these securities and the Bank’s intention and

ability to hold them for the foreseeable future or until

maturity. If the reclassification of debt securities had

not been made, the Group would have recognised a

loss of US$ 146 million for 2008 in respect of these

securities.

In addition, a net gain of US$ 349 million from the

buy-back of VTB’s own bonds had a positive impact on

the Group’s net profit in 2008.

Operating expenses

Operating expenses, defined as staff costs and

administrative expenses, grew 39.2% in 2008 to

US$ 2,711 million, as a result of the larger scale of

the Group’s business and continued inflationary

18

Annual Report 2008

pressure in the Russian economy. During the year

under review, the bank opened 176 new retail outlets

and also launched its investment banking business.

Operating expenses grew at a much slower pace than

core income, which reflects the Group’s tighter control

of costs. In particular, VTB postponed its relocation

to a new office, cut its administrative expenses,

carried out headcount reductions in some units

and introduced a moratorium on new hires across

the Group. The cost to core income ratio was 51.9%

in 2008, having improved from 62.7% in 2007.

Net profit

Net profit was US$ 212 million in 2008, compared

with US$ 1.5 billion in 2007. The key factor that

affected net profit was the growth in provisions for

loan impairments. In the fourth quarter of 2008

alone, the Group created provisions of US$ 1,102

million, while the provisioning charge for the whole

year stood at US$ 2,482 million, compared with

US$ 526 million in 2007.

Assets

The Group’s assets increased 35.9% in 2008

and totalled US$ 125,848 million. The key factor

contributing to this increase was the growth in

corporate and retail lending. The share of net loans

and advances to customers as a percentage of total

assets increased to 69.1% at the end of 2008, up

from 63.2% at the end of 2007.

Following a two-fold decrease in the total securities

portfolio to US$ 5,986 million, the share of securities

as a percentage of total assets declined to 7.0%

at the end of 2008 from 14.6% in 2007, the share

of cash and short-term funds – as well as that of

mandatory cash balances with central banks –

increased substantially, reaching 11.5% of total

assets at the end of 2008, compared with 6.5% in the

previous year. This increase was mainly due to the

receipt of funds from the placement of a subordinated

loan with Vnesheconombank in the fourth quarter

of 2008. By the end of the year, the total amount

of cash items on the Group’s balance sheet stood

at US$ 14,162 million.

Loans and advances to customers

The total gross loan portfolio grew 50.3% in 2008

to US$ 90,208 million from US$ 60,021 million.

Loans and advances to customers, net of allowance

for impairment, grew 48.5% in 2008 to

US$ 86,984 million. At the year end, the largest

share of the loan portfolio comprised of the finance

Operating expenses grew at a much slower pace than core income, which reflects the Group’s tighter control of costs.

Loan portfolio breakdown by currency (excluding provisions for impairment) as of 31 December 2008

USD (43.0%)

RUB (53.4%)

EUR (2.4%)

Other (1.2%)

Source: Consolidated IFRS financials of VTB Group for 2008

19


19segment4 (19% of the Group’s gross loan portfolio),

the construction segment (14%), the retail segment

(10%) and the individual loan segment (15%). At the

end of reporting period, mortgages to individuals

made up 49.2% of total loans to individuals.3

The corporate loan portfolio grew 47.2%

year-on-year in 2008 to US$ 77,034 million from

US$ 52,339 million, and accounted for 85.4%

of the Group’s total loan portfolio by the end of 2008.

Loans to individuals grew 71.5% year-on-year in 2008

to US$ 13,174 million.

Loan portfolio quality

The quality of VTB’s loan portfolio

remains adequate, despite the worsening

macroeconomic environment. The share of

overdue and rescheduled loans in the gross

loan portfolio was 2.4% by the end of 2008,

compared with 1.4% at the end of 2007.

The allowance for loan impairment increased

to 3.6% of the total gross loan portfolio

as compared to 2.5% in 2007, while its

coverage for overdue and rescheduled loans

remained at the comfortable level of 147.6%

as at 31 December 2008.

Liabilities

VTB’s liabilities grew 47.8% year-on-year

to US$ 112,501 million in 2008 from

US$ 76,108 million in 2007. At the same time, the

growth in VTB’s resource base was accompanied

by significant changes in its structure. The share of

customer deposits in VTB’s total liabilities decreased

to 33.3% in 2008 from 48.7% in 2007, while the

share of debt securities issued declined to 17.0%

from 21.7%, respectively. Over the course of the year,

these resources were replaced by funds received as

part of governmental support. As a result, the share

4. Includes loans made for M&A, to holding companies, to insurance

and leasing companies, and to other non-bank investment companies.

of subordinated debt in the Group’s overall liabilities

increased to 6.8% from 1.5%, and the share of other

borrowed funds increased to 25.7% from 6.8% at

the end of 2007. The total amount of funds provided

by the government in the form of subordinated debt,

CBR deposits and re-financing funds from VEB was

US$ 28 billion.

Customer deposits

Customer deposits remained unchanged in 2008

at US$ 37,503 million. Retail deposits increased

by 12.8% year-on-year to US$ 12,052 million.

Corporate deposits declined 3.6% year-on-year to

US$ 25,451 million, as a result of the significant

rouble depreciation in the second half of 2008

(about 60% of corporate deposits were rouble-

denominated). The growth of corporate deposits was

also affected by a contraction of corporate funds as

market liquidity tightened.

Customer deposits breakdown by currency as of 31 December 2008

USD (25.5%)

RUB (57.4%)

EUR (15.2%)

Other (1.9%)


20

Annual Report 2008

Debt securities issued

The debt securities issued by VTB Group increased

15.6% year-on-year in 2008 to US$ 19,063 million,

compared with US$ 16,489 million in 2007.

Among the largest public deals during the reporting

year were two Eurobond issues denominated in

US dollars and Euros in the aggregate amount of

US$ 3.3 billion. These bonds were issued within

the framework of the existing Euro Medium Term

Notes (EMTN) Programme, which was registered

in September 2007 to attract debt financing

in the international capital markets.

Furthermore, in May 2008, VTB Bank placed

US$ 2 billion of Eurobonds, despite the prevailing

difficult situation in the global capital markets. At the

time, VTB Bank was the largest issuer of a single-

tranche of Eurobonds completed by any financial

institution in the CIS and Central and Eastern Europe.

The Bank issued a further EUR 1 billion of Eurobonds

in June 2008 which, at the time, was the largest Euro-

denominated bond issue by a financial institution in

emerging markets.

In June 2008, VTB also signed a US$ 1.4 billion

two-tranche syndication loan, with the first

tranche totalling US$ 1 billion and being due in

June 2011, and the second tranche amounting to

US$ 400 million and being due in December 2009.

At the time, it was the largest syndicated loan for

any financial institution in the CIS and Central and

Eastern Europe since the beginning of 2008.

In 2008, VTB Group issued bonds on the Russian

debt market totalling approximately RUB 26 billion.

VTB’s total equity increased 21.5% in 2008 to US$ 20,641 million. At the end of 2008, VTB had a total BIS capital adequacy ratio of 17.3%, up from 16.3% at the end 2007.

Total Equity

VTB’s total equity increased 21.5% in 2008 to

US$ 20,641 million. At the end of 2008, VTB had a

total BIS capital adequacy ratio of 17.3%, up from

16.3% at the end 2007. VTB’s capital adequacy

ratio was materially supported through a VEB

subordinated debt issue in the fourth quarter of 2008

of RUB 200 billion at a rate of 8% and a maturity

of 11 years.

The Tier 1 capital adequacy ratio stood at 10.5% at

the end of 2008, down from 15.0% in the previous

year. The growth of the loan portfolio had an effect

on the capital position which was further affected

by the more than 20% devaluation of the rouble

in the second half of 2008. The effect of the rouble

devaluation on Tier 1 capital was US$ 1.8 billion.

21

4. Operating performance in 2008


VTB Bank Branch in China

(Shanghai) VTB Bank

Representative office in China

(Beijing)

VTB Bank Branch in India

VTB Capital (Namibia)

Banco VTB Africa S.A.

VTB Capital plc Branch in

Singapore3

Vietnam-Russia Joint Venture

Bank4

VTB Group1

Russia

VTB Bank

VTB24

VTB Bank North-West

VTB Capital

VTB Leasing

VTB Insurance

VTB Factoring

VTB Debt Centre

VTB Bank (Ukraine)

VTB Bank (Belarus)

VTB Bank (Armenia)

VTB Bank (Georgia)

VTB Bank (Azerbaijan)

VTB Bank (Kazakhstan)

VTB Bank Representative office

in Kazakhstan


in Kyrgyz Republic

VTB Bank (Austria)

VTB Bank (France)2

VTB Bank (Germany)2

VTB Capital plc (Great Britain)3

Russian Commercial Bank (Cyprus)

Russian Commercial Bank AG

(Switzerland)


in Italy

EuropeCIS

1. Banks, principal financial companies and representative offices of VTB Group.

2. Consolidated in VTB Bank (Austria) results. In 2008, VTB integrated its corporate

business in Europe and formed a sub-holding within VTB Bank (Austria) which included

VTB Bank (Germany) and VTB Bank (France).

3. Consolidated in VTB Capital results.

4. An associated company, not part of VTB Group, but in which VTB exercises

a significant influence due to the size of its shareholding.

VTB Bank was incorporated in 1990 as the Bank of

Foreign Trade of the Russian Federation. Over the past

18 years, VTB Bank has developed into a universal

financial and banking institution with a strong1

presence in Russia and an expanding presence in the

CIS, Western Europe, Africa and Asia, both through

organic growth and a series of strategic acquisitions.

5. The structure of VTB Group as at 31 March 2009.

The Group’s business franchise is divided into three

distinct areas of expertise: corporate, retail and

investment banking. Through its corporate banking

division, the Group provides a broad range of

commercial banking services and products to large and

medium sized companies and financial institutions.

The investment banking division provides services to

leading Russian companies. The Group’s retail banking

division offers a full spectrum of services and products

to retail and small business customers.

4.1. VTB Group structure

VTB Group (“VTB” or “the Group”) includes JSC VTB Bank (“VTB Bank” or “the Bank”) and its subsidiary banks

and companies.

Asia/Africa

5

22

Annual Report 2008

VTB Group international presence (subsidiaries and representative offices, including branches abroad)

Subsidiary bank

Financial company

Representative office

Branch

VTB Capital plc branch

Namibia

India

Singapore

Vietnam

China

Angola

Cyprus

Italy

Austria

Germany

Switzerland

Ukraine

Belarus

Russia

Kyrgyzstan

KazakhstanFrance

Great Britain

Azerbaijan

Georgia

Аrmenia

23


The core of VTB is its Russian banking business,

which is complemented by a geographically

diversified branch network for corporate and

retail services and financial companies. As at

31 December 2008, VTB Group’s Russian branch

network comprised 693 points of sale.

VTB Group’s operations include two subsidiary banks

in Russia, a number of financial companies (VTB

Leasing, VTB Insurance, VTB Capital, etc.), subsidiary

banks in Ukraine, Armenia, Georgia and Belarus, as

well as six banks in Western Europe (Great Britain,

France, Austria, Germany, Cyprus and Switzerland),

a subsidiary bank in Angola and a financial company

in Namibia. VTB Bank also has representative offices

in Italy, Kazakhstan, Kyrgyz Republic and China. VTB

Capital plc (United Kingdom) operates a subsidiary in

Singapore.

In 2008, VTB Group increased its international

presence through the acquisition of AF-Bank6 in

Azerbaijan, the registration of a subsidiary bank in

Kazakhstan (the Group expects to receive a banking

licence in the second quarter of 2009), and the

opening of VTB Bank branches in India (New Delhi)

and China (Shanghai).2

4.2. Corporate business division

The majority of VTB Group’s corporate business is

dedicated to providing banking services to large and

medium sized corporate clients. In 2008, VTB Group

fulfilled the objectives which were established for

its corporate business in spite of changed market

conditions. The Group’s market share in the corporate

lending segment rose to 12.7% from 10.7% in 2007.

Furthermore, despite the prevailing lack of financing

in the market, VTB maintained its market share of the

corporate deposits segment at 10.2%.

In 2008, VTB continued to provide a wide range of

credit products to its corporate clients. VTB Group’s

loan portfolio increased 47.2% year-on-year to

6. Renamed as VTB Bank (Azerbaijan).

US$ 77.0 billion, compared with US$ 52.3 billion

in the previous year, despite the stricter credit policy

introduced by the Bank in the second half of 2008

in response to the developing financial crisis.

In 2008, the Bank showed flexibility in its approach

to the changes in the economy and adapted its

product portfolio to the current needs of its clients.

As a result of the lack of liquidity and limited

lending activity, the Bank experienced an increase

in demand for documentary letters of credit and

bank guarantees in the market. VTB offered a wide

range of banking products and services to its

clients in this area, including an interest charge

on cash cover provided by the client for an import

documentary letter of credit as at the date of

opening and settlement using credit guarantees

based on the specifics of the client’s industry.

Breakdown of corporate loans by industry as at 31 December 2008

Finance (22%)

Тrade and commerce (11%)

Manufacturing (9%)

Building construction (17%)

Metals (9%)

Oil and Gas (6%)

Food and agriculture (3%)

Transport (6%)

Other (17%)


From vast resources

24

From vast resources

Given the limited access to liquidity, one of the Group’s key objectives became attracting client funds to expand its deposit base. Thanks to its strong market position, high brand recognition and targeting, VTB achieved retail deposits growth of nearly 13% year-on-year.

to bright results

26

Annual Report 2008

The Bank utilised the benefits of its Group structure,

and conducted transactions with the participation

of its subsidiary banks.

During the year, VTB Bank introduced a number

of measures to improve its service model for its key

client segments. In particular, the Bank launched

an institute of product managers in order to identify

more efficiently its corporate clients’ product needs.

VTB has further developed the IT infrastructure of

its corporate business. The Bank is undertaking

a number of projects to enable the generation of

necessary information on clients’ transactions

in an online format. In 2009, VTB plans to complete

in its affiliate network the rollout of the complex

automated system for documentary letters of credit

and bank guarantees which is already functioning

in its head office.

Services for large clients

In 2008, VTB had 3,700 large clients, including

financial institutions. During the year, VTB played a

special role in supporting the Russian economy as

one of the cornerstone banks. The Bank significantly

expanded its volume of lending to strategically

important companies. This lending was funded

by the State in order to support key sectors of the

Russian economy. In particular, VTB extended

loans to defence, car manufacturing, transport,

non-ferrous and ferrous metals, oil and coal mining

companies. Among them were NPO Saturn, AutoVAZ,

Rosoboronexport, Mechel, Evraz Group, Russian

Aluminium, UGMK and SUEK. Furthermore, VTB

continued to finance social housing projects, and

provided loans to retail food chains, including

Seventh Continent, X5 Retail Group, Lenta, Dixy and

Holiday. Nevertheless, VTB tightened its lending

policies and reduced lending limits for retail and real

estate sectors, recognising the increased lending

risks, but excluding large national players where it

has fixed individual limits for each company.

In 2008, the Group continued to be involved in a

number of State investment projects and provided

co-financing for the construction of Sheremetyevo-3

terminal complex; infrastructure projects in Sochi

for the Olympic Games; a civil aviation construction

project for Sukhoi Concern, SSJ-100; and a federal

investment programme in Energoatom Concern, the

State nuclear power entity.

In 2008, whilst facing the global financial crisis, VTB

was focused on attracting deposits from its large

corporate customers as one of its priorities. The bank

was particularly successful in attracting deposits from

Top ten corporate lending deals in 2008

Name of client Total deal size Transaction type

ALROSA RUB 44.2 billion Refinancing of short-term liabilities

DON-Stroy Group RUB 16.4 billion Financing of housing construction projects

UGMK-Holding US$ 338.0 million Corporate loan

AFI Development Group RUB 9.9 billion Corporate loan for the construction of the “Moscow-city” complex

RUSAL Krasnoyarsk RUB 9.0 billion Corporate loan

JSC Southern Kuzbass RUB 8.6 billion Financing of working capital needs

JSC Terminal US$ 264 million Financing for the construction of the Sheremetyevo-3 airport complex

NPO “Saturn” RUB 7.4 billion Corporate loan

Sozdanie Investment Group RUB 5.7 billion Financing for the construction of the “Park Pobedy” business centre

AutoVAZ RUB 2.5 billion Corporate loan

FGUP “Rosoboronexport” US$ 112 million

and RUB 2.8 billion

Corporate loan

Source: VTB

27


clients in the nuclear, energy, oil, ferrous metals,

telecommunications and insurance sectors. OGK-3,

Atomenergoproject, Surgutneftegas, MegaFon and the

Agency for Home Mortgage Lending (AHML) were among

its largest clients.

The Bank increased the volume of clients’ overnight

deposits 14 times year-on-year to above RUB 40 trillion

(approximately US$ 1,470 million) and was active in

attracting and placing corporate clients’ deposits using

Reuters-Dealing and BS-Client remote dealing systems.

In 2008, VTB significantly improved its customer

care in order to strengthen its position and further

develop its client relationships. VTB launched several

marketing campaigns to promote its commission-

based products, including documentary letters

of credit and bank guarantees for international

settlement transactions. The Bank also successfully

introduced a pilot programme to sell its products

proactively to customers, aimed at improving its

customer care, shortening the decision-making

process and offering the full range of the Group’s

banking and financial products. VTB has established

cooperation between its corporate banking and the

newly established investment banking business

which allowed it to offer clients the most ‘in-demand’

products and services.

At the end of 2008, the Bank opened a Centre of

Financial Services, a specialised service office in

Moscow for state companies, from which to serve

entities such as Russian Technologies. In 2009, VTB

plans to expand the services of the Centre of Financial

Services to include other large state corporations. This

would allow it to shorten the time required to process

loans and to manage the overall cash flows of state

companies.

Services for medium sized clients

In 2008, the Bank provided services to

27,470 medium sized clients. VTB’s loan portfolio

of medium sized clients increased 1.5 times

year-on-year by 31 December 2008.

Since 2005, VTB has offered a dedicated service

model which provides standard loan products

to medium sized customers at VTB head office

and in branches, thus avoiding duplication. VTB

also offers a wide range of banking products and

services, including the structuring of sophisticated

transactions. The Bank met its internal targets with

regard to the growth of its medium sized regional

corporate customers and grew nearly twice as fast

as the rest of the Russian banking sector in 2008.

The Bank made a range of improvements to its

sales of credit products and advanced its risk

assessment techniques. It has further developed

In 2008, whilst facing the global financial crisis, VTB was focused on attracting deposits from its large corporate customers as one of its priorities.

2007 2008

9,228

16,223

5,000

0

15,000

25,000

Current deposits

Term deposits


Corporate deposits, in US$ million

9,634

16,781

28

Annual Report 2008

its medium sized corporate clients’ operations and

introduced an employee incentive programme tied

to specific goals. In 2009, VTB plans to continue

expanding its product portfolio for medium sized

corporate clients, to increase the attractiveness

of its savings products and to improve the pricing

system for its tariff instruments. The Bank also

expects to improve the customer care model for its

corporate clients.

Services for financial institutions

VTB has traditionally offered a full range of products

and services to financial organisations, including cash

management, interbank lending, trade and structured

finance, custodian and investment banking services

(including arranging of debt issuance, syndicated

lending and broker services).

At the end of 2008, VTB Bank’s network of

correspondent banks comprised more then 2,000

banks in 110 countries and allowed VTB to support

both its clients’ and own banking needs globally.

VTB Bank has historically served as one of the leading

institutions in providing financial services to other

banks and financial organisations. In the autumn of

2008, VTB Bank became one of the key providers of

liquidity on the Russian interbank market. During the

year, VTB Bank focused on developing and optimising

its network of correspondent banks, expanding its

inter-bank cooperation with its foreign counterparties,

as well as its trade finance and syndicated loans

business.

VTB Bank entered into Framework Compensation

Agreement with the Central Bank of Russia to cover

possible losses on the local interbank market and

established money market lines for 104 Russian

financial institutions totalling RUB 49.5 billion as at

the end of 2008. As of 31 December 2008, the total

amount of lines extended by financial institutions to

VTB increased by US$ 1.7 billion to US$ 17.0 billion,

including lines available from foreign banks

of approximately US$ 11.5 billion.

During the year, VTB Bank launched the project to

develop settlement infrastructure for trading and

clearing of commodities of the Non-profit partnership

“Moscow Stock Exchange” and participated in

creating a universal settlement centre which was

developed on the basis of the Clearing and Custodial

Company to support clearing sessions of the

St. Petersburg International Mercantile Exchange.

VTB Bank actively participated in promoting Russian

rouble as a settlement currency for cross-border

trade contracts and intergovernmental projects

among the CIS countries. VTB Bank provides clearing

services in Russian roubles along with the necessary

technical support to its foreign counterparties. As

of 31 December 2008, VTB Bank held 356 Russian

rouble-denominated accounts for non-resident

financial institutions, including banks from the

CIS countries, thus increased the total number by

14 accounts from 2007.

In 2008, VTB Bank raised over US$ 530 million

in the international capital markets for trade

finance transactions. The total value of trade

finance transactions arranged by VTB Bank for its

counterparty banks exceeded US$ 500 million

in 2008. The European Bank for Reconstruction

and Development (EBRD) recognised VTB Bank as

“The Most Active Bank in Financing Exports” in 2008.

By the end of 2008, VTB Bank established over

20 agreements with Export Credit Agencies from

the United Kingdom, Germany, Italy, China, Japan and

other countries to provide medium- and long-term

financing for its corporate customers for a total

amount of around US$ 6 billion.

In the autumn of 2008, VTB Bank became one of the key providers of liquidity on the Russian interbank market. VTB Bank entered into Framework Compensation Agreement with the Central Bank of Russia to cover possible losses on the local interbank market.

29


In 2008, VTB Bank arranged 11 syndicated loans

for a number of banks, including Belagroprombank

(Republic of Belarus), Belgazprombank (Republic

of Belarus), Loko Bank (Russia), Bank Kreschatik

(Ukraine) and BIN Bank (Russia) for a total amount

of RUB 9.4 billion with VTB’s direct participation of

RUB 2.8 billion.

Corporate business priorities in 2009

In 2009, VTB Group intends to maintain its leading

position in the Russian corporate banking segment by:

further improving risk management systems, ranging

from the borrower assessment process to work with

doubtful debtors; introducing an efficient system for

monitoring the current portfolio and pre-empting bad

debt and adopting risk assessment procedures in

accordance with the current market situation;

strengthening control over attracting and retaining

clients’ deposits;

focusing on the quality of its customer base and

building long-term relationships with customers

based on their risk profile, reliability, profitability and

their ability to purchase more services;

increasing cross-selling opportunities, including

within the Group companies;

raising the efficiency of sales processes and

customer care;

growing the efficiency of the branch network;

broadening its product offering and creating a ‘best

in class’ product portfolio, including fee income

products, savings and payments services and

complex solutions;

further improving the quality of its customer service.

4.3. Retail business division

VTB Group is a leading retail banking business

in Russia which offers its services through

a specialised retail bank, VTB24. In 2008, VTB24

served 4.7 million individual clients and 127,000

small business customers in Russia. VTB Group’s

retail business has a national presence, covering

most of Russia through a wide network of branches

and affiliates. The Group is also developing its

retail banking in the fast growing CIS markets. At

the end of 2008, VTB Group served nearly 427,000

clients in Ukraine, Georgia, Armenia and Belarus.

Despite the difficult market conditions, VTB Group

increased its market share in the majority of retail

banking segments. VTB was active in providing

loans, attracting retail deposits, improving its

customer care and developing its service offering.

As a result, VTB’s loan portfolio increased

71.5% year-on-year to US$ 13.2 billion, from

US$ 7.7 billion in 2007.

Following the strong growth in retail loans in 2008,

VTB Group has increased its market share in the

retail lending segment in Russia to 8.8% from 5.9%

in 2007, ranking second among Russian banks by

volume of its retail loan portfolio.

The Group promptly adapted its lending policy in

the retail segment to the new economic conditions

resulting from the global financial crisis and shifted

its priorities towards maintaining the quality of

loan portfolio. In particular, the Bank has tightened

its loan assessment procedures and changed the

terms of providing the majority of its loan products,

especially mortgages.

In 2008, the growth rate of VTB’s retail deposits

remained strong. By the end of 2008, VTB had

The European Bank for Reconstruction and Development (EBRD) recognised VTB Bank as “The Most Active Bank in Financing Exports” in 2008.

30

Annual Report 2008

2007 2008

6,488

1,382

774

5,304

3,247

12,000

0

4,000

8,000

Consumer loans and other

Car loans

Mortgages


Loans to individuals, in US$ million

3,661

attracted US$ 12.1 billion of retail deposits,

compared with US$ 10.7 billion in the previous

year, demonstrating a 12.8% increase year-on-year.

VTB Group was able to utilise government support

to the full and attract additional funds from its

customers, notwithstanding the financial instability

in the market. The Group also benefited from VTB24

launching a number of innovative retail products

in Russia.

VTB Group is the second largest savings bank serving

retail customers in Russia, with a market share

of retail deposits of 5.7% as at the end of 2008,

compared with 4.8% in 2007.

VTB24, the key retail bank of VTB Group in Russia,

is one of the largest lenders, serving retail customers

and small business clients.

VTB24 offers a wide range of banking products and

services to its retail customers

Current accounts, savings accounts and

promissory notes – In 2008, VTB24 introduced

a number of innovative products, such as a

deposit account “VTB24 Growing income”,

which rewards the account holder with a higher

savings rate for keeping money in the bank for

a longer period. VTB24 continued to develop its

products and improve its customer care while

focusing on several client segments. VTB launched

“Privilege”, a programme aimed at its high net

worth clients, following the spin off of the VIP

clients’ business into a separate division in 2007.

“Privilege” offers a specialised service platform

for VIP clients, including dedicated customer care

and relationship management, special offers on

deposits and a loyalty programme with major retail

chains. In 2008, VTB24 opened two offices for

“premium” clients, in Moscow and St. Petersburg.

In 2009, VTB24 plans to open additional

“premium” offices in Moscow and St. Petersburg,

to introduce new standards for VIP services in the

regions, to expand its portfolio of international

services and concierge services, and to offer

property insurance and estate planning.

Mortgage lending – VTB views mortgage lending as

one of its priority areas for development. VTB24 offers

a wide range of mortgage products to retail clients.

In 2008, the average mortgage extended by VTB24

to its retail customers was US$ 97,229. VTB24

significantly upgraded its lending procedures and

optimised its mortgage lending technologies in the

reporting period.

Consumer loans – VTB24 continued to offer lending

services to retail and small business customers

in 2008. VTB24 offers secured consumer loans for

up to RUB 3 million and unsecured consumer loans

for up to RUB 500,000. As at the end of 2008, the

average consumer loan in its loan portfolio was

US$ 5,980. In 2009, VTB24 expects to shorten its

lending terms for retail and small business customers

in order to match the term structure more closely with

its retail deposit portfolio.

31


VTB Group retail deposits market share in Russia, % as at 31 December 2008

Sberbank (51.9%)

VTB Group (5.7%)

Bank of Moscow (2.3%)

Societe Generale Group (2.2%)

Gazprombank (1.9%)

Other (36.0%)

Source: VTB Group analysis. Societe Generale Group figures include the

figures of Societe Generale Vostok, Rosbank, Rusfinans, and DeltaCredit

2007 2008

2,9742,886

9,166

12,000

0

4,000

8,000

Current deposits

Term deposits


Deposits of individuals, in US$ million

7,709

VTB Group retail loans market share in Russia, % as at 31 December 2008

Sberbank (31.3%)

VTB Group (8.8%)

Societe Generale Group (7.5%)

Russian Standard (2.8%)

Bank of Moscow (0.8%)

Other (48.9%)

Source: VTB Group analysis. Societe Generale Group figures include the

figures of Societe Generale Vostok, Rosbank, Rusfinans, and DeltaCredit

Small business loans – In 2008, VTB24 continued

to grow its small business loan portfolio. The

Bank increased its loans 64.8% year-on-year to

RUB 74.3 billion (RAS). VTB24 has partnered with the

Small Business Credit Assistance Fund of the City of

Moscow which guarantees the liabilities of small and

medium sized companies.

Car loans – VTB24 offers loans for purchases of new

and used cars in roubles, US dollars and euros.

The total car loan portfolio more than doubled

year-on-year in 2008.

Bank credit and debit cards – VTB24 nearly

doubled the volume of issued bank cards

to 5 million as at 31 December 2008, including

1.5 million credit cards. The total amount of credit

card debt more than tripled year-on-year in 2008.

VTB24 issues VISA International, MasterCard and

Diners Club International cards. In 2009, VTB

expects to offer insurance protection products

to its credit card customers.

From extraordinary ideas

32

From extraordinary ideas

In 2008, VTB fulfilled the objective to develop corporate business in spite of changed market environment. The Group’s market share in the corporate lending segment rose to 12.7% from 10.7% in 2007.

to perfected technologies

34

Annual Report 2008

The growth of VTB Group’s retail business in key

market segments was underpinned by a well

structured and attractive product portfolio as well as

marked improvements in its sales efforts. In 2008,

VTB24 conducted an extensive training programme

for its managers aimed at introducing effective

sales techniques and improving customer care.

Furthermore, VTB24 launched an advanced analytical

data storage platform to facilitate further customer

segmentation by its sales managers and the creation

of a targeted product offering which resulted in high

growth volumes in the retail business.

VTB24 achieved further growth in its retail business

by focusing on developing alternative sales channels

whilst increasing the efficiency of its sales operations.

In 2008, VTB24 upgraded one of the largest Internet

banking systems in Russia, Telebank, and installed

1,230 cash machines, increasing the total number of

machines to 2,577 (or 1.6 times year-on-year).

In 2008, VTB24 continued to develop its regional

retail network. The Bank increased the number of

points of sale 176 year-on-year to 504 in total. The

total size of its network has nearly quadrupled in

just two years and has been expanded to 200 cities

in 84 regions of Russia. In 2008, VTB completed

the process of integrating VTB North-West’s retail

customers and small business clients with VTB24’s

client base.

In 2008, VTB24 completed the expansion of its retail

network in Russia. The current size of the retail

network allows VTB to manage its operations more

effectively providing targeted client segments with

easy access to its retail products.

The Bank plans to focus its efforts on optimising

the existing network and further increasing its

efficiency.

The transformation of the regional branch network,

which began in 2007, is expected to result in seven

regional branches, one in each Federal District of

Russia, with the remainder of the regional branches

being designated as regional operating offices.

In 2008, VTB24 converted 20 branches into the

new format and three more branches have been

transferred since the beginning of 2009. VTB24

expects to transfer the 21 remaining branches to the

new format and complete the process by the end

of 2009.

Retail business priorities in 2009

In 2009, VTB is focused on increasing the quality

and efficiency of its loan portfolio including the

generation of fee income. The Group plans to

improve its risk management systems, including

the management of its bad debt. VTB expects

to increase its market share in the retail lending

segment by:

offering short term and more profitable products

(thus limiting the growth of the mortgage lending

segment), adopting a more conservative approach

towards its borrowers and introducing limits for

mortgage lending: withdrawing from offering

construction loans, raising the size of down

payments and introducing variable rates;

VTB24 retail network

2007 2008

Number of points of sale 328 504

Including:

Branches 48 28

Operating offices 268 468

Cash and loan offices 6 1

Cashier points 6 7

ATMs VTB24 1,347 2,577

ATMs VTB Group* 3,036 3,316

* ATMs of VTB Bank, VTB North-West and VTB24

In 2008, VTB24 opened two offices for “premium” clients, in Moscow and St. Petersburg to strengthen its position in VIP segment.

35


optimising procedures for collecting bad debt;

proactively managing its loan rates;

broadening its product portfolio;

increasing the efficiency of its sales and the

quality of its customer care;

identifying and launching alternative sales

channels.

VTB24 also plans to continue growing its client

deposits from retail customers and to increase its

market share in the retail deposits segment by:

boosting the Bank’s activity to attract retail deposits

as a stable, long-term source of liquidity;

proactively managing deposit rates;

increasing the quality of client care.

VTB24 serves as a base for developing the Group’s

retail banking business beyond Russia. The Group

plans to continue leveraging its retail experience and

product knowledge in Russia to develop its position

further and to introduce new, innovative products

and services in the CIS markets.

VTB recognises the differences in serving customers

in the CIS markets based on their size, stage of

development and competitive situation and intends

to grow its retail business in these markets by

attracting deposits, monitoring asset quality and

improving its processes and technologies and risk

management systems.

4.4. Investment banking division

VTB Capital, Investment Business of VTB Group, was

established in April 2008 and has quickly gained a

reputation as one of the leading Russian investment

banks with a strong presence in Russia, Europe and

Asia. VTB Capital has built up a comprehensive team

of professionals with extensive experience in Russian

and international capital markets and has developed

a robust infrastructure for its operations.

The company focuses on arranging and executing

transactions in a vast range of markets, from Fixed

Income and Equities to Commodities and special

situations. Hedging solutions are offered to clients

through an impressive array of derivatives and other

structured products. The top ranked advisory team is

active with ECM, Infrastructure Capital and M&A deals

in Russia and abroad. In December 2008, January

and March 2009, VTB Capital was a top five operator

on the RTS Classic market.

VTB Capital’s DCM team has closed a number of

significant transactions.

VTB Capital Analysts’ team is considered to be one

of the best and strongest on the market. Alexey

Yakovitsky, Elena Sakhnova and Dmitry Skryabin are

in TOP 3 analysts of the All-Russia Research Team

Rating by Institutional Investor.

In November 2008, Investment Business of VTB

Group, VTB Invest, was rebranded as VTB Capital.

In January 2009, VTB Bank Europe plc, which

operates in London and Singapore, was rebranded

as VTB Capital plc. As of the date of this report, all

companies which form VTB Group’s investment

business, including the head office in Moscow and

offices in London and Singapore, are operating under

a unified brand: “VTB Capital”. VTB is planning to

open a new investment banking office in Dubai

in 2009.

In 2008, amid the toughest market conditions in the

living memory, VTB Capital completed a significant

number of deals for its clients and the VTB Group

companies, some of which are listed below:

acted as a Co-Lead Manager of a US$ 295 million

secondary offering for Razgulay Group, one of the

major vertically integrated agro-industrial companies

in Russia;

36

Annual Report 2008

acted as Co-arranger of RUB 50 billion Russian

Railways bonds placements;

acted as the Arranger of RUB 20 billion Russian

Agricultural Bank bonds placement;

successfully Lead Managed the international

placement of the Promsvyazbank Eurobond issue

amid rapidly deteriorating market conditions.

VTB Capital has also become a leading domestic

provider of commodity derivatives in Russia and

the CIS, offering a full range of commodity risk

management services including risk hedging

solutions, lending linked to commodity prices,

hedging of security for debt restructuring and

basis hedging. VTB Capital also offers structured

investment instruments – structured deposits and

notes linked to commodity prices or commodity

indices. VTB Capital offers the opportunity for

western counterparties to get exposure to Russian

risk and investment potential, acting as an

investment channel for such clients.

VTB Capital results in 2008 gained wide recognition

among the professional community. The company

was recognised as the Best Structured House in

CEE (EMEA Finance magazine) and Investment Bank

of the year in “Result and Success” (RBC).

Investment Business priorities in 2009

VTB Group considers VTB Capital as one of the

most promising businesses due to its proven ability

to generate significant incremental revenue from

offering investment banking products and services to

VTB’s extensive corporate client base.

To enable VTB Capital to enhance its positive impact

on the Group’s business further the following

initiatives are being undertaken:

Product development: accelerated development of

products designed to meet the current market needs:

rouble bonds, consulting and research, derivative

and structured products;

Efforts to become the leading market maker on local

FX and Rates flow and derivatives markets;

Set up for CIS FX and rates flow and dealing derivative

products;

Further client base expansion through regional

growth both inside Russia and abroad;

Playing a key role in the consolidation process

in a number of market segments, including consulting,

financing and structuring M&A transactions;

Attracting investors from the Middle East and Asia

Pacific who are looking to take advantage of the

opportunities in the Russian market;

Leveraging the investment banking expertise in

structuring credit solutions to manage the Group’s

risks;

Re-prioritisation of further development in market

segments affected by the current economic

environment (IPO, securitisation).

4.5. Treasury operations

Financial markets transactions

VTB Bank has traditionally occupied a leading position

in the Russian interbank loan market and is one of the

largest Russian players on the international currency

markets. VTB has adopted an effective policy for

attracting financing and has established good client

relationships and a wide network of correspondent

banks. As a result, VTB has a wide range of funding

sources available to finance its own needs and also

to enable it to fulfil the role of a system bank, which

is to maintain the liquidity of the Russian financial

market. In 2008, VTB significantly grew the volume

of interbank loans and conversion swaps in order to

support market liquidity as a result of highly volatile

conditions in the foreign currency markets, both

in Russia and abroad.

37


Over the course of the year, VTB increased the total

turnover of spot and forward transactions in US$/RUB

and EUR/RUB currency pairs to nearly US$ 2.4 trillion.

The total volume of FX forward and futures

transactions totalled nearly US$ 96 billion, whilst

interest rate transactions in different currencies (IRS,

FRA and MosPrime futures) exceeded US$ 11 billion.

VTB expanded its presence on the derivatives market

which resulted in more effective management of its

interest rate risk.

In 2008, VTB continued to grow the volume of its FX

futures transactions on MICEX and was one of the

major traders with an average daily transactions

volume exceeding US$ 200 million. VTB also became

the largest player on the interest rate futures market

acting as a market-maker on MICEX.

Furthermore, VTB continued to improve the efficiency

of the interbank loans market in Russia in 2008

and participated in a number of professional

organisations in the monetary and foreign currency

markets. The Bank also continuously maintained the

MosPrime indicator of monetary markets.

Transactions with banknotes

In 2008, VTB strengthened its position as a top

five player in banknotes operations in Russia and

increased the volume of transactions 1.5 times whilst

doubling its profitability compared with 2007.

Client money market transactions

VTB continued to offer its customers treasury services

in the money markets in order to optimise their short

and medium term funds needs.

Transactions with precious metals

In 2008, VTB continued to grow its business in precious

metals trading. The Bank increased the purchases

of precious metals from Russian producers so that

purchases of gold rose 1.5 times year-on-year and

purchases of silver 15 times. The Bank’s profits from

these transactions increased 2.5 times year-on-year.

The Bank achieved growth in volumes and profits by

expanding its service offering, carefully observing

trends in the global precious metals markets,

deploying the full range of market instruments,

reducing transportation costs of precious metals and

attracting some of the largest producers of precious

metals as the Bank’s clients.

4.6. Other financial services

VTB Group has established a number of financial

services businesses, including Leasing, Insurance

and Factoring. VTB Leasing, the largest universal

leasing company operating in Russia and the CIS,

grew its total consolidated leasing portfolio to over

US$ 6 billion in 2008, with the majority of its clients

concentrated in the airline, railway transport, oil

production and energy sectors.

VTB Insurance is a leading Russian insurance company

which has been underwriting property, casualty,

civil, professional and personal risks in 46 districts

of the Russian Federation since 2000. The insurance

company counts some of the largest Russian

companies in industrial production, finance, retail

and service sectors amongst its clients. In 2008 VTB

Insurance underwrote RUB 2,340 million of insurance

premiums, advancing to 35th place amongst Russian

insurers.

VTB Factoring was launched in March 2009 following

its registration in December 2008. At the beginning

of April 2009, the company signed five factoring

agreements with several retail food chains totalling

over RUB 500 million and was operating in 34 Russian

cities.

VTB Bank has traditionally occupied a leading position in the Russian interbank loan market and is one of the largest Russian players on the international currency markets.

38

Annual Report 2008

In 2009, VTB plans to continue developing its financial

services businesses within the Group, in particular:

VTB Leasing – to maintain a leading position in

the Russian market while reducing the growth of its

portfolio and lending terms

VTB Insurance – to continue to develop its insurance

business organically by focusing on growing its client

base through the existing Group network and by cross

selling its insurance products

VTB Factoring – to develop the factoring business

as a separate specialised company with the goal of

becoming a top three factoring company in Russia by

the end of 2009.

4.7. Strategic objectives for the Group

VTB Group is focused on achieving sustainable

leading positions in corporate banking, investment

banking and retail business in Russia (maintaining

second place with regard to all its key business

indicators) and its position as a top three or five bank

in every market of its presence in the CIS. VTB strives

to become a bank-partner of choice for corporate

clients in international markets and a business

intermediary for businesses from other global regions

into Russia and the CIS.

The current crisis on the global financial markets

provides VTB Group with a unique opportunity to

strengthen its position in key regions and client

segments, particularly in the emerging markets,

including Russia and the CIS, where some major

international players have been forced to reduce

their risk exposure and credit limits. The Group

has ambitious targets to develop its position in all

the segments in which it operates and considers

Sberbank and international banks to be its key

competitors.

VTB Group aims to:

become a leader in servicing corporate and retail

clients in Russia and the CIS by continuing to

capitalise on its experience in adequately evaluating

and prudently accepting clients’ risks in Russia,

together with its substantial experience in emerging

markets and by capitalising on its ability to handle

tailored transactions for large clients using its wide

network of regional branches;

use its unique position as a first Russian financial

group to service its customers in the CIS, Europe and

Asia;

increase the efficiency of each of its banks and

companies and the Group as a whole.

The global financial crisis has significantly impacted

VTB Group’s operating environment: foreign capital

markets are effectively shut, liquidity has tightened,

borrowing rates have substantially increased, and the

stock prices of Russian companies have fallen whilst

credit risks have risen in both corporate and retail

segments.

These developments have impacted the Group’s

ongoing business and its future development plans.

The Group’s priorities in the current environment

have shifted towards improving the efficiency of

its operations and maintaining the profitability of

the Group’s business by restructuring the asset

base, improving risk management procedures and

introducing more stringent control over expenditures,

the productivity of the network and the profitability

of the standalone businesses. Furthermore, the

current market environment presents VTB with a

unique opportunity to strengthen its positions in its

key regions and client segments.

VTB Group business in Russia

VTB Group continues to view Russia as a key region

in its future development plans. The Group remains

focused on increasing its market share, however its

39


primary goals are to improve the overall quality of its

loan portfolio and client base and to maintain and

increase client deposits. The key objectives for each

business of the Group in Russia are described in the

relevant sections of the Operating Review above.

The Group plans to manage its financial investments

and risks conservatively, to emphasise liquidity

management, to utilise the existing network

for selling financial services and to oversee the

profitability levels of each business unit.

VTB Group business in the CIS

After Russia, the CIS countries remain a key region

for VTB Group’s development. VTB continues to

develop its business in such key countries as Ukraine

and Belarus and intends to build its operations

gradually in Kazakhstan. The Group pays close

attention to the quality of assets, its client base and

risk management systems in both Russia and the CIS.

The Group is focusing on developing universal banks

in the CIS which serve Russian, local and international

corporate clients and on actively promoting its retail

business based on VTB24’s technology and expertise.

In 2009, VTB Group intends to focus primarily on

managing the risks of its subsidiaries in the region,

controlling asset quality, offering high quality savings

and payments services and products as well as

increasing the efficiency of its operations with limited

projected growth in lending and network size. VTB

Bank will continue to provide support as needed to its

subsidiaries.

VTB Group business in Asia and Africa

The Asian region, after Russia and the CIS countries,

remains one of the Group’s growth targets in the

medium term. The Group envisages servicing

Russian, CIS and foreign clients in this market with

business contacts in Russia and the CIS, as well

as participating in joint investment projects and

developing financial instruments for attracting

funds.

VTB also plans to offer its corporate banking services

in several Asian countries which serve as Russia’s

trade partners and partners in a number of joint

projects, such as China and India. VTB has decided to

exit African countries, including Angola and Namibia,

which it views as less strategically important in the

current crisis situation.

VTB Group business in Western Europe

VTB Group intends to continue servicing Russian

clients and supporting their growth in Western

European markets. VTB Group’s subsidiary banks,

VTB Bank (Austria) and VTB Capital plc7, will continue

to specialise in offering corporate and investment

banking services respectively. VTB Capital plc3

is presently undergoing reorganisation in order

to facilitate the implementation of its investment

banking strategy.

7. Formerly VTB Bank (Europe).

40

Annual Report 2008

5. Risk management and internal controls

5.1. Risk management policy, organisation and structure

The principal risks facing the Group’s business

are credit risk, liquidity risk, operational risk and

market risk, including securities portfolio risk,

interest rate risk and currency risk. The purpose of

the Group’s risk management policy is to evaluate,

monitor and manage the size and concentration

of these risks and to maintain the optimal balance

between them and the yields from banking

operations.

During 2007 and 2008, the Group implemented

a process of integrating risk management across

the Group, including the adoption of Group-wide

policy statements and procedures with respect

to each area of risk management. The Group also

created a number of new commissions (the Risk

Management Commission and the Assets and

Liability Commission operating under VTB Group’s

Management Committee) to support this process,

to coordinate information gathering and analysis,

and to harmonise Group-wide policies and

procedures.

VTB Bank’s risk management policy is aimed at

creating a full-scale, integrated risk management

system adequate for the nature and scale of the

Bank’s activities and risk profile, and complying

with the Bank’s needs for further development.

The development and improvement of risk

management in the Bank is carried out in

accordance with banking best practice, primarily

Bank of Russia regulations, generally recognised

international standards and the recommendations

of the Basel Committee on Banking Supervision.

The main risk management principles adopted

in JSC VTB Bank and across the Group are:

the consideration of all risk types inherent to banking

activity;

a systematic and multifaceted approach to analysing

the various types of risk;

the clear allocation of responsibilities between

authorised management bodies and employees in

the decision-making process;

the independence of functions carrying out risk

assessment and control, from banking operations

functions;

the application of state-of-the-art risk assessment

methods;

a rigorous reporting system at each management

level.

On a Group level, a number of committees and

departments are established to coordinate day-

to-day risk management. In terms of organisation,

the Risk Management System comprises various

functional bodies: the Management Board, the Credit

Committee, the Small Credit Committee, the Branch

Credit Committees and the Assets and Liabilities

Committee as well as the Bank’s structural units. The

division responsible for the development and control

of the Bank’s and VTB Group’s risk management

system is the JSC VTB Bank Risk Department.

Established in 2007, it comprises the following

structural units:

1. Operating units for principal risks and/or credit

procedure functions:

41


Credit Risk Division;

Market and Operational Risk Division;

Credit Application Examining Service;

Credit and Pledge Operations Division.

2. Consolidated Risk Analysis Division responsible

for VTB’s Group-wide risk management, including

implementation of Basel II standards.

In 2008, the Risk Departments at VTB Bank

conducted a diagnostic check of local risk

management systems in VTB Group’s subsidiary

banks (primarily its CIS banks). As a result, a series

of measures was introduced to raise the banks’

effectiveness. An internal ranking system was

introduced across all VTB Group banks in the CIS.

Comparability standards in the Group’s banks were

established through a rating system corresponding

to the rating scales of international rating agencies.

In addition, databases of interconnected counterparties

and non-performing debtors in the VTB Group were

created. These are regularly updated and reviewed

as integral parts of a process to coordinate risk

management throughout the Group. The development

of a standardised reporting system and consolidated

risk reporting are crucial parts of this process.

The implementation of the risk management system

effectively ensured the provision of the necessary

liquidity against the background of growing world-

wide financial and economic instability. VTB Bank,

has, since 2007, analysed the effects of the financial

crisis on the world economy. This helped the Bank to

minimise its losses and the potential damage caused

by the crisis and to maintain its financial stability in

the context of declining profitability.

Credit risk

Credit risk is the risk that a counterparty will not

be able to meet its obligations in full when due.

VTB is primarily exposed to credit risk through its

loan portfolio, securities portfolios, guarantees,

commitments and other on- and off-balance sheet

credit exposures. VTB manages its credit risk by

establishing limits in relation to single borrowers,

groups of borrowers, industries, regions and foreign

countries which are set and regularly reviewed by the

Credit and Risks Control Department, approved by

VTB’s Credit Committee and comply with exposure

limits established by the Central Bank of Russia.

In the face of the existing liquidity crisis and in

order to limit the increase in overdue debts, VTB

introduced a number of significant changes to

its lending practices and procedures, including

shortening lending terms based on a borrower’s

credit rating and type of collateral, reducing limits for

non-collaterised loans and loan-to-value discounts.

The Bank reviewed its loan monitoring practices and

procedures, introduced strict measures aimed at

increasing the oversight of the portfolio and launched

a programme of spot checks beyond the existing

timetable of periodic internal reviews. Presently

the head office is setting up an Office of Regional

Directors to monitor the debt situation in the regions.

At the end of 2008, VTB decided to establish a

Debt Centre which is expected to work directly with

non-performing debtors in order to speed up the

collection of debts.

VTB Bank attempts to reduce credit risk by conducting

a thorough investigation of each prospective

borrower to determine its ability to repay its debt.

In 2008, credit risk management methods continued

to be improved as part of the implementation of the

“JSC VTB Bank Credit Policy 2007–2008” which sets

out the Bank’s credit risk management principles.

One of the key instruments of current credit risk

evaluation by the Bank is the method of ranking the

One of the key instruments of current credit risk evaluation by the Bank is the method of ranking the borrowers’ risk levels according to an evaluation of their financial statements, payment discipline, market positioning and other risk factors.

42

Annual Report 2008

borrowers’ risk levels according to an evaluation

of their financial statements, payment discipline,

market positioning and other risk factors. Alongside

work on credit risk improvement, current practice,

international experience and cumulative statistics

of ratings and losses were evaluated. At the end of

this evaluation process, new methods for ranking

borrowers were approved for certain categories of

corporate client, namely large clients and authority

bodies (constituent entities of the Russian Federation

and municipal districts); for extraction companies

and for medium sized clients. In addition, the

methods for ranking separate client categories were

aligned, allowing the Bank to conduct a comparative

analysis of the level of applicable risk in various

market segments.

The Bank also approved and implemented a new

pricing system for credit deals based on the analysis

of borrower’s ranking results, the transaction risk

level for each separate deal/ category, the Bank’s

real costs for credit resources and the units’ working

hours in relation to the different client categories. The

new pricing system was implemented in a phased

roll-out through the Bank’s business divisions and

was adapted according to changes in the financial

markets.

Another important initiative in credit risk management

was the implementation of a centralised system to

monitor permanently the risk of credit deals. This

helps the Bank to identify negative trends in the

changes to borrowers’ risk profiles at an early stage

and act upon credits/clients that are exposed to

certain credit risk factors. In the second half of 2008,

the crisis in the financial markets began to affect

some of the Bank’s clients such that they suffered

difficulties in meeting commitments. Under these

circumstances, the Bank took efficient measures in

order to lower the Bank’s credit risk. These included:

introducing limit-settings in relation to the security

for credit operations and the specification of

parameters for security forming, as well as

approaches for determining the value of items put up

for collateral;

tightening conditions for issuing separate credit

products;

specifying responsibilities amongst the Bank’s

regional divisions in terms of independent

acceptance of credit risk.

Special attention during the year was paid to the

systematic modernisation of credit service models for

large business clients, aimed at optimising the credit

processes and improving the analysis of the quality of

clients and certain credit deals.

Liquidity risk

Liquidity risk is the risk of a mismatch between the

maturities of assets and liabilities which may result in

the inability to liquidate a position in a timely manner

at a reasonable price to meet funding obligations

(including not utilising funds at an above average

market rate). VTB is exposed to liquidity risk primarily

in the funding of its customer loan and securities

portfolio. VTB seeks to have sufficient liquidity to

meet the Group’s current and future obligations and

funding needs at reasonable market rates.

The Bank separates current and instant liquidity risk

management.

Current liquidity management is the main task

handled by VTB in asset and liability operational

management. Its aim is to determine and maintain

the minimum level of liquid assets and maturity

mismatch limits necessary to ensure cash/non-cash

balance settlement by currencies.

Current liquidity management is carried out by the

Bank’s Treasury by prompt (intraday) determination

of VTB’s current payment position and forecast future

payment position, taking into account the Bank’s

payment schedule and other scenarios.

The main task in instant liquidity management is to

develop and implement a number of instruments for

managing assets and liabilities, aimed at supporting

the Bank’s instant funding ability, as well as to plan

43


increases in its asset portfolio by optimising the ratio

of liquid assets and profitability.

This is achieved by VTB Bank’s Assets and Liability

Management Committee, which establishes internal

standards for overall liquid asset reserves (including

highly-liquid assets) in all currencies and in each

individual currency. In addition, forecasted liquidity

management is conducted according to liquidity

accounting standards imposed by the Bank of Russia.

Instant liquidity management is carried out by the

Treasury in a centralised manner.

Liquidity risk analysis for VTB Bank and VTB Group

is performed by the Market and Operational Risk

Division, which presents the results of its analysis

in a consolidated report to the Assets and Liability

Committee, the VTB Management Committee and the

Assets and Liability Commission operating under the

Management Committee.

Capital flow forecasts include receivables and

payments according to contractual terms, and take

the following into consideration:

credit risk level;

planned operations, including outflow of unstable

“on demand” capital.

In addition, the Market and Operational Risk Division

conducts contingency modelling so that liquid

assets can be mobilised in order to alleviate a lack of

liquidity, taking into consideration factors that might

influence the Bank’s forecasted liquidity.

Importantly, during the year, liquidity risk assessment

was performed not only by VTB Bank but by VTB

Group as a whole.

Operational risk

Operational risk is the risk of a loss resulting

from the inadequacy or failure of the Bank’s

internal processes, employees and IT systems,

inconsistencies with legislative requirements or from

external events not controlled by the Bank (primarily,

natural disasters).

The Bank’s operational risk management system

aims to prevent possible losses and reduce the

possibility of failures of business processes and the

inability to provide high level service to the Bank’s

clients caused by staff mistakes, system breakdown,

internal or external fraud and law violation.

In its operational risk management practices,

VTB follows the principles set by the Bank of

Russia regulations as well as recommendations

of the Basel Committee on Banking Supervision

(including Basel II). To implement the Bank’s

internal operational risk management strategy,

VTB carries out regular procedures for identifying,

assessing, controlling and limiting risk. All

significant deficiencies from a risk perspective,

identified within the internal control system, are

subjected to strict analysis. Based on the analysis,

measures are developed and implemented to

eliminate the cause and source of the risk. A

mechanism for collecting information regarding

operational losses and key risk indicators was

introduced at the beginning of 2007 according

to Basel II and the Bank of Russia requirements

in order to form a consolidated assessment of

VTB’s operational risk. Currently, an analogous

system is being introduced in VTB Group’s banking

organisations and participants.

The Bank’s key operational risk limitation

instruments are:

a complex system of internal control that is common

to all business units and operations throughout the

Bank;

the regulation of key operations by internal statutory

documents;

the registration and documentation of banking

operations and transactions and the regular

control of primary documents and the accounts

of operations;

44

Annual Report 2008

the application of the principles of: division

and limitation of the functions, powers and

responsibilities of employees; double control;

collegiate decision-making and limit-setting for the

terms and volumes of operations (limits for certain

operations, individual limits for certain employees);

the automation of banking operations, the use of

information systems and their constant monitoring

and immediate repair;

the provision of physical and information security,

control over access to the Bank’s facilities;

a careful HR policy, staff training and education.

These proactive measures to limit risk are

supported by appropriate insurance programmes.

In 2008, the Bank’s operational risk insurance

amounted to US$ 425 million and included

complex crime insurance (incl. electronic and

computer), the insurance of precious metals and

other valuables during transit and while in storage,

the insurance of the “card business” including cash

dispensers and currency exchange machines and

insurance against bank card fraud.

Market risk

Market risk is the risk that the fair value of future

capital flows from financial instruments will fluctuate

as a result of changes in market parameters, such as

percentage rates, currency rates or securities prices.

The Group is subject to market risks, including the

risk of change in the price of the securities portfolio,

currency risk and the risk of changes in interest rates.

VTB Bank and VTB Group are subject to the risk

of a change in interest rates. The risk of a change

in interest rates is defined as the risk of lowering

interest revenues or raising interest expenditures as

a result of unfavourable changes to market interest

rates.

The general principles for managing interest rate risk

are as follows:

1. establishing standard interest rates for

deposits and basis point rates for borrowing

that take the current state of the market into

consideration;

2. calculating interest rate risk indicators and

establishing limits/reference points of interest

rate risk for VTB Group and individual banks by

currency and temporary pools:

the susceptibility of a bank’s interest rate gap to a

change in Basis Point Value, the degree of sensitivity

to Interest Rate Risk. The reduction in monetary terms

of the Net Present Value of a bank’s interest position

under an unfavourable parallel movement of the Base

Yield Curve by 1 basis point;

the capital for covering interest rate risk, or Interest

Rate Risk Charge; assessment of a reduction in

a bank’s NPV of assets and liabilities under an

unfavourable parallel movement of BYC;

a limit to the susceptibility of the NPV balance to

a change in the interest rate (BPV limit);

the RSA/RSL ratio, i.e. susceptibility to a change in

the interest rate of assets compared to analogous

liabilities in the temporary pool for up to one year.

Stress tests are calculated based on the current

size of the interest position and hypothetical stress

scenarios (a parallel shift of the BYC by 4% annually).

They are conducted monthly.

The general principles for managing currency risk are

as follows:

the bank does not support structured long-term open

currency positions (with the exception of capital

investment in its foreign subsidiary banks);

centralised management of the open foreign

exchange position of the central office and branches;

establishment of internal limits (stricter than those

proscribed by normative documents) of the open

45


foreign exchange position for the central office and

branches;

establishment of internal limits for taking on currency

risk for arbitrage operations by the Treasury.

Currency risk management is controlled by the Asset

and Liability Risk Management Committee.

A quantitative risk assessment is carried out

using the VaR method (historical modelling, a

99% confidence level, a time span of one and

ten trading days, and a historical period of two

years).

Stress tests are calculated based on the current

size of the open foreign exchange position and

hypothetical stress scenarios (reduction of the

rouble rate by 50%). They are conducted monthly.

The general principles for managing price risk are

as follows:

restricting (limiting) the size of price risk that the

Bank will take on;

control over adherence to the established limits

and restrictions (a minimal discount size for

“reverse repo” operations, margin call conditions,

etc.) for taking on price risk;

organisation of ongoing monitoring, analysis and

reporting of price risk that the Bank has taken on;

applying adequate identification methodology

and a quantitative assessment of price risk for

Bank activity. A quantitative risk assessment

is carried out using the VaR method (historical

modelling, a 99% confidence level, a time span of

one and ten trading days, and a historical period

of not less than one year).

Restrictions on the size of the price risk that the Bank

can take on are set by establishing and adhering to a

two-tiered system of limits:

limits on taking on risks in securities operations,

established by the Asset and Liability Management

Committee and split by securities type in relation to

the following types of operation: trading operations,

“reverse repo” operations, collateral operations and

derivative operations;

individual limits on conducting securities operations

for authorised Bank employees (operational limits).

Limits are established taking into consideration

the Bank’s need to conduct operations with the

corresponding securities, the condition of its

resource base, and an assessment of the size of

the price risk by type of operation and securities

category.

The limits are established by restricting the sum

of the investments. For trading and derivative

operations there is also an established limit for the

maximum permissible amount of losses, including

limits on operations by authorised Bank employees.

The Asset and Liability Management Committee

may also establish additional restrictions in regards

to derivative operations on an as-needed basis

depending on the type of operation.

Programme for implementing Basel II standards

During the year, the readiness of VTB Bank and

other VTB Group banks to implement Basel II

standards was analysed. The analysis included the

evaluation of compliance of existing risk management

instruments and procedures with Basel II, as well

as the assessment of project implementation

options and necessary organisational, human,

technical and material resources. Furthermore, the

risk management regulatory and methodological

base was reviewed, in accordance with Basel II

recommendations (mainly oriented at conservative

approaches to prevent excessive risk in times of

financial crisis).

In accordance with plans for Basel II

recommendations to be introduced to the Russian

Federation legislation for Banking, the Bank intends

46

Annual Report 2008

to align its risk management strategy so that it

incorporates these prescribed standards and will

submit a regulatory filing, stating how the project will

be coordinated across the Bank’s activities and the

corresponding budget.

VTB Group banks based in Western Europe have

already introduced new Basel II standards as Basel II

principles were introduced to EU legislation on

1 January 2008.

Risk management objectives and tasks for 2009

In 2009, which is expected to be no less difficult than

2008 in terms of the global economic situation, VTB

Bank plans to improve its risk management system

in three key directions:

further implementation of best global banking

practices and Basel II standards along with raising

efficiency and conservatism in the assessment of the

risks taken by the Bank;

completion of the large-scale implementation of risk

control procedures at VTB Group level (based on the

consolidated risk management concept developed

and approved by Group);

development of a mature risk management system

within the Group’s investment business, taking into

consideration its active development.

In order to achieve these improvements, it is

necessary to establish consolidated limits of credit

risk for general VTB Group contractors (among

corporate clients and banks) and total limits of

country and industry risk concentration, taken by

the whole Group from the start of 2009. VTB has

revised and approved the “JSC VTB Bank Credit Policy

2009-2010” taking into account the global financial

situation. The Bank will improve its ranking system

for borrowers and its procedures for issuing credits

to different categories of client within the framework

of the new policy. In particular, the delegation

of credit issuing responsibilities will be improved.

In 2009, it will be especially important to develop an

information and technical infrastructure specialised

in risk management, in order to meet stringent

requirements (quality, accuracy and timeliness)

concerning quantitative evaluation of risk. In order

to improve the availability of data and to utilise

sophisticated mathematical models, VTB Bank is

leading several high technology projects including:

1. The implementation of the Oracle OFSA Risk

Manager “Balance Risk Analysis” module that will

help to automate the assessment of interest risk and

which is due to be completed in 2009.

2. The launch of an automated risk management

system for VTB Group based on the world leading

software by Kamakura Risk Manager. The first stages

of this project are:

identify market risks and ALM and automate the

methods for assessing the rank of market risk

associated with the financial instruments in VTB

Group portfolios (securities, derivatives);

implement interest and liquidity risk assessment

methods based on stochastic modeling.

5.2. System of internal controls

The Internal Control System at VTB was established

and operates in accordance with Russian legislation

and international standards. VTB’s Internal Control

System aims to:

improve the efficiency and effectiveness of

operations conducted by VTB Group;

optimise the activities of VTB Bank and its

management bodies;

ensure the adequacy and timeliness of financial and

administrative information and reporting;

minimise internal and external risks;

47


ensure compliance with legal requirements and

standards regulating the activity of VTB Group;

improve the efficiency with which assets and

liabilities are managed;

ensure the safety of VTB Group’s assets;

ensure that neither VTB Bank nor the Group’s

employees are involved in criminal conduct such as

money laundering or the financing of terrorism.

Strong internal controls are crucial to ensure that

the business of the Group is conducted according

to the highest standards, and to increase its

attractiveness for customers, shareholders,

investors and other stakeholders on both the

domestic and international markets. The Group is

seeking to comply with international best practice

(the rules of the Basel Committee on Banking

Supervision, the Institute of Internal Auditors and

the Committee of Sponsoring Organisations of the

Treadway Commission) in order to optimise its

internal control system.

Strong internal controls improve VTB Group’s

management system in the following areas:

the creation of a unified control environment and

unified systems of strategic and financial planning

and risk analysis within VTB Group;

the integration of information systems at Group

level, in the Bank and in subsidiaries and separate

business units;

the creation of a clear and transparent system for

decision-making and reporting at the Bank, its

branches and VTB Group as a whole.

In 2008, VTB Group’s Internal Audit / Control

Management Policy was produced with a focus on

enhancing the role and the quality of internal controls

in Group companies.

To implement these principles of internal control

at VTB Bank effectively, a system of control and

inspection bodies is in place including:

The Audit Committee of the Board

The Statutory Audit Commission

The Internal Control Department

The Audit Committee

The Audit Committee was created in 2007 with the

aim of analysing, supporting and further developing

the internal audit system.

Members of the Audit Committee:

Matthias Warnig – Committee Head (independent

member of the Supervisory Council of VTB Bank);

Alexey L. Savatyugin – Committee Member

(member of the Supervisory Council of VTB Bank);

Alexei V. Ulyukaev – Committee Member (member

of the Supervisory Council of VTB Bank).

More detailed information on the activity of the

Audit Committee can be found in the Corporate

Governance section on page 61.

The Statutory Audit Commission

The Statutory Audit Commission monitors the

Bank’s compliance with the relevant regulations,

internal bank controls, and the legality of

the operations carried out by the Bank (by

comprehensive inspection or spot checks).

The Group is seeking to comply with international best practice in order to optimise its internal control system.

From a clear concept

48

From a clear concept

The Bank is successfully undertaking a number of high-tech projects. In 2009, VTB plans to complete in its affiliate network the rollout of the complex automated system for documentary letters of credit and bank guarantees, which is already functioning in its head office.

to solid growth

50

Annual Report 2008

The Statutory Audit Commission is elected by the

annual General Shareholders Meeting.

New members of the Statutory Audit Commission

were elected at the annual General Shareholders

Meeting held on 26 June 2008. The Statutory Audit

Commission consists of 5 members:

Vladimir V. Lukov – Chairman (Deputy Director,

Department of Financial Policy, Ministry of Finance

of the Russian Federation);

Tatiana A. Bogomolova – member of the Statutory

Audit Commission (Deputy Head of Non-Core

Businesses and Foreign Property Management

Department – Head of Financial, Credit, Foreign

Trade, Land Development and Tax Authorities

Management Division, Federal State Property

Management Agency);

Alexey E. Kovrov – member of the Statutory

Audit Commission (Head of Business Results

Analysis and Control Division, Expert Analytical

Department, Federal State Property Management

Agency);

Rustem S. Memetov – member of the Statutory

Audit Commission (Advisor to the Unit of Property

Relations with Foreign Countries, Division of Financial

and Foreign Economic Institutions, and of Foreign

Property, Federal State Property Management Agency);

Alexey V. Terentiev – member of the Statutory Audit

Commission (Advisor to the State Legal Directorate

of the President of the Russian Federation).

Internal Control Department (ICD)

The Internal Control Department is an independent

structural unit responsible for performing internal

controls within VTB Bank and ensuring the efficiency

and effectiveness of its operations.

As of 1 January 2009, the Internal Control Department

of VTB Bank comprised 135 employees.

Several internal control groups have been created

within the structure of the Internal Control

Department in order to carry out internal control at

the Bank’s branches.

In 2008, the Central Bank of Russia noted that

the Internal Control Department of VTB Bank was

successfully managing its operations.

The Internal Control Department performs the

following functions:

checking the effectiveness of the internal control

system and ensuring that it is functioning correctly

with the use of automated information systems;

ensuring that the methodology for assessing and the

procedures for managing banking risks are properly

applied;

checking the accuracy, completeness, objectivity and

timeliness of accounting, information collation and

presentation and reporting;

ensuring the safety of the Bank’s property;

51


ensuring that the Bank’s internal regulatory acts

comply with regulatory legal acts, and the standards

of self-regulating organisations and professional

codes of conduct.

The Internal Control Department assists the Bank’s

external auditors by providing information on

the Bank’s internal control system and any flaws

identified during the period being examined by the

auditors.

VTB Bank’s external auditor

Every year, VTB Bank engages an external auditor in

order to check and confirm the reliability of its annual

financial statements.

Based on its scrutiny of the financial and economic

activity of the Bank, the external auditor prepares a

report, which is submitted to the Audit Committee

for preliminary assessment. The prepared report is

sent to the Bank’s Supervisory Council and is also

submitted to the Bank’s Annual General Shareholders

Meeting.

The Bank’s external auditor is designated as a result

of a tender, the approval of the candidacy of the

external auditor at a meeting of the Audit Committee,

the recommendation of the Supervisory Council to the

General Shareholders Meeting and the approval of

the proposed candidate at the Bank’s Annual General

Shareholders Meeting.

CJSC Ernst & Young Vneshaudit, a Russian subsidiary

of one of the largest international auditing

companies, was appointed as VTB Bank’s external

auditor for 2008.

52

Annual Report 2008

6. Corporate governance

6.1. Overview of the corporate governance system

Given the global financial crisis, 2008 not only

tested the strength of the Bank’s corporate

governance but also confirmed the ability of VTB’s

existing mechanisms to respond effectively to new

conditions. Despite certain changes in priorities,

the Bank continues to believe that international

best practice in its corporate governance system is

necessary for its effective development, increased

stability and improved transparency.

Adherence to the corporate governance code

VTB Bank’s existing system of corporate governance

is based on the following principles which reflect

the provisions of Russian legislation, as well as the

requirements of the Central Bank of Russia and the

recommendations of the Federal Service for Financial

Markets of Russia:

the Bank provides its shareholders with the

opportunity to exercise their rights, including the

right to participate in the decision-making process

by voting at the AGM, the right to receive dividends

and the right of access to information;

the Bank operates a principle of equal treatment

of its shareholders of a certain class of shares, as

well as guaranteeing the effective protection of

their rights;

the Bank’s Supervisory Council carries out

strategic governance of the activity of executive

bodies (the President and Chairman and the

Management Board). Two independent directors

are members of the Supervisory Council.

The Supervisory Council is accountable to

shareholders;

the President and Chairman and the Management

Board direct the Bank’s current activity. The

executive bodies of the Bank are accountable to

the Supervisory Council and to shareholders;

the Bank ensures the timely disclosure of full

and reliable information including its financial

position, economic figures and the structure of

its property and governance in order to provide

shareholders and investors with the opportunity

to make well-informed decisions;

the Bank respects the rights of interested parties,

including workers, as required by law and

encourages the active collaboration of the Bank

and interested parties in order to increase its

assets, the value of its shares and the creation of

new jobs;

VTB Bank has controls in place over the use of

confidential and insider information; these include

documents establishing rules for preventing the

use of this information;

the Bank has built an effective system of

control for its financial and economic activity

in order to protect the rights and interests of

its shareholders. The Bank has created an

Given the global financial crisis, 2008 not only tested the strength of the Bank’s corporate governance but also confirmed the ability of VTB’s existing mechanisms to respond effectively to new conditions.

53


Audit Commission accountable to the General

Shareholders Meeting. The Audit Committee,

which reports to the Bank’s Supervisory Council,

helps increase the effectiveness of the Bank’s

internal control system.

VTB Bank’s corporate governance system lays down

specific responsibilities for the:

annual General Shareholders Meeting

Supervisory Council and its Committees

President and Chairman

Management Board

Statutory Audit Commission

Internal Control Department.

In order to carry out an examination and approval

of its financial reporting, the Bank annually engages

an external auditor who is not connected with

the bank and/or its shareholders by any property

interests.

In 2008, VTB Bank continued to work to modernise

its corporate governance system. Specifically, the

following measures were taken:

a series of documents were developed and

adopted regarding corporate governance:

the Code of Corporate Conduct, the Code

of Ethics, Regulation on Dividend Policy and

Regulation on Information Policy;

sections of the Bank’s website concerning

corporate governance were optimised (in both

English and Russian) for the convenience

of shareholders and investors;

the IR department expanded its presence

to reflect the Bank’s public status;

the disclosure of information was standardised

across the Bank’s divisions.

The Bank’s primary goals for updating corporate

governance in 2009 are:

improving the quality of preparation for issues

introduced to the Supervisory Council concerning

the HR policy, strategy and risk management,

including the creation of a Remuneration and HR

Committee and a Strategy and Risk Committee;

updating management bodies and procedures

to cooperate with shareholders, including:

– setting up a Corporate Secretary position;

– developing and establishing a procedure to

consider shareholder complaints and queries;

– adding two more independent directors to

the Supervisory Council;

developing the Bank’s social responsibility activities

and programmes, including:

– developing and introducing a Corporate Social

Responsibility Policy;

– preparing a Social Responsibility Report;

implementing a series of activities to improve

disclosure;

conducting a survey of the effectiveness of the

corporate governance system.

The global financial crisis has changed the order

of priorities for the Bank’s development. Together

with VTB’s focus on steps to improve corporate

governance, the Bank has prioritised goals aimed at

reducing the influence of the crisis on its activities

and ensuring stable development in the post-crisis

period.

VTB Bank’s information policy

VTB Bank strives to report its activity and

the activities of its subsidiaries promptly

and objectively using all available means

of communication but also seeks to avoid

unauthorised disclosure of confidential and

commercially sensitive information concerning

its activity in the interests of all its stakeholders.

While VTB Group’s information policies meet the

requirements of Russian legislation, a flexible

The Bank has built an effective system of control for its financial and economic activity in order to protect the rights and interests of its shareholders.

54

Annual Report 2008

system allowing for prompt fine-tuning is also in

place, necessitated by adherence to the Group’s

development strategy and the formation, under

the VTB brand, of an international financial group

that is unique in the Russian banking sector. Here,

as in all of its work, VTB Bank strives to adhere to

the highest international standards.

In 2008, Standard & Poor’s conducted a survey of

the transparency of information disclosed by Russian

companies. The survey concluded that the Bank

improved two positions, from 23rd to 21st. The Bank

is continuing to work to improve the transparency

of its business.

VTB Bank has already developed a series of

documents governing the handling of inside

information. These include:

instructions regarding the internal control of the

Bank’s own trading activities;

a list of measures aimed at preventing the illegal use

of sensitive information in the Bank’s own trading

activities;

a list of measures aimed at preventing conflicts of

interest;

regulations on insider information.

These documents define the circle of insiders,

their rights and obligations, the list of documents

falling under the category of insider information and

measures for protecting insider information from

unauthorised use.

In 2008, the Supervisory Council approved the

Regulations on the Information Policy of VTB, which

were developed following a self-assessment of

corporate governance in 2007. The Regulations will

become the foundation of interrelations between the

Bank and its stakeholders with the aim of increasing

further the Bank’s level of transparency and the level

of trust in the VTB brand.

The information policy of VTB Bank is based on the

following principles:

the periodic and prompt provision of complete,

consistent and reliable information;

equal rights for all interested parties to receive

information, taking into account the standards and

requirements established by current legislation and

regulatory bodies;

maintaining a reasonable balance between the

transparency of VTB Bank and the protection of its

commercial interests;

maintaining the confidentiality of information that

comprises an official or commercial secret and

controlling the use of and access to insider information.

VTB Bank uses various communication methods for

the disclosure of information. These include quarterly

and annual reports; announcements of material and

other information; the corporate website; the use

of print and electronic mass media and the supply

of publically available information and documentation

to shareholders on request.

6.2. The Supervisory Council of JSC VTB Bank

The Supervisory Council of VTB Bank acts according

to Russian law, the Bank’s Charter and the Regulations

on the Supervisory Council.

The Supervisory Council’s responsibilities include

setting general policies and broad principles for the

Bank with the exception of those issues defined by

Russian Federal Law On Joint Stock Companies and

the Bank’s Charter as being under responsibility of the

annual General Shareholders Meeting.

The Supervisory Council of VTB Bank performs

the following functions:

prioritising areas of the Bank’s activity;

convening annual and extraordinary General

Shareholders Meetings (except for the cases specified

in Item 8, Article 55 of the Federal Law On Joint Stock

Companies);

55


approving changes to the Bank’s charter capital;

the issue and acquisition by the Bank of bonds and

other securities;

endorsing the agenda of a General Shareholders

Meeting;

setting the record date for drafting a list of persons

entitled to participate in the General Shareholders

Meeting and making other decisions related to

preparing and holding the General Shareholders

Meeting in accordance with applicable legislation,

the Charter and Regulation on preparing and holding

General Shareholders Meetings;

increasing the Bank’s charter capital through the

issue by the Bank of additional shares within the

quantity and classes (types) of authorised share in

those cases provided for by Russian law and by the

Bank’s Charter;

the placement by the Bank of convertible securities

and other equity securities convertible into Bank

shares, in cases provided for by Russian law and the

Bank’s Charter;

determining the market value of assets (monetary

valuation), price of issue and repurchase of the

securities specified in Russian law;

acquiring shares and other securities issued by the

Bank in the cases specified by Russian law;

forming the Bank’s Management Board, defining

the number of its members, their election and

early removal, appointment and early removal of

the President and Chairman of the Management

Board, and setting the amount of remuneration and

compensation to the President and Chairman of the

Management Board and the Board members;

recommending the amount of remuneration and

compensation to be paid to the members of the

Statutory Audit Commission and determining the fee

to be paid for the services of the external auditor;

recommendations as to the dividend amount and

payment procedures;

use of the reserve fund and the formation and use of

other funds of the Bank;

endorsing VTB Bank’s internal documents (except

for those which must be endorsed by the General

Shareholders Meeting or other internal regulations of

the Bank);

opening branches and representation offices of the

Bank and determining the transition of branches to the

status of departments of the Bank;

approval of interested-party transactions, conclusion of

major transactions connected with the acquisition and

disposal of property by the Bank in cases provided for by

Russian law and the Bank’s Charter;

preliminary consideration of the annual report of the

Bank;

appointing and dismissing the head of the Bank’s

Internal Control Department;

setting contractual terms with the registrar of the Bank;

writing off unrecoverable loans not exceeding in the

aggregate US$ 1,000,000 (one million) or its equivalent

for a single borrower out of the allowances for loan

impairment;

other issues as specified by applicable legislation and

the Charter.

Members of the Supervisory Council

As of 31 December 2008, the Supervisory Council of VTB

Bank consisted of the following eleven members.

Alexei L. Kudrin

Chairman of the Supervisory Council of VTB Bank

2007–present – Deputy Prime Minister of the

Government of the Russian Federation – Finance

Minister of the Russian Federation. Holds the following

positions in other organisations: member of the

Supervisory Council of JSC Sberbank; Chairman of the

Board of Directors of the State Corporation Deposit

Insurance Agency; Chairman of the Supervisory Council

of CJSC ALROSA; member of the Supervisory Board of

State Corporation “Bank for Development and Foreign

Economic Affairs (Vnesheconombank).

Previously held the following positions:

2004–2007 – Finance Minister of the Russian

Federation.

2000–2004 – Deputy Chairman of the Government of

the Russian Federation – Finance Minister of the Russian

Federation.

1997 – January 1999, June 1999 – May 2000 –

First Deputy Finance Minister of the Russian

Federation.

56

Annual Report 2008

January–June 1999 – First Deputy Chairman of

the Management Board of RAO UES of Russia.

1996–1997 – Deputy Head of the of the Presidential

Executive Office, Chief of the Presidential Control

Directorate.

Acting State Counsellor of the Russian Federation,

First Class.

Awards: Certificate of Merit from the Government of

the Russian Federation (2000); Order of Service to

the Fatherland, Fourth Class (2005); Certificate of

Gratitude of the President of the Russian Federation

(2004 and 2005).

Date of birth: 1960.

Education: graduated in 1983 from Leningrad State

University (now St. Petersburg State University),

Economics Faculty. PhD in Economics, Professor.

Holds no shares in VTB Bank.

Anton V. Drozdov

Member of the Supervisory Council of VTB Bank

2008–present – Chairman of the Board of the Pension

Fund of the Russian Federation. He also serves as a

member of the Supervisory Council of JSC Sberbank.


2004–2008 – Head of the Economics and

Financial Department of the Russian Government

Administration.

2003–2004 – Deputy Head of the Russian

Government Administration.

1999–2003 – Head of the Financial Department of

the Russian Government Administration.

1994–1999 – Deputy Chief of the Central Department

of the Federal Treasury, Ministry of Finance of the

Russian Federation.

Acting Counsellor of State of the Russian Federation,

First Class.

Awards: Certificate of Merit of the Government of

the Russian Federation (2002). Granted the title

of merit “Honoured Economist of the Russian

Federation” (2005). Awarded the Medal of Honour

(2008).


Education: graduated in 1986 from the Moscow

Finance Institute with a degree in Economics.


Arkady V. Dvorkovich


2008 – present – Aide to the President of the

Russian Federation (since 2008). Member of the

National Banking Board of the Bank of Russia

(representative of the President of the Russian

Federation) since June 2004. Holds the following

positions in other organisations: Chairman of the

Supervisory Council of OJSC The Agency for Housing

Mortgage Lending; member of the Supervisory

Council of JSC Sberbank; member of the Board of

Directors of the State Corporation Deposit Insurance

Agency; member of the Supervisory Board of the

State Corporation Housing and Utilities Reform

Fund; Deputy Chairman of the Board of Trustees

of the Federal Support Fund for the Housing

Development.


2004–2008 – Head of the Presidential Experts

Directorate.

2000–2004 – Advisor and later Deputy Minister of

Economic Development and Trade of the Russian

Federation.

1994–2000 – Advisor, Senior Expert and General

Director and Science Supervisor of the Economic

Expert Group under the Ministry of Finance of the

Russian Federation.

Acting Counsellor of State of the Russian

Federation, First Class.

57


Awards: several Certificates of Gratitude of the

President of the Russian Federation, Order of

Service to the Fatherland, Fourth Class (2008).


Education: graduated in 1994 from Moscow State

University and in 1997 from Duke University in

North Carolina, USA. Economist and mathematician.

Master of Economics.


Andrei L. Kostin


VTB Bank President and Chairman of the

Management Board (since 2002). Holds the

following positions in other organisations:

Chairman of the Supervisory Council of VTB North-

West, VTB24 and VTB Capital; Chairman of the

Advisory Committee of VTB Capital plc; member

of the Boards of Directors of OJSC Sovkomflot, JSC

NK Rosneft, JSC United Aircraft Corporation and

JSC Russian Railways, Chairman of the Board of

Directors of LLC Holding VTB Capital AB, President of

the Artistic Gymnastic Federation of Russia; member

of the Bureau of the Russian Engineering Union,

member of the Managing Bureau of the Russian

Union of Industrialists and Entrepreneurs; member

of the Board of the Association of Russian Banks.


1996–2002 – Chairman of Vnesheconombank.

1995–1996 – First Deputy Chairman of the National

Reserve Bank.

Awards: Order of Honour (1999); Russian

Government’s Honorary Diplomas (1998 and 2001);

the Order of Service to the Fatherland, Fourth Class

(2006); Certificate of Gratitude of the President of

the Russian Federation (2006).


Education: graduated in 1979 with honours from the

Economics Department of Moscow State University.

PhD in Economics.

Holds shares equivalent to 0.0028% of the charter

capital of VTB Bank.

Yuri M. Medvedev


2008–present – Deputy Head of the Federal Agency

for the Management of State Property. Holds the

following positions in other organisations: member

of the Supervisory Council of CJSC ALROSA; member

of State Corporation’s Supervisory Board for building

Olympic Venues and developing Sochi city as a

mountain resort; member of the Boards of Directors

of JSC Sovkomflot, JSC Irkutsenergo, JSC Radio

Engineering Corporation “VEGA”, Kristall Production

Company, JSC Almaz-Antey, JSC Rosneftegaz and JSC

Centralised Dispatching Administration of Unified

Energy System; Chairman of the Board of Directors of

JSC Kavminkurortresursy.


2004–2008 – Deputy Head of the Federal Agency for

the Management of Federal Property.

2000–2004 – First Deputy Ministry for Property

Relations of the Russian Federation.

1998–2000 – First Deputy Minister for State Property

of the Russian Federation.

1997–1998 – Authorised Representative of the

President of the Russian Federation in the Volgograd

Region.

1992–1997 – Deputy Head of the Administration

of the Volgograd Region and Head of the Local

Committee for the Management of State Property.


First Class.

Awards: Certificate of Merit of the Government of the

Russian Federation (2008).


58

Annual Report 2008

Education: graduated in 1971 from the Tambov

Institute of Chemical Machinery Construction with

a degree in chemical engineering and equipment

construction. PhD in Philosophy.


Anna V. Popova


2008 – present – State Secretary/Deputy Minister of

Economic Development of the Russian Federation. Holds

the following position in other organisations: member

of the Board of Directors of the Deposit Insurance

Agency, a State company; member of the Supervisory

Board of the Housing and Utilities Reform Fund, a State

company; member of the Board of Directors of JSC

Rosinfokominvest; member of the Management Board of

“Bureau of Economic Analysis” Fund.


2007–2008 – State Secretary/Deputy Minister of the

Ministry of Economic Development and Trade of the

Russian Federation.

2004 – Deputy Head of Corporate Governance

Department of the Ministry of Economic Development

and Trade of the Russian Federation.

2002–2004 – Advisor to the Office of the Committee

on Financial Markets and Monetary Circulation, Office

of the Council of Federation of the Federal Assembly

of the Russian Federation.


Third Class.

Awarded a Medal of the Order of Services to the

Fatherland, Second Class.


Education: Graduated in 1986 from Leningrad

N.A. Voznesenskiy Institute of Finance and

Economics. PhD in Economics.


Alexey L. Savatyugin


2004–present – Director of the Department of

Financial Policy of the Ministry of Finance of the

Russian Federation. Holds the following positions

in other organisations: Chairman of the Board

of Directors of JSC Rosgosstrakh; member of the

Supervisory Council of JSC Sberbank; member of the

Board of Directors of the Deposit Insurance Agency, a

State company.


1992–2004 – assistant and later senior lecturer of

Economic Theory and Economic Policy Department,

St. Petersburg State University.


Third Class.


Russian Federation (2007).


Education: Graduated in 1992 from St. Petersburg

State University with a degree in Political Economy.


Anton G. Siluanov


2005–present – Deputy Finance Minister of the

Russian Federation. Member of the Collegium, Ministry

of Finance, since 24 August 2004.


2004–2005 – Director in the Department

of Interbudgetary Relations in the Finance Minister of

Russia.

2003–2004 – Deputy Finance Minister of the Russian

Federation.

1997–2003 – Head of Macroeconomic Policy and

59


Banking Department, Finance Minister of the

Russian Federation.


First Class.

Awards: Certificate of Honour of the Ministry

of Finance of the Russian Federation (2001);

Gratitude of the President of the Russian

Federation (2002); the 200th Anniversary of

the Finance Minister of the Russian Federation

Commemorative Medal (2002); Certificate of

Gratitude of the Finance Minister of the Russian

Federation (2003); the 300th Anniversary

of St. Petersburg Commemorative Medal (2003);

Order of Service to the Fatherland, First Class

(2007).


Education: Graduated in 1992 from Moscow Finance

Institute. PhD in Economics.


Alexei V. Ulyukaev


2004– present – First Deputy Chairman of the

Central Bank of the Russian Federation. Holds the

position of the Deputy Chairman of the Supervisory

Council of JSC Sberbank.


2000–2004 – First Deputy Finance Minister of the

Russian Federation.

1999–2000 – Deputy Director of the Fund “Institute

for the Economy in Transition”.

1998–1999 – Deputy Director of the Institute for the

Problems of Economy in Transition.

1996–1998 – member of the Moscow City Duma.


First Class.


Russian Federation (2001); Order of Merit (2006).

Granted the title of merit “Honoured Economist of

the Russian Federation” (2004). Awarded a Citation

from the President and Government of the Russian

Federation.


Education: graduated in 1979 from Moscow State

University with a degree in Economics. Doctor of

Economics, associate professor.


Matthias Warnig

Independent Member of the Supervisory Council of VTB Bank

2006–present – Managing Director of Nord Stream

AG, Switzerland (previously the North European Gas

Pipeline). Holds the following positions in other

organisations: member of the Board of Directors of

JSC Bank Rossiya; member of the Board of Directors

of EastWest Institute, USA.


2005–2006 – Chairman of the Board of Directors of

CJSC Dresdner Bank.

2004–2005 – Chairman of the Managing Committee

of Dresdner Kleinwort for Russia and the CIS.

2002–2004 – President of CJSC Dresdner Bank.

2000–2002 – Chief Coordinator of the Dresdner Bank

Group in Russia.

1999–2000 – General Director of the St. Petersburg

office of BNP-Dresdner Bank (later renamed CJSC

Dresdner Bank).

1997–1999) – Deputy Director of the Moscow Branch

of BNP-Dresdner Bank.

1981–1990 – service in the Ministry of Foreign Trade

and later in the Cabinet of Ministers of the German

Democratic Republic, officer with the German Main

Intelligence Directorate.


60

Annual Report 2008

Education: in 1981, graduated from the Higher

School of Economics (Berlin).


Nikolai M. Kropachev

Independent Member of the Supervisory Council of VTB Bank

2008–present – Rector of St. Petersburg State

University. Holds the following positions in other

organisations: Head of St. Petersburg and the

Leningrad region Lawyers Association; Presidium

member of the Russian Lawyers’ Association.


2006–2008 – First Deputy Rector of St. Petersburg

State University.

2000–2005 – Chairman of St. Petersburg Statutory

Court.

Acting Counsellor of State of St. Petersburg, First Class.

Awards: Order of Honour (2004); Certificate

of Gratitude of the President of the Russian Federation

(2008).


Education: graduated in 1981 from Leningrad State

University (now St. Petersburg State University) .

Professor, Doctor of Juridical Science.


Supervisory Council Work in 2008

In 2008, the Supervisory Council held five formal

meetings and eleven meetings by absentee ballot.

The Supervisory Council reviewed and approved the

following issues:

the agenda for the annual General Shareholders

Meeting including preliminary approval of the annual

report, financial reporting, dividend payment and

remuneration;

the disposal of a 10.63% stake in AK Alrosa with a

pre-tax gain of US$ 51 million;

a management Action Plan to ensure the Bank’s

stability in the current market conditions;

the Directors and Officers Liability Insurance with

VTB-Insurance LLC;

interested party transactions to be entered into by

JSC VTB Bank in the course of its ordinary business

activities;

approval of the Code of Corporate Conduct and the

Code of Ethics.

Name Attendance (formal meetings and by absentee ballot)

Alexei L. Kudrin 16

Arkady V. Dvorkovich 16

Anton V. Drozdov 15

Andrei L. Kostin 11

Yuri M. Medvedev 10

Alexey L. Savatyugin 15

Alexei V. Ulyukaev 11

Anna V. Popova (appointed 26 June 2008) 8

Anton G. Siluanov (appointed 26 June 2008) 7

Nikolai M. Kropachev (appointed 26 June 2008) 7

Kirill G. Androsov (resigned 26 June 2008) 5

Sergey A. Storchak (resigned 26 June 2008) 1

Yvev-Thibault de Silguy (resigned 26 June 2008) 4

Matthias Warnig 11

61


The annual General Shareholders Meeting held

on 26 June 2008, elected three new members

to the Supervisory Council: Anna V. Popova,

Anton G. Siluanov, Nikolai M. Kropachev

(Independent Member of the Supervisory Council).

Kirill G. Androsov, Sergey A. Storchak and Yvev-

Thibault de Silguy left the Supervisory Council.

Details of members’ attendance at the Supervisory

Council meetings are at the previous page.

The Audit Committee

The Audit Committee was created by the Supervisory

Council in April 2007 with the aim of analysing and

supporting the internal audit system. The Audit

Committee is comprised of members of the

Supervisory Council with professional experience

and expertise in internal control, audit, finance,

accounting and the management of financial

institutions. The Committee reports annually to the

Supervisory Council on its performance.

Members of the Audit Committee as of

31 December 2008:

Matthias Warnig – Head of the Committee (independent member of the Supervisory Council of VTB Bank)

Alexey L. Savatyugin – Committee Member (member of the Supervisory Council of VTB Bank)

Alexei V. Ulyukaev – Committee Member (member of the Supervisory Council of VTB Bank).

The Committee’s exclusive functions are to assess:

nominees to be appointed as auditors of the Bank;

the audit report made by the Bank’s auditor;

the effectiveness of the Bank’s internal control

procedures then prepare recommendations on their

improvement.

In 2008, the Audit Committee held two formal

meetings and five meetings by absentee ballot.

In 2008, the Audit Committee reviewed the:

drafts of VTB Bank’s consolidated financial

statements according to International Financial

Reporting Standards (IFRS) and Russian Accounting

Standards (RAS);

results of the tender for VTB Bank’s auditor in 2008;

Controller’s report on the professional activity of VTB

Bank on the securities market;

reports of the Bank's Internal Control Department;

draft of VTB Bank’s Internal Audit / Control policy.

6.3. The Management Board of JSC VTB Bank

Members of the Management Board, the Chairman

of the Management Board and VTB Bank’s Chief

Executive Officer are elected by the Supervisory

Council and are responsible for the day-to-day

management and administration of the Group’s

activities, regulated by the Russian Federation

legislation, the Bank’s Charter, the Regulations on

the Management Board and other internal documents

of VTB Bank.

The Management Board of VTB Bank performs the

following main functions:

enforces the decisions of the AGM and the

Supervisory Council of the Bank;

creates the conditions necessary for the AGM,

the Supervisory Council and the Statutory Audit

Commission of the Bank to function;

reviews VTB Bank’s financial reports, in particular,

those prepared under IFRS and approving their

publication;

approves the publication of the financial statements

in accordance with international accounting

standards;

62

Annual Report 2008

approves the Bank’s participation in legal entities

(with the exception of the participation in holding

companies, financial and industrial groups,

and associations of other united commercial

organisations), if the amount of the Bank’s

participation (the sum of its proprietary investment)

exceeds 5 percent of the charter or joint-stock capital

(property) of the legal entity;

approves the opening of additional offices and cash

transaction service desks of VTB Bank;

sets a fee for recovering the Bank’s lost bond

certificate;

determines and manages the use of commercially

confidential and sensitive information;

approves regulations on branches, representative

offices, collegial bodies and internal departments of

the Bank;

submits materials to the Supervisory Council for its

approval;

appoints the managing directors and chief

accountants of the Bank’s branches;

approves the standard organisational structure of

branches and remuneration of branch employees;

confirms the results of VTB Bank’s activity for the

reporting period, and takes decisions on awarding

bonuses to the Bank’s employees;

examines reports on the work of the structural units

of VTB Bank;

approves the Bank’s budget for the following fiscal

year;

writes off unrecoverable loans not exceeding in

the aggregate US$ 1,000,000 (one million) or its

equivalent for a single borrower out of the allowances

for loan impairment;

considers other issues related to the Bank’s

day-to-day activities submitted to the Management

Board for approval by the President and Chairman

of the Board.

Members of the Management Board

As of 31 December 2008, VTB Bank’s Management

Board consisted of the following members.

Andrei L. Kostin

President and Chairman of VTB Bank Management BoardMember of the Supervisory Council of VTB Bank

A detailed biography of Mr. Kostin is presented in

the “Supervisory Council” section on page 57.

Mikhail V. Kuzovlev

First Deputy Chairman of VTB Bank Management Board

Joined VTB Bank in 2002.

Member of the Supervisory Council of the Russian

Commercial Bank (Cyprus) Ltd.


2005–2008 – Executive Director of Russian

Commercial Bank (Cyprus) Ltd.

2004–2005 – President and Chairman of the

Management Board of Guta Bank (later renamed to

VTB24).

2002–2004 – Vice President at Vneshtorgbank.

1997–2002 – Head of the Financial Transactions

Department, Deputy Chairman of the Management

Board, Senior Vice President at Probusinessbank.

1994–1996 – Vice President of AOZT Probusiness-

holding.


Education: graduated in 1989 from the Moscow

State Institute of International Relations.


63


Vadim O. Levin

First Deputy Chairman of VTB Bank Management Board


Holds the following positions in other organisations:

member of the Supervisory Council of VTB24,

Bank VTB Bank North-West and AKB Evrofinans

Mosnarbank.


1997–2002 – Deputy Chairman of

Vnesheconombank.

1994–1997 – Head of the liabilities operations

division, Deputy Branch Director, Branch Director

of the St. Petersburg branch of Imperial Bank.


Education: graduated in 1985 from the Leningrad

Financial Economic Institute, specialising in

economic cybernetics. PhD in Economics.



Andrei S. Puchkov

Deputy Chairman of VTB Bank Management Board

Joined VTB Bank in 2002. Since then has held

the following positions in VTB Bank’s Legal

Department: Deputy Head of the Department, Head

of the Department, Vice President – Head of the

Department, Senior Vice President – Head of the

Department, Senior Vice President, Member of

Management Board.


Chairman of the Board of Directors of the Russian

Commercial Bank (Cyprus), VTB-Development, VTB Debt

Centre and VTB-Leasing; member of the Supervisory

Council of VTB Bank (Ukraine); VTB Bank (France); VTB24

and VTB Bank North-West; member of the Consultative

Committee of VTB Capital plc. (Great Britain).


1999–2002 – member of the Moscow Bar Association.

1996–1997 – consultant in the central economics

department of the Central Bank of the Russian

Federation.


Education: graduated in 1998 from the Law Faculty

of the Moscow State University. Lawyer.



Gennady V. Soldatenkov




member of the Board of Directors of the Moscow Stock

Exchange Non-Commercial Partnership; member of the

Management Presidium of the Moscow Chamber of

Trade and Industry.


1996–2001 – Deputy Chairman of the Management

Board of JSC Sberbank.

1991–2001 – Chairman of the Moscow Bank of

Sberbank of the Russian Federation.


Education: graduated in 1975 with honours from the

Moscow Financial Institute, specialising in finance and

credit. In 1989, he graduated from Moscow Higher

Party School and in 1990 – from the Higher Commerce

School of the Academy of National Economy under

the USSR Council of Ministers.



64

Annual Report 2008

Vasily N. Titov




member of the Supervisory Councils of VTB Bank

(France) and VTB Bank (Ukraine); member of the

boards of directors of CJSC Interfax-China;

OJSC Interfax-AKI and JSC All-Russian Automotive

Alliance, and CJSC AKB Automotive Bankers House.


1998–2002 – Deputy Director of the Administrative

Department, Director of Foreign and Public Relations,

Head of the Department of Information and Foreign

Relations of Vnesheconombank, member of the

Board of Directors of Vnesheconombank USSR.

1996–1998 – Deputy General Director of JSC All-

Russian Automotive Alliance.


Education: graduated in 1983 from the A. A. Zhdanov

Leningrad State University and in 2002 from the

Finance Academy under the Government of the

Russian Federation. Economist.



Yulia G. Chupina


Joined VTB Bank in 2004. Since then has held the

positions of Vice President, Vice President – Head

of Corporate Development Department, and Senior

Vice President – Head of Corporate Development

Department.


member of the Supervisory Councils of VTB24; VTB

Bank North-West; VTB Bank (Austria); VTB Bank

(Ukraine); member of the Board of Directors of VTB

Insurance, VTB Capital and VTB Factoring; member of

the Consultative Committee of VTB Capital plc

(Great Britain).


1998–2004 – Junior Consultant, Senior Consultant,

Project Manager at Moscow Representative Office of

McKinsey and Company Inc.


Education: graduated in 1993 with honours from

the Moscow State University of the Order of the

Friendship of Peoples, specialising in foreign

languages and in 1997 received an MBA in the Higher

School of Administration and Company Management

in Barcelona (Spain) with an MBA at Leonard Stern

Business School, New York University, USA.

Holds shares equivalent to 0.0008 % of the charter


Olga K. Dergunova

Member of VTB Bank Management Board

Joined VTB Bank in 2007. Heads one of VTB

Bank’s three corporate blocks as a member of

the Management Board, Chairman of the Client

Committee and a member of the Assets and

Liabilities Committee.


member of the Supervisory Council of VTB24,

member of the Board of Directors of VTB Insurance,

VTB Factoring and Systematic Group. Member of the

Investment Committee of the Supervisory Council

of the Russian Corporation of Nanotechnologies,

member of the Board of Trustees of the Higher

School of Management of St. Petersburg State

University.

A participant in the Young Global Leaders forum

(YGL WEF) since 2004; appointed to the “first 100”

management cadre under the patronage of the

President of the Russian Federation since February

2009.


2004–2007 – General Director of OJSC Microsoft

Rus, President of Microsoft Russia and CIS

65


in the Department of Strategic Development of

OJSC Microsoft Rus.

1999–2004 – Head of the Moscow representative

office of Microsoft Airland Operations Ltd.


Education: graduated in 1987 from

the G.V. Plekhanov Institute of National Economy and

in 1991 – postgraduate course at the G.V. Plekhanov

Institute of National Economy.


Valery V. Lukyanenko


Joined VTB Bank in 2002. Since then has held

the positions of the Head of the First Corporate Block,

Senior Vice President – Head of Mid-Size Corporate

Business, Senior Vice President – Corporate Business

President, Vice President – Head of Fourth Corporate

Block, Vice President, Counsellor to VTB President

and Chairman of the Management Board.


Chairman of Banco VTB-Africa S.A. Administrative

Council; member of the Russian party to

Intergovernmental Commissions for Trade and

Economic Cooperation with Angola, Bulgaria, Greece,

Macedonia, Namibia, Serbia, Slovenia, Croatia and

Montenegro.


2001–2002 – Chairman of the Council of Experts

in Project Financing and Forecasts at LANTA BANK

(Moscow).

1994–2002 – Deputy Head of State Programmes

Division, Head of Foreign Economic Relations Division

at Presidential Property Management Department of

the Russian Federation.

1993–1994 – Director, Chairman of GagarinStroi

Industrial and Investment Centre.


Education: graduated in 1982 from the Novosibirsk

Agrarian Institute, and in 1991 from the Russian

Academy of Public Administration under the President

of the Russian Federation. Doctor of Economics,

professor.


Evgeny V. Novikov



Holds the following position in another organisation:

member of the Board of Directors of VTB Factoring

and VTB Debt Centre.


2003–2007 – Deputy CEO of JSC Industrial and

Construction Bank (now VTB Bank North-West).

1993–2007 – Head of the Directorate of Bank

Asset and Liability Operations Management

at JSC Industrial and Construction Bank.


Education: graduated in 1989 from the M. I. Kalinin

Polytechnical Institute in Leningrad, specialising

in robotic technical systems and in 2002 from the

North-Western Academy of State Service, specialising

in finance and credit. Economist.


Nikolai V. Tsekhomsky


Joined VTB Bank in 2005 as Senior Vice President

and CFO.


member of the Supervisory Councils of VTB24;

VTB Bank North-West and VTB Bank (Ukraine);

member of the Consultative Committee of VTB Bank

(Europe); member of the Supervisory Councils of

66

Annual Report 2008

INTERPIPE Limited, CJSC VTB-Invest and VTB Loan

Centre


2002–2005 – Vice President of Finance and

Investments in JSC Mobile TeleSystems.

1999–2002 – Financial Director of the Renaissance

Capital Investment Group.

1998–1999 – Financial Controller at Brunswick UBS

Warburg Investment Bank (Moscow).

1996–1998 – Senior auditor at Ernst and Young.


Education: graduated in 1996 from the St. Petersburg

State Academy for Engineering and Economics. PhD

in Economics.



6.4. Remuneration of members of the Supervisory Council and the Management Board

Remuneration may be paid out to members of the

Supervisory Council of VTB Bank during the period of

the performance of their duties and/or compensation

may be made for expenses of members of the

Supervisory Council connected with the performance

of their functions as decided by the annual General

Shareholders Meeting. The amounts of such

remunerations and compensation are determined by

the AGM. In 2008, remuneration of RUB 4.4 million

(approximately US$ 150 thousand8) was paid out to

independent members of the Supervisory Council

of VTB Bank. The other members of the Bank’s

Supervisory Council were not paid in 2008.1

Determining the remuneration and compensation of

the members of the VTB Bank Management Board

falls within the remit of the Supervisory Council.

8. Official exchange rate of the Central Bank of the Russian Federation as

at 31 December 2008: US$ 1= RUB 29.38.

The salaries and bonus remunerations are reflected

in the employment contracts of the members of the

Management Board. In 2008, remuneration of RUB

534 million (approximately US$ 18.2 million9) was

paid out to members of the Management Board.2

6.5. The President and Chairman

The President and Chairman of the Management

Board is responsible for running VTB Bank’s business

on a day-to-day basis in order to meet the Bank’s

targets and to implement its strategy.

The President and Chairman reports to the

Supervisory Council and to the AGM.

Andrei L. Kostin has been the President and Chairman

of VTB Bank since June 2002. In April 2007, he was

re-elected for this position for the period ending

June 2012.

6.6. The Group Management Committee (GMC)

VTB Group’s governance is aimed at achieving the

fullest possible benefit from the Group’s competitive

strengths, increasing its share of its target markets,

enhancing its performance and strengthening VTB

Group’s capitalization.

A fundamental management mechanism used in VTB

Group is its corporate governance, i.e. implementing

the Bank’s rights as a major shareholder through

participating in the management bodies of its

subsidiaries. An additional management mechanism

is the functional coordination of VTB Group’s main

business areas, including support and control areas

(e.g., risk management, planning, budgeting and

management reporting, brand, internal control and

audit).

9. Official exchange rate of the Central Bank of the Russian Federation as

at 31 December 2008: US$ 1= RUB 29.38.

67


Functional coordination mechanisms are applied

in order to achieve the greatest synergies within

the Group, to share best practices among VTB Group

member companies acting alongside certain

business lines, and to limit risk exposure. Functional

coordination also facilitates knowledge and

experience exchange among the companies within

the Group, and enables the pooling of resources

available to realise certain projects. Functional

coordination helps create common standards,

principles and limits to be applied to certain business

lines of VTB Group’s activities.

A major coordination and advisory body for

VTB Group companies is the VTB Group Management

Committee (“the Management Committee”). Among

the Management Committee members are heads of

VTB Bank and its subsidiaries. The main objective

of the Management Committee is to approve the

strategic and financial parameters of VTB Group’s

development and the key standards, approaches and

principles of the Group’s operations, before they are

approved by the relative authorities of VTB Group’s

companies.

As of 31 December 2008, the VTB Group

Management Committee consisted of the following

members:

Andrei L. Kostin (Chairman of the GMC, President and

Chairman of VTB Bank Management Board, member

of the Supervisory Council of VTB Bank)

Mikhail V. Kuzovlev (First Deputy Chairman of

VTB Bank Management Board)

Vadim O. Levin (First Deputy Chairman of VTB Bank

Management Board)

Andrei S. Puchkov (Deputy Chairman of VTB Bank

Management Board)

Gennady V. Soldatenkov (Deputy Chairman of

VTB Bank Management Board)

Vasily N. Titov (Deputy Chairman of VTB Bank

Management Board)

Yulia G. Chupina (Deputy Chairman of VTB Bank

Management Board)

Olga K. Dergunova (member of the Management

Board of VTB Bank)

Valery V. Lukyanenko – (member of the Management

Board of VTB Bank)

Evgeny V. Novikov (member of the Management Board

of VTB Bank)

Nikolai V. Tsekhomsky (member of the Management

Board of VTB Bank)

Nikolay A. Kuznetsov (Senior Vice President of

VTB Bank)

Ekaterina V. Petelina (Senior Vice President of

VTB Bank)

Yuriy A. Soloviev (Senior Vice President of VTB Bank)

Mikhail M. Zadornov (President and Chairman

of the Management Board of VTB24)

Dmitry V. Rudenko (First Deputy President and

Chairman of the Management Board of VTB24)

Dmitry Y. Olyunin (Chairman of the Board

of VTB Bank North-West)

Vadim V. Pushkarev (Chairman of the Management

Board of VTB Bank Ukraine).

In order to provide a platform for the in-depth and

expert analysis of VTB Group’s performance,

the Management Committee has set up Coordination

Commissions in the Bank’s main business lines

VTB Group’s governance system is designed to comply fully with the local corporate and antitrust legislation of VTB Group’s member companies.

68

Annual Report 2008

which are managed by the heads of the Bank’s

relative divisions and staffed by professionals

from VTB Group companies. The objective of these

Commissions is to identify best practices and find

ways of implementing them. The proposals submitted

by the Commissions are further approved by

the Management Committee.

VTB Group’s governance system is designed to

comply fully with the local corporate and antitrust

legislation of VTB Group’s member companies.

The regulation on VTB Group Management Committee

therefore stipulates that no decision can be made

which would limit competition in the markets in

which VTB Group companies operate, nor can it

violate the local legislation and by-laws of these

companies. Adhering to civil law, VTB Group’s

governance system is founded on the principle of its

members’ independence.

In 2008, the most significant events in streamlining

VTB Group’s governance system were:

extending the definition of VTB Group (to include

non-banking financial institutions);

upgrading VTB Group’s governance model and

formalising of VTB Group’s governance mechanisms

in the “Primary Rules of Management of the Group”

in accordance with the Federal Anti-monopoly Service

and the Bank of Russia and confirmed by VTB Group’s

Management Committee;

streamlining the Management Committee’s

procedures, including the mechanisms of its decision

documenting and implementing; adopting a new

version of the “Regulations on the Management

Committee of VTB Group” and confirming it with

the Federal Anti-monopoly Service and the Bank

of Russia; rotating its membership to reflect new

companies in VTB Group;

developing and implementing of standardised

systems of business planning and reporting among

the Group’s companies, common funding principles,

single standards in lending and in relations with

financial institutions;

introducing a consolidated risk management

system, including the creation of VTB Group’s Credit

Committee.

VTB has consistently improved the Group’s

governance system by applying best practices for

holding companies and plans to take the following

steps in this direction in 2009–2010:

improve VTB Group’s corporate governance through

upgrading the efficiency of Supervisory Councils and

Boards of Directors);

streamline the organisation structures of VTB Group’s

member companies;

introduce a set of unified principles for the incentive

scheme for top executives at VTB Group, as well as

enhancing HR activities to attract and maintain new

staff;

optimise the reporting system and document flows

within VTB Group and implement the Customer

relationship management and consolidated system

of management reporting at VTB Group;

coordinate the policies and procedures applied

within VTB Group, especially in customer

relationships, product offering, credit limit setting,

reporting, compliance, monitoring and control.

69

7. Corporate social responsibility (CSR)


The Group is committed to the principals of

corporate social responsibility and believes that

business should be involved in resolving key social

issues. In performing its business, VTB takes into

consideration socially important aspects of its

activities and commitments towards shareholders

for its performance, customers – for the quality of

banking products and services, business partners –

for due exercise of its commitments, the society and

the state – for respect of individuals, their rights and

freedoms, for contribution to the Russian economy.

The core social values and principles guiding VTB

activities are as follows:

Promoting equality, fairness and mutual respect

among VTB’s employees, partners, customers and

shareholders;

Adhering to the policy of maximum openness

and transparency of its activities to shareholders,

customers, business partners and employees;

Maintaining its corporate reputation and commitment

to business ethics;

Providing high-profile services and meeting

customers’ needs;

Ensuring efficient and safe working conditions and

health protection for its employees; and

Supporting the communities in which it operates.

The VTB Bank “Corporate Social Responsibility Report

2008” will be available at www.vtb.ru from July 2009.

7.1. Employees

VTB builds relationships with its employees based

on long-term cooperation, mutual respect and

trust. The Group ensures the social protection and

well-being of its employees by facilitating their

professional development.

The Group has developed a comprehensive training

programme for its employees at all levels, which

is conducted by the Group’s internal resources, as

well as external organisations. The VTB Corporate

University, set up in 2005, continued to operate

in 2008 and the total number of graduates and

students of the “Energy of Leadership” programme

reached approximately 200. A number of new training

programmes, including “Execution Management”,

“VTB Bank and VTB Group Products and Services”,

as well as specialised training courses for lending

experts and client- and deal structure managers,

were introduced during the year.

VTB promotes and supports its employees’

commitment and professional achievements by

offering incentives, which directly and justly reflect

the Bank’s results and the individual performance of

the employees. The system of incentives and wage

payments (SIWP) was revised in 2008 in response

to current market conditions. In addition to monthly

salary, the compensation and remuneration packages

include a range of attractive corporate benefits which

offer solutions for a healthy work-life balance, and

provide for illness, families and retirement.

The Group believes that creating a corporate

culture is important for its business development.

It holds meetings and video conferences with staff

and managers in order to improve intra-corporate

relations and internal communications, as well as to

70

Annual Report 2008

increase staff awareness of current developments

within the Group. Since 2008, VTB has published

its corporate magazine, “Team Energy”, for its

employees, as well as regular updates on the

information boards in all VTB offices and branches

with regards to business development, different

activities, culture and services. It also supports the

corporate portal and conducts regular surveys of

employees.

VTB gives great importance to the development of

social responsibility amongst its staff. In 2008, VTB

Group launched its new project “VTB for the Country”,

combining social initiatives in terms of voluntary

and charity work “Do It Yourself”, environmental

protection, and increasing financial literacy.

In 2008, VTB launched an e-recruitment project

comprising a job search website and the software

automation of the recruitment process. The job

search website aims to build the image of VTB as

an attractive employer, reflects various aspects of

VTB’s corporate life and culture, and intends to

help applicants from different regions and countries

to find out more about VTB Group and to define

their professional ambitions. Applicants may apply

via the website for the jobs they are interested in,

within any Group company. This project allows VTB

to accumulate the CVs of professionals from various

sectors and to create a personnel reserve from which

to choose the best staff with minimal cost and time

deployed. As the economic situation stabilises, this

electronic personnel reserve will enable VTB to form

professional teams within the Group’s companies

promptly, as required.

7.2. Health and safety

Health and safety measures are an integral part of

VTB’s social programmes. All VTB employees are

provided with health insurance, and workers in high-

risk categories receive additional accident insurance.

VTB undertakes a number of measures to improve

health and safety conditions, including regular

medical examinations, assessment of workplaces

with respect to working conditions, and training and

testing managers with regards to safety measures.

7.3. Customers

VTB is committed to developing and strengthening

relationships with its customers based on the

principles of good faith, integrity, professionalism

and mutual respect. VTB’s dedicated teams provide

clients with a wide spectrum of services in order to

meet their specific needs and VTB constantly seeks

better ways and means to provide more efficient and

innovative services to its customers.

7.4. Shareholders

The Group places great importance on effective

communication with its shareholders and potential

investors. The Group believes that it is essential

to maintain dialogue with its shareholders and to

keep them updated with regards to its financial

performance, strategy and business developments.

In order to maintain transparency and comply

with international public company standards,

VTB continues to hold regular meetings and

conference calls of the Bank’s top management with

shareholders, fund managers, financial analysts

and brokers. During 2008, the Group’s executive

management held more than 300 meetings with

Russian and international investment funds.

In 2008, VTB launched a number of initiatives to

improve relationships with the Bank’s individual

shareholders. In particular, two meetings with

individual shareholders were held in St. Petersburg

and Moscow. During the meetings, VTB shareholders

and top executives discussed a broad range of

issues, including dividend policy, the performance of

equities on stock exchanges, trading of equities, the

current performance of the Bank, as well as prospects

for increasing its equity value and improving

71


relationships with shareholders. The Group aims to

hold such meetings on a quarterly basis in the future.

In the second half of the year, VTB opened

Shareholders’ Support Centres in St Petersburg to

work with individual shareholders and launched call

centre services. Following the end of the reporting

period, additional Shareholders’ Support Centres

were opened in Moscow and Ekaterinburg. These

centres provide shareholders with the opportunity

to receive professional advice from VTB staff

on shareholders’ rights, the dividend payment,

transactions in VTB shares and other issues related

to the trading of VTB shares on the stock market, as

well as the opportunity to review AGM materials and

other documents. In 2008, the Group also launched

the “Controlling Interest” newspaper for shareholders

on a quarterly basis, and significantly improved

the “Investor Relations” section of its website, adding

interactive tools for the convenience of shareholders.

The Supervisory Council and executive bodies of the

Bank invite all shareholders to attend the Group’s

annual General Shareholders Meeting and encourage

them to exercise their voting rights and to participate

with questions.

All corporate materials, including annual reports,

financial results statements and other information,

are available on the Group’s website www.vtb.com

7.5. Community support

The sponsorship and charity activity of VTB combines

long-term project support and donations. Decisions

on any charity funding are taken collectively by

VTB’s Charity Committee. In 2008, VTB reviewed over

2,000 requests for sponsorship and charity support,

participated in more than 100 sponsorship projects,

and provided financial support to 106 cultural,

healthcare, education and sport institutions, as

well as to religious organisations and veterans’

committees. Among these projects are:

Art and culture

The Toulouse-Lautrec Paris Joy Exhibition and “Fedor

Matveyev: Travelling in Italy” Exhibition at the State

Tretyakov Gallery.

The restoration of M.A.Voloshin’s Kimmeria in the

Crimea and further support of the development of

this reserve and exposition.

The traditional Russian Evening in Milan, organised

within the framework of the Protocol of Russian-

Italian Joint Commission for Partnership in Culture

and Education.

II International Russian-Georgian poetry festival held

by “Russian Club”, the International Cultural and

Educational Union.

The Living Word 3rd International Multimedia Festival

in A.S. Pushkin Estate Museum, Boldino.

Cinema and television

Film projects within the framework of “In Support

of Russian Cinematography – Presenting Russian

cinematography in Italy” Programme.

“In the bosom of my family” Social Programme

(within the framework of this programme, heads of

VTB branches in the regions in which the programme

took place participated in press conferences, round

table discussions and meetings, promoting the

development and maintenance of family values).

The Group places great importance on effective communication with its shareholders and potential investors. The Group believes that it is essential to maintain dialogue with its shareholders and to keep them updated with regards to its financial performance, strategy and business developments.

72

Annual Report 2008

Russian national TV competitions “TEFI” and “TEFI-

Region” (in partnership with the Academy of Russian

Television (ART)).

Music and theatre

The International Ballet Festival “Mariinsky”,

a highlight in the world of ballet.

“The Gambler” an opera by S. Prokofiev, at the

Metropolitan Opera in New York and “The Night

Before Christmas” an opera by Rimsky-Korsakov,

at the Mariinsky Theatre.

Three ballets in one act in the Bolshoi Theatre:

Grand Pas from the ballet Paquita to music by Ludvig

Minkus, “Russian Seasons” to music by Leonid

Desyatnikov, and “Symphony in C” to music by

Georges Bizet.

Equipping the new theatre for the Fomenko Studio,

a Moscow State-run theatre company.

The tour of the Fomenko Studio which performed

“Wolf and Sheep” by A. Ostrovsky in B.Lavrenev

Drama Theatre of the Black Sea Fleet of the Russian

Federation in Sevastopol and “Family Happiness”

and “War and Peace” by Leo Tolstoy in Erevan,

Armenia; as well as participation in international

festivals in Russia, Poland, Germany and France.

The not-for-profit St. Petersburg Ballet Theatre of the

Boris Eifman Fund.

A concert of the Grammy 2007 winners,

Moscow Soloists orchestra, led by Yuri Bashmet

in Washington D.C. during the Annual Meeting

of the International Monetary Fund (IMF).

The 12th Dmitry Shostakovich Awards Ceremony.

Education and science

E.D. Stasova Interdom boarding school in Ivanovo,

the Financial Academy under the government

of the Russian Federation, the Danila Efremov

Aksaiskyi Region Cossack Cadet Corps boarding

school in Rostov, the State Academy of Slavic

Culture, the Department of Economics of Moscow

State University, the Higher School of Management

of St. Petersburg State University, the Institute of

Volcanology and Seismology of the Far Eastern

branch of the Russian Academy of Science, the

Russian State University for the Humanities, the

VOENMEKH Baltic State Technical University,

the Military Academy of the Central Command

of the Russian Armed Forces and State Grammar

School No. 1518.

The 9th International Science Conference:

Modernisation of the Economy and Globalisation

organised by the State University – Higher School

of Economics.

VTB scholarships to the best students and

postgraduates from the Moscow State Institute

for International Relations (MGIMO), Moscow

State University, the Financial Academy under

the Russian Government, the Higher School of

Economics, the VOENMEKH Baltic State Technical

University, St. Petersburg State University

of Economics and Finance and many other

educational establishments for the 2008–2009

academic year.

Sport

Funds for training the Russian national men’s

volleyball team and the women’s basketball team to

participate in the 2008 Beijing Olympic Games.

The Commonwealth of Independent States and Baltic

States Football Cup.

In 2008, VTB reviewed over 2,000 requests for sponsorship and charity support, participated in more than 100 sponsorship projects, and provided financial support to 106 institutions.

73


The 11th IAAF World Championship in Valencia,

Spain, and the 7th World Athletics Final in Stuttgart,

Germany, and other international athletics

competitions.

A friendly men’s basketball tournament, the Joint

VTB Cup, in CSKA arena, with the participation of the

best basketball players from Russian and Eastern

European teams.

A number of projects, including the construction of

hotels in preparation for the Olympic Winter Games

in Sochi.

Healthcare

In 2008, VTB has financially supported and allocated

funds to children’s healthcare institutions within the

framework of its charity programme “World Without

Tears”:

Inspiration LS, a modern machine for artificial lung

ventilation, to N.Filatov Children’s Hospital No. 13 in

Moscow;

Special equipment for a sensory room to the

Children’s Specialised Hospital for Rehabilitation in

Ekaterinburg (this will help to improve the mental

development of children with neuropathy, to develop

the cognitive skills of children with psycho-neurologic

problems and the speech skills of children with

hearing and speech disorders);

Funds to purchase rehabilitation equipment,

LOKOMAT, for children suffering from infantile

Cerebral Palsy, G.I.Turner Children’s Orthopedic

Institute, and the antifungal medicine Considas for

four Hematological Oncology departments of the

Russian Children’s Clinical Hospital;

Rehabilitation equipment for preventive treatment

(to protect children from tuberculosis) to the Regional

Children’s Anti-tuberculosis Sanatorium No. 1 in

Vladivostok;

Funds to the independent not-for-profit First Hospice

for children with cancer and the Central Military

Clinical Hospital of the Air Force.

Support for veterans

The Regional public organisation of war and labour

veterans and the disabled people of the Ministry of

Foreign Affairs of the Russian Federation;

The Moscow House of war veterans (pensioners) and

Military Forces;

The Interregional Society of Disabled Russian

Servicemen, providing assistance to veterans on

Defenders of the Motherland Day and Victory Day;

The Russian national public organisation for blind

and disabled veterans and pensioners of the

Southern Administrative District of Moscow city.

Religious organisations

Donations to the local Russian Orthodox religious

organisation Parish of the Feodorovskaya Icon of

the Madonna of the St. Petersburg Diocese for the

restoration of the cathedral;

Funds to the International Orthodox Education Centre

of the Moscow Patriarchy for publishing the Bible with

illustrations by Russian artists;

Donations to the charity fund Restoration of the

Cathedral of the Kazan Icon of the Madonna, for the

restoration of the cathedral in the village of Staritsa in

the Astrakhan Region.

In 2008, VTB has financially supported and allocated funds to children’s healthcare institutions within the framework of its charity programme “World Without Tears”.

74

Annual Report 2008

8. Management report

The management has pleasure in submitting

the Annual Financial Report of VTB Group

together with the audited accounts for the year

ended 31 December 2008.

Key strategic highlights

Continued support from the Government on capital

and funding

Increasing emphasis on supporting customers and

protecting our franchise

Increased focus on efficiency and cost control

Risk management policies tightened

Financial highlights

VTB remained profitable at the net level for the full year

Net profit of US$ 212 million, down from

US$ 1.5 billion in 2007

Total loans up 50.3% year-on-year to US$ 90.2 billion,

reflecting strong increases in both corporate and

retail lending

Total customer deposits stable at US$ 37.5 billion,

with retail deposits up 12.8% to US$ 12.1 billion

Core income of US$ 5.2 billion, a 70.9% increase

year-on-year

Net interest margin up to 4.8% from 4.4% in 2007

Provisioning charge, as a proportion of average gross

loan portfolio, up to 3.2% from 1.3% in 2007

Total BIS ratio at 17.3%

Principal activities

VTB Group (“VTB” or “the Group”) which includes

JSC VTB Bank (“VTB Bank” or “the Bank”) and its

subsidiaries is a leading Russian banking group,

offering a wide range of universal banking services

and products across Russia, certain CIS countries and

in selected countries of Western Europe, Asia and

Africa. The Group’s business franchise is divided into

three distinct areas of expertise: corporate, retail and

investment banking.

Review of financial performance

Despite the challenging market conditions and

higher provision charges, VTB posted a net

profit of US$ 212 million for the year, down from

US$ 1.5 billion in 2007.

The Group achieved strong asset growth of 36%

to US$ 125.8 billion, up from US$ 92.6 billion in

2007. VTB’s key role in the economy and the support

we have received from the Government as it seeks

to sustain economic activity has enabled VTB to

benefit substantially from business inflows in both

corporate and retail, driving total loans up 50.3% to

US$ 90.2 billion from year end 2007.

Customer deposits remained stable in 2008 at

approximately US$ 37.5 billion, with retail deposits

up 12.8% year-on-year to US$ 12.1 billion. This

reflects the growth in the branch network and

a strong retail customer preference for the security

of a state-backed bank with a strong brand.

Corporate deposits declined 3.6% year-on-year to

US$ 25.5 billion. This was partly due to the impact

of the currency devaluation – about 60% of VTB’s

corporate deposits were rouble-denominated. With

reduced access to other sources of funding, corporate

75


customers also reduced cash deposits to fund

expenditure.

Core income, defined as net interest income and

net fee and commission income before provisions

and excluding one-off items, was up 70.9% to

US$ 5.2 billion year-on-year reflecting the strong

top-line growth and improved underlying profitability

in both corporate and retail lending, as well as

the resilience of our business. Net interest income

increased 78.7% from 2007 to US$ 4.6 billion. Net

fee and commission income grew US$ 656 million

year-on-year, or 31.2% excluding one-off items

in 2007. Net interest margin before provisions

increased to 4.8% in 2008 as compared with 4.4%

in 2007. Income from trading and available for sale

financial instruments was US$ 41 million reflecting

effective trading and hedging strategies and the

impact of the application of the amended IAS 39

standard. Overall, the value of VTB’s debt and equity

portfolio fell 53.2% year-on-year to US$ 6 billion from

US$ 12.8 billion at the year end 2007.

In the fourth quarter of 2008, provision charges grew

US$ 1.1 billion compared with US$ 1.4 billion in the

first nine months of the year. The increase reflected

the strong growth in our loan portfolio as well as

a further decline in the financial and operating

environment. Given the worsening economic outlook

for Russia, VTB significantly increased its provisioning

charge to 3.2% of the average gross loan portfolio as

compared with 1.3% in 2007. The share of overdue

and rescheduled loans in the gross loan portfolio

increased to 2.4% by the end of 2008 from 1.4%

at the end of 2007. Coverage ratio for overdue and

rescheduled loans by allowances for loan impairment

stood at a comfortable level of 147.6% as of

31 December 2008.

In the face of the existing liquidity crisis and in order

to limit the increase in overdue debts, VTB introduced

a number of significant changes to its lending

procedures, including tightening lending standards

and strengthened loan monitoring practices. At the

end of 2008, VTB established a Debt Centre to work

with borrowers in difficulty and secure the bank’s

position in restructuring situations.

Continuing its efforts to manage its liabilities

prudently, VTB initiated steps to optimise its debt

obligations. The nominal value of bonds bought

back during the fourth quarter of 2008 amounted

to US$ 1.4 billion. A net gain from the buy-back of

US$ 349 million was booked during that quarter.

Review of operating performance

Although the economy continued to grow well

into 2008, a sharp deterioration in output in the

fourth quarter and the devaluation of the rouble led

management to focus increasingly on the following

strategic priorities: seeking ways to preserve, and

where possible strengthen, our capital base in

anticipation of rising bad debt provisions going

into 2009, supporting customers through their own

difficulties and protecting our customer franchise,

and maintaining, and where necessary strengthening,

efforts to rein in costs and tighten risk control.

Capital position

As of the end of 2008, VTB had a total BIS capital

adequacy ratio of 17.3%, up from 16.3% at the

end 2007. The bank is making strenuous efforts to

optimise capital allocation within the Group. It has

also continued to enjoy the strong commitment

from the Russian Government to provide capital and

funding support. In the fourth quarter of 2008 VTB’s

capital adequacy ratio was materially supported

through a Government subordinated debt issue of

RUB 200 billion at a rate of 8% and with a maturity

of 11 years.

Core income was up 70.9% to US$ 5.2 billion year-on-year reflecting the strong top-line growth and improved underlying profitability in both corporate and retail lending, as well as the resilience of our business.

76

Annual Report 2008

As part of the Government’s plans to

recapitalise the banking sector and ensure it is

adequately capitalised to absorb an expected

rise in bad debt provisions, the Government

has indicated that it intends to underwrite

an injection of up to RUB 200 billion in Tier 1

Capital into VTB. This capital increase, which

will take the form of an issue of new ordinary

shares, will enable VTB to continue to grow

its lending book and support the Russian

economy in 2009. Shareholders will vote on

the proposed capital increase at the annual

General Shareholders Meeting in June. The

capital increase is expected to be completed by

October 2009.

Supporting customers and protecting

the franchise

All our businesses reported strong growth

in 2008, consolidating VTB’s position as the

second largest financial group in both corporate

and retail banking in Russia.

Corporate banking:

In the course of 2008, VTB was able to consolidate

its strategic position as lender of choice to the

Russian corporate sector, thanks to its strong

relationship with the Government which ensured

access to reliable funding. With the capital markets

closed to Russian issuers, and foreign banks

seeking to reduce exposure to Russian borrowers,

VTB was one of the few sources of reliable credit

for corporate borrowers in Russia. We were thus

able to increase our share of the lending market to

12.7% from 10.7% at the end of 2007. In the face

of deteriorating market conditions, we expect to

focus increasingly on supporting viable customers

through the downturn while maintaining our tight

risk criteria. We believe that by taking a long-term,

supportive view, we can protect and consolidate

our franchise while continuing to benefit from

the support of our largest shareholder, the

Government, which at present is the only source

of long-term capital and funding. In the autumn

of 2008, VTB significantly expanded its volume of

lending to strategically important companies. From

September to the end of December 2008, VTB

issued over US$ 27 billion of new loans to Russian

customers across key sectors. As a result of this

lending activity, our gross corporate loan portfolio

increased 47.2% to US$ 77.0 billion at the end of

2008 from US$ 52.3 billion at the end of 2007.

Retail banking:

During 2008, we completed our three-year branch-

opening programme in Russia. In the course of the

year, we opened 176 new branches, bringing the total

number of branches to 504. VTB24’s retail branch

network is now one of the largest in Russia. In 2008,

VTB24 served more than 4.7 million individual and

around 127,000 small business customers in Russia.

Early action was taken to mitigate risk in the portfolio

by shifting away from long to short-term lending

products, such as consumer loans and credit cards,

tightening requirements on borrowers and increasing

emphasis on improving collection of arrears.

In the fourth quarter of 2008, thanks to its stronger

market presence and trusted brand, VTB was one

of a few banks that saw net deposit inflow with a

substantial increase in the number of new current

and savings accounts being opened. In 2008, retail

loans were up 71.5% to US$ 13.2 billion. Overall, our

market share of loans increased to 8.8% (from 5.9%

in 2007) while the share of deposits grew to 5.7%

(from 4.8% in 2007).

With the capital markets closed to Russian issuers, and foreign banks seeking to reduce exposure to Russian borrowers, VTB was one of the few sources of reliable credit for corporate borrowers in Russia.

77


Investment banking:

The Group launched VTB Capital, its new investment

banking business in April last year. By the end of

2008, we had established a full service investment

bank, staffed with 500 employees, including both

external hires and transfers from elsewhere in VTB.

We are in the process of establishing ourselves

as one of the leading Russian investment banking

business. The objective is to provide a full suite

of investment banking products to our extensive

corporate client base and provide multiple

opportunities to grow revenue.

Efficiency and cost control

VTB’s cost to core income ratio improved to 51.9%

in 2008 from 63.7% in 2007 despite the continued

investment in expanding the retail branch network

and building out the investment banking business.

As previously announced, at the end of 2008 VTB

implemented a number of cost-cutting measures

which included postponing the move to new

headquarters, cutting administrative expenses,

implementing a hiring freeze across the Group

and reducing the headcount in some VTB Group

businesses. Given the current challenging market

environment, VTB Bank has resolved not to pay

annual bonuses to the members of the Management

Board in respect of the past financial year.

Corporate governance

On the corporate governance front, we intend

to strengthen VTB’s Supervisory Board with the

appointment of two new independent directors,

bringing the total number of independent directors

to four. We have approved a policy on information

disclosure and dividend policy, and have adopted

a code of ethics setting out clear procedures and

rules of conduct across the business.

2009 Outlook

The key variable is the state of the economy. Our

current working assumption is that the percentage

growth in our loan portfolio in dollar terms this year

will be in the mid-teens.

We are also working on the basis that there will be

additional funding from the Government to support

that growth. Cost control remains a key priority and

we expect costs to remain broadly at the same level

as in the fourth quarter of 2008 on an annualised

basis. We do not expect to see the allowance for loan

impairment to rise beyond 8% of our total gross loan

portfolio. Nevertheless, given current CBR interest

rate policies and the likelihood of continued tough

macroeconomic conditions, we expect interest

margins to come under pressure. Our focus for the

year ahead will be on supporting customers through

these difficult times.

Dividend policy

In July 2008, the Supervisory Committee approved

the Regulation on VTB Bank’s Dividend Policy.

This Regulation establishes the basic principles of

the Bank’s dividend policy, the decision-making

procedure for dividend payments (declaration), the

rules for calculating dividends and payouts aimed

at informing shareholders and other interested

parties. The recommended dividend payment

is determined by the Supervisory Council based

on the Bank’s financial performance as of the

year-end, amounting to at least 10 per cent of the

Bank’s net profit. Dividends on all categories of

In the fourth quarter of 2008, thanks to its stronger market presence and trusted brand, VTB was one of a few banks that saw net deposit inflow with a substantial increase in the number of new current and savings accounts being opened.

78

Annual Report 2008

share should be paid within the period set by the

General Shareholders Meeting. If the Payout Period

is not specified in the resolution of the General

Shareholders Meeting, it shall not exceed 60 days

after the date of such resolution.

On 26 June 2008, VTB’s annual shareholders’

meeting declared dividends of RUB 9 billion

(US$ 381 million at an exchange rate of

RUB 23.6113 per US$ 1.00) for 2007

(RUB 0.00134 per share or US$ 0.000057 per

share). Dividends were paid within 60 days of the

dividend declaration.

Employees

The Group’s human resources management policy is

aimed at developing a skilled and highly productive

staff that is successful in conducting its business. The

Group has developed a number of comprehensive

training programmes which provide both internal

and external professional training for employees

at all levels. The Group also operates a corporate

university, which offers professional development

training to its junior and mid-level managers.

The Group believes that its current compensation

package is generally comparable to that offered by

other major Russian banks.1

The Group contributes to the State and Group

pension schemes, social insurance, and obligatory

medical insurance funds in respect of its

employees.10

10. See note #29 to the accounts for details of staff costs. The

consolidated financial statements in accordance with IFRS are available

at the Bank’s website: www.vtb.com.

The Group strongly believes that creating a corporate

culture is important for its business development.

VTB also has a trade union to which a number of

its employees currently belong. The Group has not,

to date, experienced any strikes, work stoppages,

labour disputes or actions that have had a material

effect on the operation of its business.

The number of employees in the Group as at 31

December 2008 was 41,992 (31 December 2007:

35,945).

Donations

VTB Group made charitable donations in 2008

amounting to US$ 28 million.

Annual General Shareholders Meeting

VTB Bank’s annual General Shareholders Meeting is

expected to take place on 29 June 2009. Notice of an

AGM and the agenda is sent to shareholders no less

than 30 days prior to the date of the meeting.

Auditors

CJSC Ernst & Young Vneshaudit was appointed as

VTB Bank’s external auditor for 2008 at the annual

General Shareholders Meeting held on 26 June 2008.

The Annual Financial Statements for the years ended

31 December 2008, 2007, 2006, 2005 and 2004

have been audited by Ernst & Young, independent

auditors. Address: 77, Building 1, Sadovnicheskaya

Naberezhnaya, Moscow 115035, Russian Federation.

Ernst & Young is a member of the Institute of

Professional Accountants and Auditors of Russia

(‘‘IPAR’’). IPAR is a full member of the International

Federation of Accountants.

79

9. Responsibility statement by management

Management is responsible for preparing the Annual

Report and the Group’s financial statements in

accordance with applicable law and regulations.

As VTB is listed on the London Stock Exchange, we

adhere to the requirement of UK company law which

requires the directors to prepare the Group’s financial

statements in accordance with International Financial

Reporting Standards (‘‘IFRS’’) as adopted by the

European Union and applicable law.

The Group financial statements are required by law

and IFRS as adopted by the EU to present a true and

fair view of the state of affairs of the Group and of

the profit for that year. In preparing the accounts the

management is required to:

select suitable accounting policies and then apply

them consistently;

make judgements and estimates that are reasonable

and prudent;

state whether applicable accounting standards have

been followed, subject to any material departures

disclosed and explained in the accounts;

prepare the accounts on the going concern basis

unless it is inappropriate to presume that the Group

will continue in business.

The management is responsible for keeping proper

accounting records which disclose with reasonable

accuracy at any time the financial position of

the Group and to enable them to ensure that the

accounts comply with the Companies Act 1985.

They are also responsible for safeguarding

the assets of the Group and hence for taking

reasonable steps for the prevention and detection

of fraud and other irregularities.

9. Responsibility statement by management

VTB Bank President and Chairman Andrei Kostin

of the Management Board

80

Annual Report 2008

10. Summarised consolidated financial statements in accordance with IFRS

derived from the audited consolidated financial statements and auditors’ report For the years ended 31 December 2008 and 2007

* For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarised

consolidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarised

consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained

from VTB Bank.

The consolidated financial statements in accordance with IFRS are available at the Bank’s website: www.vtb.com.

*

81Independent auditors’ report

To the Board of Directors and Shareholders of the VTB Bank:

We have audited the consolidated financial

statements of VTB Bank (“the Bank”) and its

subsidiaries (together “the Group”) as of and for

the years ended 31 December 2008 and 2007,

from which the accompanying summarised

consolidated financial statements (which

comprise the summarised consolidated balance

sheets as at 31 December 2008 and 2007,

the summarised consolidated statements of

income, summarised consolidated statements of

changes in shareholders’ equity and summarised

consolidated statements of cash flows for the

years then ended) were derived, in accordance

with International Standards on Auditing. In

our report dated 27 April 2009 we expressed

an unqualified opinion on the consolidated

financial statements from which the summarised

consolidated financial statements were derived.

In our opinion, the accompanying summarised

consolidated financial statements are consistent, in

all material respects, with the consolidated financial

statements from which they were derived.

For a better understanding of the Group's financial

position as at 31 December 2008 and 2007 and the

results of its financial performance and cash flows for

the years then ended and of the scope of our audit,

the summarised consolidated financial statements

should be read in conjunction with the consolidated

financial statements from which the summarised

consolidated financial statements were derived and

our audit report thereon.

27 April 2009

ЗАО «Эрнст энд Янг Внешаудит»Россия, 115035, Москва,Садовническая наб., 77, стр. 1Teл.: 7 (495) 705-9700 755-9700Факс: 7 (495) 755-9701ОКПО 00139790

CJSC Ernst & Yong VneshauditSadovnicheskaya Nab., 77, bld. 1Moscow, 115035, RussiaTel.: 7 (495) 705-9700 755-9700Fax: 7 (495) 755-9701www.ey.com/russia

82

Annual Report 2008

Summarised consolidated balance sheets as of 31 December(expressed in millions of US dollars)

2008 2007

Assets

Cash and short-term funds 14,162 5,160

Mandatory cash balances with central banks 259 825

Financial assets at fair value through profit or loss 5,813 10,436

Financial assets pledged under repurchase agreements and loaned financial assets 1,513 2,212

Due from other banks 10,482 9,733

Loans and advances to customers 86,984 58,549

Financial assets available-for-sale 812 858

Investments in associates 153 167

Investment securities held-to-maturity 703 5

Premises and equipment 2,070 1,997

Investment property 148 168

Intangible assets 385 480

Deferred tax asset 316 215

Other assets 2,048 1,804

Total assets 125,848 92,609

Liabilities

Due to other banks 13,231 14,794

Customer deposits 37,503 37,098

Other borrowed funds 28,888 5,176

Debt securities issued 19,063 16,489

Deferred tax liability 188 149

Other liabilities 5,924 1,231

Total liabilities before subordinated debt 104,797 74,937

Subordinated debt 7,704 1,171

Total liabilities 112,501 76,108

83


83

2008 2007

Equity

Share capital 3,084 3,084

Share premium 8,792 8,792

Treasury shares (15) (21)

Unrealised gain / (loss) on financial assets available-for-sale and cash flow hedge (3) 109

Premises revaluation reserve 568 587

Currency translation difference (1,853) 663

Retained earnings 2,682 2,993

Equity attributable to shareholders of the parent 13,255 16,207

Minority interest 92 294

Total equity 13,347 16,501

Total liabilities and equity 125,848 92,609

Approved for issue and signed on 27 April 2009.

A.L. Kostin

President – Chairman of the Management Board

N.V. Tsekhomsky

Chief Financial Officer – Member of the Management Board

Summarised consolidated balance sheets as of 31 December(continued)(expressed in millions of US dollars)

84

Annual Report 2008

Summarised consolidated statements of income for the years ended 31 December(expressed in millions of US dollars, except earnings per share data)

2008 2007

Interest income 9,809 5,387

Interest expense (5,242) (2,831)

Net interest income 4,567 2,556

Provision charge for impairment (2,482) (526)

Net interest income after provision for impairment 2,085 2,030

Gains less losses arising from financial instruments at fair value through profit or loss 87 138

Gains less losses arising from extinguishment of liability 349 —

Gains less losses / (losses net of gains) from available-for-sale financial assets (46) 116

Gains less losses / (losses net of gains) arising from dealing in foreign currencies (2,416) 547

Foreign exchange translation gains less losses 2,547 108

Fee and commission income 779 637

Fee and commission expense (123) (80)

Share in income of associates 6 18

Recovery of / (provision charge for) impairment of other assets and credit related

commitments (58) 2

Income arising from non-banking activities 127 95

Other operating income 175 121

Net non-interest income 1,427 1,702

Operating income 3,512 3,732

Staff costs and administrative expenses (2,711) (1,948)

Expenses arising from non-banking activities (58) (63)

Profit from disposal of subsidiaries and associates – 98

Profit before taxation 743 1,819

Income tax expense (531) (305)

Net profit 212 1,514

Net profit attributable to:

Shareholders of the parent 218 1,480

Minority interest (6) 34

Basic and diluted earnings per share

(expressed in USD per share) 0.000032 0.000241

85


Summarised consolidated statements of cash flows for the years ended 31 December(expressed in millions of US dollars)

2008 2007

Cash flows from operating activities

Interest received 9,450 5,246

Interest paid (4,791) (2,622)

Income received / (losses incurred) on operations with financial instruments at fair

value through profit or loss (353) 286

Income received / (losses incurred) on dealing in foreign currency (1,186) 474

Fees and commissions received 745 637

Fees and commissions paid (110) (96)

Income arising from non-banking activities and other operating income received 206 110

Staff costs, administrative expenses and expenses arising from non-banking activities

paid (2,404) (1,790)

Income tax paid (599) (476)

Cash flows from operating activities before changes in operating assets and liabilities 958 1,769

Net decrease (increase) in operating assets

Net decrease (increase) in mandatory cash balances with central banks 505 (125)

Net decrease in restricted cash 29 38

Net decrease (increase) in financial assets at fair value through profit or loss 4,612 (5,521)

Net increase in due from other banks (876) (2,617)

Net increase in loans and advances to customers (35,412) (28,231)

Net increase in other assets (414) (914)

Net (decrease) increase in operating liabilities

Net (decrease) increase in due to other banks (1,083) 6,805

Net increase in customer deposits 6,557 15,566

Net increase in promissory notes and certificates of deposits issued 2,835 2

Net increase in other liabilities 291 266

Net cash used in operating activities (21,998) (12,962)

86

Annual Report 2008

2008 2007

Cash flows from (used in) investing activities

Dividends received 53 38

Proceeds from sale or maturities of financial assets available-for-sale 1,035 2,409

Purchase of financial assets available-for-sale (588) (256)

Purchase of subsidiaries, net of cash acquired (7) (11)

Purchase of minority interest in subsidiaries (326) (309)

Purchase of associates and contribution to associates (16) (10)

Disposal of associates — 45

Disposal of subsidiaries, net of cash disposed — 109

Proceeds from maturities of investment securities held-to-maturity — 8

Purchase of investment securities held-to-maturity (316) (2)

Purchase of premises and equipment (448) (343)

Proceeds from sale of premises and equipment 97 73

Purchase of intangible assets (33) (15)

Proceeds from sale of intangible assets 1 —

Purchase of investment property — (19)

Proceeds from disposal of investment property — 61

Net cash from (used in) investing activities (548) 1,778

Summarised consolidated statements of cash flows for the years ended 31 December (continued)(expressed in millions of US dollars)

87


Summarised consolidated statements of cash flows for the years ended 31 December (continued)(expressed in millions of US dollars)

2008 2007

Cash flows from financing activities

Dividends paid (382) (135)

Proceeds from other borrowings 25,723 1,547

Repayment of other borrowings (1,928) (660)

Proceeds from syndicated loans 1,654 453

Repayment of syndicated loans (1,044) (831)

Proceeds from issuance of RUR-denominated bonds 1,089 501

Repayment of RUR-denominated bonds (294) –

Buy-back of RUR-denominated bonds (10) –

Proceeds from issuance of eurobonds 3,603 5,628

Repayment of eurobonds (2,818) (1,495)

Buy-back of eurobonds (768) –

Repayment of SSD debentures (Shuldscheindarlehen) – (227)

Proceeds from share issue, less transaction costs – 7,842

Proceeds from subordinated debt 7,418 –

Repayment of subordinated debt (15) –

Buy-back of subordinated debt (145) –

Purchase of treasury shares – (21)

Sale of treasury shares 5 –

Net cash from financing activities 32,088 12,602

Effect of exchange rate changes on cash and cash equivalents (512) 199

Net increase in cash and cash equivalents 9,030 1,617

Cash and cash equivalents at beginning of the year 5,096 3,479

Cash and cash equivalents at the end of the year 14,126 5,096

88

Annual Report 2008

Share

capital

Share

premium

Treasury

shares

Balance at 1 January 2007 2,500 1,513 –

Unrealised gain on financial assets available-for-sale, net of tax – – –

Transferred to profit or loss on sale, net of tax – – –

Unrealised gains less losses on cash flow hedge, net of tax – – –

Premises revaluation, net of tax – – –

Transfer of premises revaluation reserve upon disposal or depreciation – – –

Effect of translation – – –

Total income recognized directly in equity – – –

Net profit – – –

Total income and expense for the period – – –

Dividends declared – – –

Share issue 584 7,279 –

Treasury shares – – (21)

Acquisition of subsidiaries – – –

Increase in share capital of subsidiaries – – –

Acquisition of minority interests – – –

Change in ownership share in associates (not recognised in associate's profit or loss) – – –

Establishment of subsidiaries – – –

Disposal of subsidiaries – – –

Balance at 31 December 2007 3,084 8,792 (21)

Balance at 1 January 2008 3,084 8,792 (21)

Unrealised loss on financial assets available-for-sale, net of tax – – –

Transferred to profit or loss on sale or impairment on financial assets available-for-sale, net of tax – – –

Unrealised gains less losses on cash flow hedge, net of tax – – –

Transferred to profit or loss realized gain on cash flow hedges, net of tax – – –

Transfer of premises revaluation reserve upon disposal or depreciation – – –

Adjustment of deferred income tax liability due to change in applicable income tax rate – – –

Actuarial gains less losses arising from difference between pension plan assets and obligations – – –

Changes in associates’ equity (not recognised in profit or loss) – – –

Effect of translation – – –

Total income recognised directly in equity – – –

Net profit – – –

Total income and expense for the period – – –

Dividends declared – – –

Treasury shares – – 6

Acquisition of subsidiaries – – –

Increase in share capital of subsidiaries – – –

Acquisition of minority interests – – –

Balance at 31 December 2008 3,084 8,792 (15)

Summarised consolidated statements of changes in shareholders’ equity for the years ended 31 December 2008 and 2007 (expressed in millions of US dollars)

89


Attributable to shareholders of the parent Minority

interest

Total

equityUnrealised gain/ (loss)

on financial assets available-for-sale

and cash flow hedge

Premises

revaluation

reserve

Currency

translation

difference

Retained

earnings

Total

154 341 352 1,744 6,604 388 6,992

16 – – – 16 (1) 15

(112) – – – (112) – (112)

51 – – – 51 – 51

– 264 – – 264 9 273

– (15) – 15 – – –

– – 324 – 324 28 352

(45) 249 324 15 543 36 579

– – – 1,480 1,480 34 1,514

(45) 249 324 1,495 2,023 70 2,093

– – – (133) (133) (2) (135)

– – – – 7,863 – 7,863

– – – – (21) – (21)

– – – – – 25 25

– – – 26 26 (26) –

– – – (146) (146) (165) (311)

– – – 4 4 – 4

– – – – – 6 6

– (3) (13) 3 (13) (2) (15)

109 587 663 2,993 16,207 294 16,501

109 587 663 2,993 16,207 294 16,501

(110) – – – (110) (4) (114)

35 – – – 35 – 35

8 – – – 8 – 8

(42) – – – (42) – (42)

– (43) – 42 (1) – (1)

(3) 24 – – 21 – 21

– – – (13) (13) (1) (14)

– – (34) – (34) – (34)

– – (2,482) – (2,482) (16) (2,498)

(112) (19) (2,516) 29 (2,618) (21) (2,639)

– – – 218 218 (6) 212

(112) (19) (2,516) 247 (2,400) (27) (2,427)

– – – (382) (382) (26) (408)

– – – (1) 5 – 5

– – – – – 2 2

– – – 2 2 (2) –

– – – (177) (177) (149) (326)

(3) 568 (1,853) 2,682 13,255 92 13,347

90

Annual Report 2008

11. Summarised financial statements in accordance with RAS

91

To the shareholders of VTB Bank

(open joint stock company)

The Auditor:

Full name: Closed Joint Stock Company “Ernst &

Young Vneshaudit”.

Address: 77, bld. 1, Sadovnicheskaya Nab., Moscow

115035, Russia

Certificate of entry made to the Uniform State Register

of Legal Entities Concerning a Legal Entity Registered

before 1 July 2002; date of entry – 16 September

2002, series 77 No. 008050714, registered by the

State Institution Moscow Registration Chamber at

No. 033.468 on 30 August 1994, Main State

Registration Number 1027739199333.

Audit Licence No. Е003246, approved by Order No. 9

of the Ministry of Finance of the Russian Federation

dated 17 January 2003, valid for five years, extended

until 17 January 2013 by Order No. 746 of the

Ministry of Finance of the Russian Federation dated

14 December 2007.

The Audited Entity:

Full name: VTB Bank (open joint stock company),

(the “Bank”).

Short name: JSC VTB Bank.

Address: 29, Bolshaya Morskaya str., St. Petersburg

190000, Russia.

Entry of state registration of the credit organization by

the Central Bank of the Russian Federation: No. 1000

made on 17 October 1990.

Certificate of entry made to the Unified State Register

No. 1027739609391, issued by the Ministry for

Taxes and Levies of the Russian Federation on

22 November 2002.

We have audited the accompanying annual report

of the Bank for the period from 1 January 2008 till

31 December 2008.

According to Regulation of the Central Bank

of the Russian Federation No. 2089-U dated

8 October 2008, "On the Procedure of Preparing an

Annual Report by Credit Organisations", the annual

report of VTB Bank (open join stock company)

includes:

the annual balance sheet as of 1 January 2009;

the income statement for 2008;

the statement of capital adequacy and loan

impairment for bad loans and other assets as of

1 January 2009;

the information on mandatory ratios as of

1 January 2009;

the cash flow statement for 2008;

the explanatory note.

Audit reporton the annual report of VTB Bank (open joint stock company) prepared on the basis of its results for 2008 yearTranslation from the original in Russian

92

Annual Report 2008

The preparation and presentation of the

annual report is the responsibility of the Bank's

management. Our responsibility is to express an

opinion based on our audit on whether this annual

report is presented fairly in all material respects, and

as well as on compliance of accounting procedures

with the legislation of the Russian Federation.

We conducted our audit in accordance with the

Federal Law on Auditing Activity, the Federal Rules

(Standards) on Auditing, the Rules (Standards) for

Auditing Activities, as approved by the Committee on

Auditing Activity under the President of the Russian

Federation, and the International Standards on

Auditing.

The audit was planned and performed to obtain

reasonable assurance whether the annual report

is free from material misstatement. The audit was

performed on a selective basis and included an

examination, on a test basis, of evidence supporting

the amounts and disclosures in the annual report

about the financial performance of the audited entity;

an assessment of compliance with the accounting

principles and rules used in the preparation of this

annual report, and a review of significant estimates

derived by the management of the audited entity;

as well as a valuation of the overall presentation of

the annual report. We believe that our audit provides

a reasonable basis for our opinion on whether this

annual report is presented fairly in all material

respects, and as well as on compliance of accounting

procedures with the legislation of the Russian

Federation.

In our opinion, the annual report presents fairly, in all

material respects, the financial position of VTB Bank

(open joint stock company) as at 1 January 2009

year and its financial performance for the period

from 1 January 2008 year till 31 December 2008

year according to the laws and regulations governing

the preparation of the annual report in the Russian

Federation.

According to clause 9.10. of the Explanatory note,

the decision on publishing an explanatory note within

the annual report in print media will be made by the

Bank’s management after the report is approved at

the General Shareholders Meeting. We draw your

attention that this Audit Report to the accompanying

annual report shall be considered together with all

the published forms of annual financial statements

and the explanatory note, being an integral part of

the annual report.

The accompanying annual report is not intended

to present the financial position and results of

performance in accordance with accounting and

reporting principles or practices generally accepted

in countries and jurisdictions other than the Russian

Federation. Accordingly, this annual report is not

designed for those who are not informed about

accounting and reporting principles, procedures and

practices in the Russian Federation.

16 April 2009

General Director (signed) O. V. Youshenkov

Auditor (signed) T. L. Kozlova

(Auditor’s Qualification Certificate No. К021414,

issued on 23 December 2004

for an indefinite period of time,

Order No. 8 dated 14 February 2005)

93


Balance sheet (published form)as at 1 January 2009 Translation from the original in Russian

Name of the credit institution:

VTB Bank (open joint stock company)

JSC VTB bank

(full and short name)

Postal address

37, Plyushchikha str., Moscow 119121

Code of form 0409806

Annual

thousand RUB

No. Line item Data as at the

reporting date

Data as at the

reporting date

of the previous year

I Assets

1 Cash 11,302,667 7,920,359

2 Funds with the Central Bank of the Russian Federation 214,143,624 54,828,115

2.1 Mandatory reserves 1,920,244 12,347,946

3 Funds with credit institutions 210,134,317 56,172,802

4 Net investments into securities at fair value through profit or loss 75,481,279 122,055,010

5 Net loans 1,787,587,453 1,026,364,733

6 Net investments into securities and other financial assets available for sale 157,892,162 178,096,632

6.1 Investments into subsidiaries and associates 136,743,362 99,456,291

7 Net investments into securities held to maturity 10,894,006 8,356,476

8 Fixed assets, intangible assets and materials 28,277,998 21,176,899

9 Other assets 55,061,137 37,794,658

10 Total assets 2,550,774,643 1,512,765,684

II Liabilities

11 Loans, deposits and other funds of the Central Bank of the Russian Federation 510,423,542 15,420,000

12 Funds of credit institutions 727,659,590 430,947,312

13 Funds of clients (non-credit institutions) 730,455,916 612,435,315

13.1 Individual deposits 12,118,192 33,743,467

14 Financial liabilities at fair value through profit or loss 1,131,417 0

15 Debt instruments issued 185,444,779 76,650,985

16 Other liabilities 24,258,874 12,644,818

17 Provisions for possible losses on the credit commitments and contingencies, for

other possible losses and for operations with offshore residents 1,840,016 412,286

18 Total liabilities 2,181,214,134 1,148,510,716

94

Annual Report 2008

No. Line item Data as at the

reporting date

Data as at the

reporting date

of the previous year

III Sources of equity

19 Share capital 67,241,385 67,241,385

20 Treasury shares 0 0

21 Share premium 219,170,513 219,170,513

22 Reserve Fund 3,362,069 3,217,618

23 Unrealised gain or (loss) on securities available for sale (12,578,481) 0

24 Revaluation of fixed assets 10,599,206 11,133,115

25 Retained earnings (accumulated deficit) of the previous years 54,871,444 45,514,345

26 Profit (loss) for the reported period 26,894,373 17,977,992

27 Total sources of equity 369,560,509 364,254,968

IV Off-balance liabilities

28 Irrevocable liabilities of the credit institution 799,821,292 1,062,413,285

29 Guarantees issued by the credit institution 182,533,666 80,101,544

The annual report is available at the Bank’s website: www.vtb.ru.

Due to the changes in the accounting rules for credit institutions from 1 January 2008 year according to Bank of Russia Regulation No. 302-P “On

accounting rules for credit organisations located in the Russian Federation” dated 26 March 2007 data as at the reporting date and data as at the

reporting date of the previous year are not comparable in the following items:

– Retained earnings (accumulated deficit) of the previous years,

– Profit (loss) for the reported period.

President and Chairman of the Management Board (signed) A. L. Kostin

Chief Accountant (signed) O. A. Avdeeva

Balance sheet (published form)as at 1 January 2009(continued)

95

Income statement (published form)for 2008 Translation from the original in Russian



JSC VTB bank


Postal address


No. Line item Data

for the reporting

period

Data for the

same period of the

previous year

1 Total interest income including income from: 143,118,356 73,095,328

1.1 Funds placement with credit organisations 25,918,559 11,386,506

1.2 Loans, granted to clients (non-credit organisations) 108,716,592 52,471,130

1.3 Financial leasing 0 0

1.4 Investments in securities 8,483,205 9,237,692

2 Total interest expenses including expenses on: 92,326,065 45,182,877

2.1 Attracted funds of credit organisations 30,889,443 18,695,117

2.2 Attracted funds of clients (non-credit organisations) 51,063,379 21,727,185

2.3 Debt securities issued 10,373,243 4,760,575

3 Net interest income (negative interest margin) 50,792,291 27,912,451

4 Change of provisions for possible losses on loans, other similar indebtedness

and funds on correspondent accounts including: (22,239,549) (1,327,688)

4.1 Change of provisions for possible losses on accrued interest (1,921,742) (31,284)

5 Net interest income (negative interest margin) after provisions for possible

losses 28,552,742 26,584,763

6 Gains less losses from operations with securities at fair value through profit

or loss (66,900,445) 8,610,354

7 Gains less losses from operations with securities available for sale 5,229,239 4,695,065

8 Gains less losses from operations with securities held to maturity (106,109) 135,480

9 Gains less losses from operations with foreign currency 5,026,484 4,605,458

10 Foreign exchange translation gains less losses 65,438,766 (10,052,139)

11 Income from participation in other companies 6,139,888 2,989,506

12 Fee & commission income 24,137,428 10,407,628

13 Fee & commission expense 7,563,045 622,754

14 Change of provisions for possible losses on securities available for sale (16,869) (11,301)

15 Change of provisions for possible losses on securities held to maturity (14,964) 1,523

16 Change of provisions for other losses (1,132,102) (847,573)

17 Other operating income 20,875,656 3,559,775

18 Net income (loss) 79,666,669 50,055,785

19 Operating expenses 41,348,515 21,645,242

20 Profit before taxes 38,318,154 28,410,543


Annual

thousand RUB


96

Annual Report 2008

Income statement (published form)for 2008(continued)

No. Line item Data

for the reporting

period

Data for the

same period of the

previous year

21 Accrued (paid) taxes 11,423,781 10,432,551

22 Profit (loss) after taxation 26,894,373 17,977,992

23 Total payments from profit after tax, including: 0 0

23.1 Distribution of dividends among shareholders (participants) 0 0

23.2 Assignments for creation and charging of Reserve Fund 0 0

24 Profit (loss) for the reported period 26,894,373 17,977,992


Due to the changes in the accounting rules for credit institutions from 1 January 2008 year according to Central Bank of Russia Regulation No. 302-P

“On accounting rules for credit organisations located in the Russian Federation” dated 26 March 2007) data for the reporting period and data for the

same period of the previous year are not comparable in the following items:

– Net interest income (negative interest margin),

– Gains less losses from operations with securities at fair value through profit or loss,

– Gains less losses from operations with securities available for sale,

– Gains less losses from operations with securities held to maturity,

– Other operating income,

– Operating expenses,

– Profit (loss) before taxes,

– Profit (loss) after taxation.



97

Statement of capital adequacy and loan impairment for bad loans and other assets (published form) as at 1 January 2009 Translation from the original in Russian



JSC VTB bank


Postal address

37, Plyushchikha str., Moscow 119121Code of form 0409808

Annual

No. Line item Data as at

the reporting

date of the

previous year

Increase (+) /

decrease (–)

during

the reporting

period

Data

as at the

reporting

date

1 Equity (capital), thousand rubles, including: 278,296,267 118,774,274 397,070,541

1.1 Authorised capital, including 67,241,385 0 67,241,385

1.1.1 Face value of registered common shares 67,241,385 0 67,241,385

1.1.2 Face value of registered preferred shares 0 0 0

1.1.3 Unregistered authorised capital of non share credit institutions 0 0 0

1.2 Treasury shares 0 0 0

1.3 Share premium 219,170,513 0 219,170,513

1.4 Reserve Fund 3,217,618 144,451 3,362,069

1.5 Retained earnings (accumulated deficit): 17,215,799 63,685,485 80,901,284

1.5.1 of the previous years 0 54,803,541 54,803,541

1.5.2 of the reporting period 17,215,799 8,881,944 26,097,743

1.6 Intangible assets 35,209 (6,991) 28,218

1.7 Subordinated loan (credit, deposit) balance value 18,409,650 203,625,650 222,035,300

1.8 Sources (part of sources) of capital for creation of which investors utilised

inappropriate assets 0 0 0

2 Standard capital adequacy level, % 10.0 X 10.0

3 Actual capital adequacy level, % 19.0 X 16.1

4 Actual provisions for possible losses (thousand rubles), including: 12,941,435 20,552,407 33,493,842

4.1 on loans and similar indebtedness 11,678,405 20,192,660 31,871,065

4.2 on other assets liable to risk of losses and for other possible losses 862,275 (381,494) 480,781

4.3 on credit commitments and contingencies recorded on off-balance

accounts and forward transactions 400,755 741,241 1,141,996

4.4 on operations with offshore residents 0 0 0





98

Annual Report 2008

Information on mandatory ratios(published form)as of 1 January 2009Translation from the original in Russian



JSC VTB bank


Postal address



Annual

Percent

No. Line item Regulatory

value

Actual value

as at

the reporting

date

as at

the preceding

reporting date

1 Capital adequacy ratio (Н1) 10.0 16.1 19.0

2 Instant liquidity ratio (Н2) 15.0 127.5 42.9

3 Current liquidity ratio (Н3) 50.0 143.5 93.9

4 Long-term liquidity ratio (Н4) 120.0 87.9 83.0

5 The ratio of maximum risk per borrower / group of related borrowers

(H6) 25.0

Maximum 19.8

Minimum 1.0

Maximum 17.5

Minimum 0.6

6 Maximum large credit risk ratio (H7) 800.0 259.1 232.0

7 Maximum loans, bank guarantees and sureties granted by the bank to its

shareholders (H9.1) 50.0 0.0 0.1

8 Aggregate risk by the bank’s insiders (H10.1) 3.0 0.0 0.0

9 Allocation of equity funds (capital) to purchase shares (stake) in other

legal entities (Н12) 25.0 0.8 0.3

10 The ratio of liquid assets with 30-day maturity to NSCA total liabilities

(H15)

11 Maximum aggregate loans to customers, participating in settlements

to complete payment (Н16)

12 Provision of loans to borrowers granted on behalf and for account of

NSCA, excluding customers participating in settlements (Н16.1)

13 The ratio of minimum mortgage-backed loans to equity funds (capital)

(H17)

14 The ratio of minimum mortgage-backed amount to the volume of

mortgage-backed bonds issued (H18)

15 Maximum ratio of total liabilities of a credit institution, acting as the

issuer, to senior debt lenders (in accordance with the applicable federal

law) with respect to holders of mortgage-backed bonds, to equity funds

(capital) (H19)




99Name of the credit institution:


JSC VTB bank


Postal address



Annual

thousand RUB

Cash flow statement (published form)for 2008 Translation from the original in Russian

No. Line item Cash flows

for the reporting

period

Cash flows for the

preceding reporting

period

I Net cash received/used in operating activities

1.1 Total cash received/used in operating activities before changes in operating

assets and liabilities, including: (8,679,564) 16,994,140

1.1.1 Interest received 13,100,3046 67,670,507

1.1.2 Interest paid (91,917,467) (44,048,914)

1.1.3 Fees and commission received 24,137,428 10,407,628

1.1.4 Fees and commission paid (7,563,045) (622,754)

1.1.5 Gains less losses on financial assets at fair value through profit or loss,

financial assets available-for-sale (45,829,717) 10,631,135

1.1.6 Gains less losses on investment securities held-to-maturity 0 0

1.1.7 Gains less losses arising from dealing in foreign currency 12,181,237 1,007,462

1.1.8 Other operating income received 20,508,041 3,462,261

1.1.9 Operating expense (41,562,360) (24,048,082)

1.1.10 Income tax paid (9,636,728) (7,465,103)

1.2 Total increase/decrease in net cash from operating assets and liabilities,

including: 160,758,302 (117,295,448)

1.2.1 Net increase/decrease in mandatory cash balances with the Central Bank

of Russia 10,427,702 (2,133,641)

1.2.2 Net increase/decrease in investment securities at fair value through profit

or loss 9,927,044 (48,137,183)

1.2.3 Net increase/decrease in due from other banks (137,863,763) (5,311,156)

1.2.4 Net increase/decrease in loans (640,936,703) (567,631,661)

1.2.5 Net increase/decrease in other assets 6,169,129 (6,704,282)

1.2.6 Net increase/decrease in loans, deposits and due from the Central Bank

of Russia 495,003,542 2,738,048

1.2.7 Net increase/decrease in due from other banks 235,012,463 197,972,838

1.2.8 Net increase/decrease in customer deposits (non-credit institutions) 72,751,210 303,658,138

1.2.9 Net increase/decrease in financial liabilities at fair value through profit or loss 1,131,417 0

1.2.10 Net increase/decrease in promissory notes issued 108,279,478 12,582,962

1.2.11 Net increase (decrease) in other liabilities 856,782 (4,329,510)

1.3 Section 1 (items 1.1 + 1.2), total 152,078,738 (100,301,308)


100

Annual Report 2008

No. Line item Cash flows

for the reporting

period

Cash flows for the

preceding reporting

period

II Net cash received from/used in investing activities

2.1 Purchase of securities and other financial assets available-for-sale 73,067,320 194,710,878

2.2 Proceeds from sale and maturities of investment securities and other financial

assets available-for-sale (29,222,539) (280,314,173)

2.3 Purchase of investment securities held-to-maturity (13,438,416) 47,781,391

2.4 Proceeds from redemption of investment securities held-to-maturity (110,852) (51,402,030)

2.5 Purchase of premises and equipment, intangible assets and inventories (17,151,585) (3,199,267)

2.6 Proceeds from sale of premises and equipment, intangible assets and

inventories 9,091,348 1,018,261

2.7 Dividends received 5,894,251 2,989,506

2.8 Section 2 (items 2.1 - 2.7), total 28,129,527 (88,415,433)

III Net cash used in operating activities

3.1 Proceeds from share issue 0 206,569,686

3.2 Purchase of treasury shares 0 0

3.3 Sale of treasury shares 0 0

3.4 Dividends paid (9,010,036) (3,439,326)

3.5 Section 3 (items 3.1–3.4), total (9,010,036) 203,130,360

IVEffect of exchange rate changes on cash and cash equivalents

1,927,290 (106,550)

V Increase in cash and cash equivalents 173,125,519 14,307,069

5.1 Cash and cash equivalents at the beginning of the year 50,400,528, 36,093,459

5.2 Cash and cash equivalents at the end of the year 223,526,047 50,400,528




Cash flow statement (published form) for 2008 (continued)

101

12. Transactions of JSC VTB Bank

12. Transactions of JSC VTB Bank

12.1. Major transactions of JSC VTB Bank

In 2008, JSC VTB Bank did not perform any transactions that were material as defined in accordance with

article 79 of the Federal Law No. 208-FZ of 26 December 1995 On Joint Stock Companies.

12.2. Interested party transactions of JSC VTB Bank

VTB participated in the following interested-party transactions between 2004 and 2008 which were approved

by either its Supervisory Council or the General Shareholders Meeting:

Year Total number of transactions Total amount of transactions

in thousands roubles

2004 208 406,774,471

2005 1,376 563,968,082

2006 4,756 1,437,468,855

2007 5,309 4,071,978,368

2008 6,640 7,811,570,233

102

Annual Report 2008

13. Other Group information

Currency Name of Bank Account No.

AUD Westpac Banking Corporation, Sydney (WPAC AU 2S)* RAR0001975

CAD Royal Bank of Canada, Toronto (ROYC CA T2)* 095912098408

CHF Russian Commercial Bank Ltd., Zurich (RKBZ CH ZZ)* 666000.0048

CHF UBS AG, Zurich (UBSW CH ZH) 0230-69082.05T

DKK Danske Bank, Copenhagen (DABA DK KK)* 3996019136

EUR Deutsche Bank AG, Frankfurt/Main (DEUT DE FF)* 10094980801000

EUR VTB Bank (Austria) AG, Vienna (DOBA AT WW) 08.00.0617203-023

GBP HSBC Bank Plc, London (MIDL GB 22)* 36505983

JPY Bank of Tokyo-Mitsubishi UFJ Ltd, Tokyo (BOTK JP JT)* 653-0408522

NOK DNB NOR Bank ASA, Oslo (DNBA NO KK)* 7002.02.05170

NZD ASB Bank Ltd, Auckland (ASBB NZ 2A)* 12-3121-0060126-00

SEK Nordea Bank Sweden AB, Stockholm (NDEA SE SS)* 39527908930 SEK

SGD VTB Bank Europe Plc, Singapore (MNBL SG SG)* 315150-7321

USD Bank of New York, New York (IRVT US 3N) 890-0055-006

USD JPMorgan Chase Bank, New York (CHAS US 33)* 001-1-907557

* Note: Banks marked with asterisk are also designated for MM, FX and derivatives operations.

13.1. Main correspondent accounts

13.2. Licences

General licence to conduct banking operations

No. 1000, dated 9 March 2007.

Licence for performing banking activities with precious

metals No. 1000, dated 9 March 2007.

Licence of professional participant on the securities

market for depository activities No. 178-06497-

000100, dated 25 March 2003.


market for brokerage activities No. 177-06492-00000,

dated 25 March 2003.


market for dealing activities No. 177-06493-010000,

dated 25 March 2003.


market for securities management No. 177-06496-

001000, dated 25 March 2003.

Licence of a specialised depository for investment

funds, unit trust and non-state pension funds

No. 22-000-0-00011, dated 4 October 2000.

Licence of the stock exchange intermediary for futures

and options transactions at stock exchanges

No. 04-001094-892, dated 12 October 2006.

103


General licence for exports of refined gold in standard

bars No. LG0270805506896, dated 2 June 2008.

General licence for exports of refined silver in standard

bars No. LG0270805506897, dated 2 June 2008.

Licence for activities involving State secrecy

information No. 2747, dated 5 July 2007.

Licence to take measures and/or provide services to

protect State secrecy information No. 3099, dated

14 August 2008.

Licence to perform technical maintenance of encoding

devices No. 101X, dated 25 November 2007.

Licence for distribution of encoding devices No. 102R,

dated 25 November 2007.

Licence to render information encoding services

No. 103U, dated 25 November 2007.

Notification No. 62 of the Federal Customs Services,

dated 1 September 2008, on inclusion in the Registry

of banks and other credit institutions authorised to act

as guarantors to customs authorities.

13.3. Membership of non-profit organisations

APEC Business Advisory Council.

Joined – 29 March 2004.

Council for Security Cooperation in the Asia Pacific.

Joined – 3 November 2003.

Association of Russian Banks.

Joined – 13 February 1996.

Russian Union of Industrialists and Entrepreneurs

(Employers). Joined – 9 October 2002.

World Economic Forum. Joined – 10 August 2001.

Russo-British Chamber of Commerce.

Joined – 16 January 2004.

American Chamber of Commerce (American Chamber

of Commerce in Moscow, Russia Inc.).

Joined – 12 November 2003.

Autonomous Independent Organisation Russian-Arab

Business Council. Joined – 17 December 2003.

Non-Profit Partnership Russian-Chinese Business

Council. Joined – 22 March 2005.

U.S.-Russia Business Council.

Joined – 29 December 2005.

Non-Profit Organization Association of Regional Banks

of Russia. Joined – 22 October 2004.

Non-Profit Association of Legal Entities Russian-

American Business Council.


Forum of Young Global Leaders (YGL) World Economic

Forum (WEF). Joined – January 2008.

Non-Profit Partnership Russian National Committee

of the International Chamber of Commerce – World

Business Organisation. Joined – 6 May 2000.

Association of Russian Banks – VISA members.

Joined – 9 April 1997.

Association of Russian Europay International members.


Non-Profit Partnership National Securities Market

Association. Joined – 16 January 1996.

Non-Profit Partnership St. Petersburg Stock Exchange.

Joined – 15 August 2005.

104

Annual Report 2008

Non-Profit Partnership RTS Stock Exchange.


Non-Profit International Forfeiting Association.


Non-Profit Organisation Association of Bill Market

Participants. Joined – 15 October 1996.

National Foreign Exchange Association.

Joined – 30 August 2002.

Non-Profit Partnership National Council on Corporate

Governance. Joined – 24 May 2006.

Russian National SWIFT Association.

Joined –26 July 1995.

Non-Profit Partnership Business Centre for Economic

Development of the CIS. Joined – 10 August 2006.

Non-Profit Partnership to Promote Cooperation

between the CIS Member States CIS Financial and

Banking Council. Joined – 1 December 2006.

Professional Association of Registrars, Transfer

Agents and Depositaries (PARTAD).

Joined – 26 September 2007.

The Institute of Professional Accountants of Russia

Non-Profit Partnership Russian-Vietnamese Business

Council

Association of Chinese Banks

Association of Indian Banks

Regional branch network of JSC VTB Bank

Central Federal District

Branch of JSC VTB Bank in Belgorod

Address: 35A, Slavy Avenue, Belgorod 308600

Telephone: +7-4722-58-02-00

Branch of JSC VTB Bank in Bryansk

Address: 16, Arsenalskaya str., Bryansk 241000

Telephone: +7-4832-66-06-95

Branch of JSC VTB Bank in Vladimir

Address: 21, Razina str., Vladimir 600001

Telephone: +7-4922-32-09-70

Branch of JSC VTB Bank in Voronezh

Address: 58, Revolyutsii Avenue, Voronezh 394000

Telephone: +7-4732-53-19-26

Branch of JSC VTB Bank in Kaluga

Address: 20, Dostoevskogo str., Kaluga, Kaluga

oblast 248653

Telephone: +7-4842-56-50-85

Branch of JSC VTB Bank in Kostroma

Address: 49, Sovetskaya str., Kostroma, Kostroma

oblast 156000

Telephone: +7-4942-31-76-46

Branch of JSC VTB Bank in Kursk

Address: 24, Radishcheva str., Kursk,

Kursk oblast 305000

Telephone: +7-4712-36-05-01

Branch of JSC VTB Bank in Lipetsk

Address: 1, Pervomaiskaya str., Lipetsk,

Lipetsk oblast 398001

Telephone: +7-4742-22-70-07

Branch of JSC VTB Bank in Oryol

Address: 47, Maksima Gorkogo str., Oryol,

Oryol oblast 302040

Telephone: +7-4862-43-72-73

13.4. Contact information

105


Branch of JSC VTB Bank in Ryazan

Address: 39, Moskovskoe shosse, bldg. 5, Ryazan,

Ryazan oblast 390044

Telephone: +7-4912-24-80-03

Branch of JSC VTB Bank in Smolensk

Address: 5A, Gagarina avenue, Smolensk,

Smolensk oblast 214000

Telephone: +7-4812-49-96-01

Branch of JSC VTB Bank in Tambov

Address: 16A, Internatsionalnaya str., Tambov,

Tambov oblast 392000

Telephone: +7-4752-63-20-35

Branch of JSC VTB Bank in Tver

Address: 9, Svobodny Avenue, Tver,

Tver oblast 170000

Telephone: +7-4822-248-18-09

Branch of JSC VTB Bank in Tula

Address: 134, L. Tolstogo str., Tula,

Tula oblast 300034

Telephone: +7-4872-36-67-98

Branch of JSC VTB Bank in Yaroslavl

Address: 44A, Rybinskaya str., Yaroslavl,

Yaroslavl oblast 150014

Telephone: +7-4852-45-71-57

Northwest Federal District

Branch of JSC VTB Bank in Vologda

Address: 9, Chelyuskintsev str.,

Vologda 160001

Telephone: +7-8172-57-16-01

Branch of JSC VTB Bank in Kaliningrad

Address: 5, Bolnichnaya str., Kaliningrad,

Kaliningrad oblast 236040

Telephone: +7-401-235-01-11

Branch of JSC VTB Bank in St. Petersburg

Address: 30B, Morskaya str., St. Petersburg, 190000

Telephone: +7-812-494-94-54

Branch of JSC VTB Bank in Syktyvkar

Address: 78, Pervomaiskaya str., bldg. 1, Syktyvkar,

Komi Republic 167610

Telephone: +7-8212-39-19-90

Southern Federal District

Branch of JSC VTB Bank in Astrakhan

Address: 67, Kuibysheva str., Astrakhan 414056

Telephone: +7-8512-25-58-78

Branch of JSC VTB Bank in Volgograd

Address: 30A, Raboche-Krestyanskaya str., Volgograd

400074

Telephone: +7-8442-93-09-69

Branch of JSC VTB Bank in Krasnodar

Address: 116, Krasnoarmeiskaya/ Kuznechnaya str.,

bldg. 2, Krasnodar

Krasnodar krai 350000

Telephone: +7-8612-79-57-01

Branch of JSC VTB Bank in Rostov-na-Donu

Address: 62, Voroshilovsky Avenue, bldg. 284,

Rostov-na-Donu

Rostov oblast 344010

Telephone: +7-8632-97-27-28

Branch of JSC VTB Bank in Stavropol

Address: 7, Marshala Zhukova str., Stavropol,

Stavropol krai 350000

Telephone: +7-865-226-09-95

Volga Federal District

Branch of JSC VTB Bank in Izhevsk

Address: 63, Krasnogeroiskaya str., Izhevsk,

Udmurt Republic 426034

Telephone: +7-3412-75-73-19

Branch of JSC VTB Bank in Ioshkar-Ola

Address: 112, Palantaya str., Ioshkar-Ola,

Republic of Mari El 424000

Telephone: +7-8362-45-15-81

Tatar Branch of JSC VTB Bank in Kazan

Address: 84, Ostrovskogo str., Kazan,

Republic of Tatarstan 420107

Telephone: +7-843-570-67-01

Branch of JSC VTB Bank in Nizhny Novgorod

Address: 4, Reshetnikovskaya str., Nizhny Novgorod

603950

Telephone: +7-8312-18-04-34

106

Annual Report 2008

Branch of JSC VTB Bank in Orenburg

Address: 15/1, Chkalova str., Orenburg,

Orenburg oblast 460058

Telephone: +7-3532-99-49-92

Branch of JSC VTB Bank in Penza

Address: 9, Moskovskaya str., Penza,

Penza oblast 440000

Telephone: +7-8412-52-03-53

Branch of JSC VTB Bank in Perm

Address: 54, Lunacharskogo str., Perm,

Perm oblast 614000

Telephone: +7-342-237-77-11

Branch of JSC VTB Bank in Samara

Address: 14, Mayakovskogo str., Samara 443100

Telephone: +7-8463-37-53-33

Branch of JSC VTB Bank in Saransk

Address: 42A, Bogdana Khmelnitskogo str., Saransk,

Republic of Mordovia 430000

Telephone: +7-8342-27-04-58

Branch of JSC VTB Bank in Saratov

Address: 28A, M.Yu. Lermontova str., Saratov 410002

Telephone: +7-8452-48-98-28

Branch of JSC VTB Bank in Ulyanovsk

Address: 5A, Kuznetsova str., Ulyanovsk,

Ulyanovsk oblast 432062

Telephone: +7-8422-42-08-85

Branch of JSC VTB Bank in Ufa

Address: 52, Shafieva str., Ufa,

Republic of Bashkortostan 450096

Telephone: +7-3472-37-60-00

Branch of JSC VTB Bank in Cheboksary

Address: 80A, K. Ivanova str., Cheboksary,

Chuvash Republic 428018

Telephone: +7-8352-42-04-02

Urals Federal District

Branch of JSC VTB Bank in Ekaterinburg

Address: 5, Zhukova str., Ekaterinburg 620219

Telephone: +7-343-379-66-96

Branch of JSC VTB Bank in Tyumen

Address: 143A, Respubliki str., Tyumen,

Tyumen oblast 625026

Telephone: +7-3452-54-04-54

Branch of JSC VTB Bank in Chelyabinsk

Address: 2, Karla Liebknechta str., Chelyabinsk,

Chelyabinsk oblast 454092

Telephone: +7-3512-39-62-01

Siberian Federal District

Branch of JSC VTB Bank in Barnaul

Address: 10, Krasnoarmeisky avenue, Barnaul,

Altai krai 656049

Telephone: +7-3852-39-91-66

Branch of JSC VTB Bank in Irkutsk

Address: 40, Sverdlova str., Irkutsk 664011

Telephone: +7-3952-24-39-40

Branch of JSC VTB Bank in Kemerovo

Address: 12, N. Ostrovskogo str., Kemerovo,

Kemerovo oblast 650000

Telephone: +7-3842-36-92-67

Branch of JSC VTB Bank in Krasnoyarsk

Address: 3B, Krasnaya sq., Krasnoyarsk,

Krasnoyarsk krai 660017

Telephone: +7-3912-56-08-02

Branch of JSC VTB Bank in Novosibirsk

Address: 44, Kirova str., Novosibirsk,

Novosibirsk oblast 630102

Telephone: +7-3832-02-10-02

Branch of JSC VTB Bank in Omsk

Address: 6, Tarskaya str., Omsk, Omsk oblast 644043

Telephone: +7-3812-94-83-95

Branch of JSC VTB Bank in Tomsk

Address: 39, Lenin avenue, Tomsk,

Tomsk oblast 634034

Telephone: +7-3822-56-46-03

Branch of JSC VTB Bank in Ulan-Ude

Address: 55B, Klyuchevskaya str., Ulan-Ude,

Republic of Buryatia 670013

Telephone: +7-3012-41-54-15

107


Branch of JSC VTB Bank in Chita

Address: 41, Amurskaya str., Chita,

Chita oblast 672010

Telephone: +7-3022-36-90-01

Far Eastern Federal District

Branch of JSC VTB Bank in Blagoveshchensk

Address: 65/1, Sovetsky lane, Blagoveshchensk,

Amur oblast 675000

Telephone: +7-4162-22-31-01

Branch of JSC VTB Bank in Vladivostok

Address: 8A, Mordovtseva str., Vladivostok,

Primorsky krai 690091

Telephone: +7-4232-30-14-55

Branch of JSC VTB Bank in Magadan

Address: 30B, Lenin Avenue, Magadan,

Magadan oblast 685000

Telephone: +7-4132-60-73-34

Branch of JSC VTB Bank in Petropavlovsk-Kamchatsky

Address: 11, Lukashevskogo str., Petropavlovsk-

Kamchatsky, Kamchatka oblast 683031

Telephone: +7-4152-26-89-00

Branch of JSC VTB Bank in Khabarovsk

Address: 7, Moskovskaya str., Khabarovsk,

Khabarovsk krai 680000

Telephone: +7-4212-41-36-01

Branch of JSC VTB Bank in Yakutsk

Address: 3, Oktyabrskaya str., Yakutsk,

Republic of Sakha (Yakutia) 677000

Telephone: +7-4112-36-73-00

Banks and financial companies of the VTB Group in Russia

JSC VTB Bank

Address: 29, Bolshaya Morskaya str,

St. Petersburg 190000

Telephone: 8-800-200-77-99, +7-495-739-77-99

Fax: +7-495-258-47-81

Website: www.vtb.com

E-mail: [email protected]

JSC Bank VTB 24

Address: 35, Myasnitskaya str, Moscow 101000

Telephone: +7-495-777-24-24

Fax: +7-495-980-46-66

Website: www.vtb24.ru


OJSC VTB Bank North-West

Address: 38, Nevsky Avenue, St. Petersburg 191011

Telephone: +7-812-329-83-29

Fax: +7-812-310-61-73

Website: www.vtb-sz.ru

CJSC ODK (CJSC United Depositary Company)

Address: 35, Myasnitskaya str., Moscow 101000

Telephone: +7-495-956-30-70

Fax: +7-495-956-30-71

Website: www.odk.ru


JSC VTB-Leasing

Address: 10, Akademik Sakharov Avenue,

Moscow 107078

Telephone: +7-495-514-16-51

Fax: +7-495-514-16-50

Website: www.vtb-leasing.com


CJSC VTB-Development

Address: 29, Bolshaya Morskaya str.,

St. Petersburg, 190000

Telephone: +7-812-326-07-70

Fax: +7-812-326-07-97


108

Annual Report 2008

LLC VTB Strakhovanie, Insurance Company

Address: 2/4, Turgenevskaya sq., bldg. 1,

Moscow 101000

Telephone: +7-495-580-73-33

Fax: +7-495-230-72-95

Website: www.vtbins.ru


LLC MultiCarta

Address: 43 Vorontsovskaya str., Moscow 109147

Telephone: +7-495-784-60-55

Fax: +7-495-785-12-24


CJSC VTB-Capital

Address: Capital Plaza, 7th floor, 4, 4-i Lesnoi lane,

Moscow 125047

Telephone: +7-495-960-99-99

Fax: +7-495-664-47-00

Website: www.vtbcapital.ru


Banks and financial companies of the VTB Group abroad

Banks and financial companies in Europe

VTB Capital Plc

Address: 81, King William str., London EC4N 7BG,

United Kingdom

Telephone: (4420) 7263-2066

Fax: (4420) 7283-4840

Website: www.vtbcapital.com

VTB Bank (France) SA

Address: 79/81, Boulevard Haussmann – 75382

Paris Cedex 08, France

Telephone: (331) 4006-4321

Fax: (331) 4006-4848

Website: www.france.vtb.com

VTB Bank (Deutschland) AG

Address: Walter-Kolb-Strasse 13, D-60594

Frankfurt-am-Main, Germany

Telephone: (4969) 216-8216

Fax: (4969) 216-8389

Website: www.vtb.de


VTB Bank (Austria) AG

Address: A-1010 Wien, Parkring 6, Postfach 560,

Telephone: (431) 515-35-226

Fax: (431) 515-35-316

Website: www.vtb-bank.at


Russian Commercial Bank (Cyprus) Ltd.

Address: 2, Amathuntos str., P.O. Box 56868, 3310

Limassol, Cyprus

Telephone: (35725) 83-73-00

Fax: (35725) 34-23-50

Website: www.rcbcy.com


Russische Kommerzial Bank AG

Address: Zollikerstrasse 183, Postfach 1274,

CH-8032, Zurich, Schweiz

Telephone: (4144) 386-86-86

Fax: (4144) 386-86-87

Website: www.rkb.ch


Banks in the CIS

JSC VTB Bank (Ukraine)

Address: 8/26, Taras Shevchenko blv/ Pushkinskaya

str., Kiev, 01004 Ukraine

Telephone: (38044) 391-54-09, 239-35-39

Fax: (38044) 391-54-09

Website: www.vtb.com.ua


CJSC VTB Bank (Belarus)

Address: 51, K. Tsetkin str., Minsk 220004, Belarus

Telephone: (37517) 306-26-36

Fax: (37517) 306-26-37


Website: www.vtb-bank.by

109


VTB Bank (Armenia) CJSC

Address: 46, Nalbandyana str., Yerevan,

Republic of Armenia 375010

Telephone: (37410) 58-04-51

Fax: (37410) 56-55-78

Website: www.vtb.am


JSC VTB Bank (Georgia)

Address: 14, G. Chanturiya str., Tbilisi, 0102 Georgia

Telephone: (99532) 50-55-05

Fax: (99532) 99-91-39, 95-60-85

Website: www.vtb.com.ge


OJSC VTB Bank (Azerbaijan)

Address:34, Sameda Vurguna str., Baku AZ1014,

Azerbaijan

Telephone: (99412) 490-83-56

Fax: (99412) 490-83-55

SJSC VTB Bank (Kazakhstan)

Address: 28B, Timiryazeva str., Almaty 50040,

Republic of Kazakhstan

Telephone: (7727) 330-40-40

Fax: (7727) 330-40-50

Website: www.bank-vtb.kz


Banks and financial companies in Asia and Africa

Banco VTB Africa S.A.

Address: 22, Rua da Missao, Luanda, Angola

Telephone: (2442) 2239-5889

Fax: (2442) 2239-5297

VTB Capital (Namibia) (Proprietary)) Limited

Address: 5th, CIH House, Kasino Street,

Windhoek, Namibia

Telephone: (26461) 304-588

Fax: (26461) 304-282

Branches and representative offices abroad

Representative office of JSC VTB Bank in Italy

Address: 8, Piazzale Principessa Clotilde,

Milan 20121, Italy

Telephone: (3902) 2901-3278

Fax: (3902) 2906-0007


Representative office of JSC VTB Bank in China

Address: 18BC, CITIC Bldg., 19, Jianguomenwai dajie,

Beijing, China, 100004

Telephone: (8610) 8526-2800

Fax: (8610) 8526-2810


Branch of JSC VTB Bank in Shanghai (China)

Address: Unit 01A, 02 and 03, Level 11, Plaza 66

Phase 1, 1266 Nanjing Road West in Shanghai, China

Telephone: (8621) 6136-6236

Branch of JSC VTB Bank in New Delhi (India)

Address: Mezzanine floor, Taj Mahal Hotel,

Number one, Mansingh Road, New Delhi, 110011

Telephone: (9111) 6622-1000

Representative office of JSC VTB Bank

in the Republic of Kazakhstan

Address: 28B, Timiryazeva str., Almaty 050040,

Republic of Kazakhstan

Telephone: (7727) 330-50-50

Fax: (7727) 330-40-50

Representative office of JSC VTB Bank in the Republic

of Kyrgyzstan

Address: 55, Manasa Avenue, Bishkek 720017,

Kyrgyzstan

Telephone: (996775) 98-33-08

Fax: (996775) 98-33-08

110

Annual Report 2008

14. Shareholders’ information

Registered office

29, Bolshaya Morskaya str.

St. Petersburg 190000,

Russian Federation

JSC VTB Bank is registered in the Unified State Register of Legal Entities under the principal state registration

number 1027739609391.

Dividends

Dividend payments are approved by the annual General Shareholders Meeting of VTB Bank following

recommendations made by the Supervisory Council. The size of the dividend payment is determined according

to the net income received by the Bank calculated in accordance with Russian Accounting Standards.

In May 2007, following the IPO of the Bank, the total number of ordinary shares and the parameters of

dividend payments changed. As a part of the share issue the Bank placed 1,513,026,109,019 ordinary shares

with a par value of RUB 0.01. Following an additional share issue in 2007, the share capital of the Bank

increased to 6,724,138,509,019 ordinary shares with a par value of RUB 0.01.

The Supervisory Council will submit recommendations to the annual General Shareholders Meeting in 2009

regarding the dividend payment for 2008, based on the Bank’s financial performance for the year ended

31 December 2008. The amount of dividend payments for the years 2003–2007 are set out below.

2003 2004 2005 2006 2007

Net income in accordance with RAS (in millions of RUB) 8,947 9,541 12,919 17,176 17,977.99

Dividend amount per one ordinary share, RUB 37.98 40.5 32.75 0.00066 0.00134

Dividend payments (in millions of RUB) 1,600 1,707 1,707 3,439 9,010.35

Dividend payment ratio (% of net income) 17.9 17.9 13.2 20.0 50.12

Dividend payments to shareholders on record are made during 60 days period following the decision made by

the annual General Shareholders Meeting.

111

14. Shareholders’ information

Advisers

Auditors – CJSC Ernst & Young Vneshaudit

Legal Advisor – Linklaters LLP

Depositary – The Bank of New York

Investor Relations

Address: 6, Lesnaya str., Moscow 127055, Russia

Tel: +7-495-775-71-39

Email: [email protected]

Shareholders’ Support Centres in Moscow

Address: 35, Myasnitskaya str., 103450 Moscow,

Russia

Tel: +7-495-645-43-61

Shareholder Number of shares Capital, %

The Federal Property Agency 5,209,091,700,000 77.47

Institutional investors 1,162,264,136,063 17.28

Individual investors 352,782,672,956 5.25

Total 6,724, 138, 509, 019 100

Share price performance in 2008

Shareholders’ structure as at the record date of 7 May 2008

GDR11 price in 2008 (LSE)

At year end: US$ 2.17 Lowest: US$ 1.62 Highest: US$ 10.10

Ordinary share price in 2008 (MICEX)

At year end: RUB 0.0334 Lowest: RUB 0.0272 Highest: RUB 0.12181

11. Each GDR grants the proprietary right to 2,000 ordinary share.

Shareholders’ Support Centre in St Petersburg

Address: 29, Bolshaya Morskaya str.,

St. Petersburg 190000, Russia

Tel: +7-812-494-94-46

Shareholders’ Support Centre in Ekaterinburg

Address: 5, Marshala Zhukova str., Ekaterinburg

620142, Russia

Tel: +7-343-217-81-00

112

Annual Report 2008

General information

Full name VTB Bank (open joint stock company)

Abbreviated name JSC VTB Bank

General banking licence No. 1000

Legal address 29, Bolshaya Morskaya str., St. Petersburg 190000,

Russia

Postal address 37, Plyushchikha str., Moscow 119121, Russia

Call center 8-800-200-7799 (Russia toll-free)

+7-495-739-7799

Fax +7-495-258-4781

E-mail [email protected]

Website www.vtb.com

Public Relations +7-495-783-1717

[email protected]

Investor Relations +7-495-775-7139

[email protected]

Details

OKPO code 00032520

TIN 7702070139

Correspondent account with the Clearing

House of the Moscow Main Territorial Department

of the Bank of Russia 30101810700000000187

Russian BIC 044525187

Taxpayer record validity code 997950001

TELEX 412362 BFTR RU

SPRINTMAIL PROTOCOL/MOSVTB0/CEA

SWIFT VTBRRUMM

VTBRRUMM SEC

VTBRRUMM CSD (Custody)

Dealing Codes

Reuters: VTBP securities operations

VTBR deposit and financial transactions in foreign

currencies, interbank loans/deposits in Roubles

VTBX forex transactions in international and domestic

currency markets

vtb annual report 2008

Documents