Corporate business — Annual report 2011

Annual Report 2011
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- Portrait of the Bank
- Letter from the Chairman of the Management Board
- Strategy
- Main Events of 2011
- Russian Economy and Banking Sector
- Business Overview
  - Analysis of financial results
  - Corporate business
  - Retail business
  - Bank cards
  - Operations on financial markets
  - Banking technologies
- Shareholder Structure
- Corporate Governance
- Risk Management
- Human Resources
- Environment
- Social Responsibility
- Financial Statements
- Branches in Russia
- Offices of Vozrozhdenie Bank
- Address and Contacts

# Corporate business

Last year Bank Vozrozhdenie’s corporate business demonstrated solid results, despite the low margins in the banking sector due to the slow pace of recovery of the Russian economy and greater competition in the sector. The segment’s positive results were due to the prudent conservative policy of previous years, sustainable partnerships with clients and effective use of a broad product line. Thanks to its solid foundations, the Bank hit its annual targets for the corporate business in the first two quarters.

The key areas of focus for the Bank’s corporate business in 2011 were:

- continuing to work with the most reliable and relevant borrowers
- developing loyalty programs for clients
- expanding the loan portfolio while improving its quality
- reducing the share of low-quality debt and NPLs in the loan portfolio
- enhancing the monitoring and management of credit risks while making them
- more diversified

The number of corporate clients increased to 62,600, while the number of SME clients rose by 23.2%. Key factors in attracting new clients were an individual approach and partnership in dealing with financial issues, as well as a wide range of high-tech banking products. Last year, Bank Vozrozhdenie’s clients included Systematika, Real Hypermarket, KM/H, Soyuzdorstroi, Ilyushin, Kondopoga, Kola Energy Retail Company and other important businesses in the aviation, metals and mining, construction, chemicals, pulp and paper, agricultural, retail and service sectors in Moscow Region and other areas where the Bank has a presence.

## Corporate client funds

In 2011, Bank Vozrozhdenie focused closely on creating a sufficient, diversified resource base. In the middle of the year, the Bank had amassed funds that exceeded targets by 40%, thanks to the active work of branches and centralized fundraising of insurers and state corporations, as well as the resources of federal and municipal budgets. This liquidity reserve enabled Bank Vozrozhdenie to navigate a lean period at the year-end without scaling down its business.

#### Corporate client funds by industry

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#### Corporate client funds, RUB million

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The Bank continued to raise funds from its long-term partners: the Agency for Housing Mortgage Lending, the St Petersburg Finance Committee, funds to support SMEs, management companies and insurers. A new line of business in 2011 was working with electronic trading platforms to participate in auctions for the placement of available funds by companies.

One trend last year was a slight decrease in the time needed to secure immediate resources, as well as a fall in the share of foreign-currency deposits among corporate clients. The total volume of funds from corporate clients stood at RUB 52.8 billion at the end of 2011, 17.2% higher than a year previously.

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## Lending

The main objectives of the Bank’s lending policy in 2011 were to maintain positions in the corporate lending market amid greater competition from state banks, sustain loan portfolio quality and ensure an adequate balance between profitability and risk. The most important task was to boost the number of loyal clients, as well as maintain income against the background of a minimal margin. The Bank focused especially on reducing NPLs, as well as monitoring and diversifying credit risks.

#### Corporate loan portfolio, RUB million

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#### Quality of corporate loan portfolio

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When lending to corporate clients, the Bank maintained a conservative approach. Loans were granted mainly to enterprises and organizations in the real sector with a solid reputation, positive borrowing history and stable financial condition. In 2011, the Bank’s credit policy was amended to optimize credit procedures for SMEs. In particular, it approved a more loyal approach to collateral and extended the power of branches to authorize loans independently when guaranteed by regional funds to support and develop SMEs.

IN 2011, THE BANK’S CORPORATE CREDIT PORTFOLIO EXPANDED BY RUB 14.4 BILLION TO RUB 112.9 BILLION1. THE VOLUME OF LENDING TO SMES ROSE BY 22.6% YEAR-ONYEAR, WHICH RECONFIRMED THE BANK’S STATUS AS A LEADER IN THAT SEGMENT.

To ensure convenient lending terms for borrowers, the Bank raised the number of partners in state support programs last year. It signed a cooperation agreement with funds that support and develop SMEs in the Ryazan, Voronezh and Tula regions, as well as the republics of Mordovia and Karelia. Meanwhile, the volume of collateral from regional funds exceeded RUB 440 million, which allowed the Bank to grant more than RUB 1.1 billion in loans to SMEs as part of various programs. Today, the Bank’s borrowers have access to funds in the 12 regions where it is present.

In December 2011, as part of the second annual “Small and Medium Businesses: Contribution to a New Economy” forum, the Bank won an award “For Promoting the Quality Development of the Program”. The forum is organized by SME Bank, with which Bank Vozrozhdenie has been working closely, aiming to enhance SME access to financial resources.

In the first stage of its work with the SME Bank, as part of the long-term state program of financial support for SMEs, Bank Vozrozhdenie fulfilled all of its obligations in six months, disbursing more than RUB 6 billion in loans to SMEs, split equally between funds from SME Bank and its own. During the program, which runs to December 2015, Bank Vozrozhdenie intends to maintain the loan portfolio at current levels. The program involves over 420 SMEs throughout regions where the Bank is present, which have received over RUB 9 billion funding.

In 2011, Bank Vozrozhdenie continued to finance small businesses as part of its long-term partnership with the European Bank for Reconstruction and Development (EBRD). In late 2009, the EBRD extended a US$51 million credit line to the Bank for the purpose of lending to micro enterprises and small businesses. Last year, as part of this, the Bank granted over RUB 3.2 billion to SMEs and used new opportunities to expand its loan portfolio.

In addition, Bank Vozrozhdenie won 25 electronic auctions for providing lending services to federal and municipal bodies and enterprises in which state and local authorities have stakes. Such loans totaled RUB 2.1 billion overall.

In 2011, Bank Vozrozhdenie’s corporate loan portfolio remained well balanced, with investments in such sectors as industry, agriculture, construction, trade, transport and communications accounting for 81.9% of the total. In addition, during the year, the Bank took steps to further diversify the portfolio geographically. By the end of 2011, the share of loans issued in Moscow Region had fallen by 2.4 percentage points to 53.3%. The breakdown of the loan portfolio by currency did not change significantly last year. Despite the popularity of foreign-currency loans in the second half, by the end of 2011, ruble loans accounted for 86% of the total.

In 2011, Bank Vozrozhdenie paid close attention to the quality of the loan portfolio. Amid its solid growth, the volume of loan-loss provisions was increased to RUB 11.9 billion. The share of NPLs in the portfolio stood at 8.7% at the year-end, down from 11.2% a year earlier.

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## Leasing and factoring

In 2011, factoring remained a popular facility for financing working capital. Factoring is popular among clients that do not have sufficient collateral or that want to boost sales using flexible delivery terms and offering deferred payment options to their customers.

The Bank’s strategy is to provide factoring services to both clients and their suppliers and customers, thereby financing the entire business chain. In 2011, its factoring portfolio expanded by 40% and the client base by 150%.

Last year, the Bank actively financed leasing company V-Register. It granted RUB 450 million in loans to the company, while the overall loan portfolio was over RUB 1 billion.

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## Trade financing

In 2011, Bank Vozrozhdenie consistently boosted its trade financing transactions, which rose by 40%. Such facilities were predominantly popular among metals and timber-processing enterprises that were actively developing and upgrading their production capacity.

The Bank worked effectively with some of the world’s largest lending institutions, including the European Bank for Reconstruction and Development, as well as numerous national export credit agencies. Trade financing remains an effective tool for implementing the Bank’s policy, which aims to expand the loan portfolio and modernize the real sector of the economy.

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## Customs duties

In 2011, the professional community recognized the Bank’s success in the Green Corridor project for the second consecutive year, when the Bank was again named “Best Financial Institution Providing Customs Services” in the Customs Olympus competition for leaders in foreign economic activity.

The Green Corridor card is an advanced method for paying customs duties. In 2011, the number of clients using the service rose to 350, turnover on the cards increased by 33%, and total annual payments exceeded RUB 50 billion.

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## Remote services

In 2011, Bank Vozrozhdenie continued to develop remote channels of customer service, as they are a key source of non-interest income in the corporate segment. The main products are “Client-Bank”, “Corporate Control”, “Corporation Settlement Center” and “Secure E-Mail.” As a result, the share of working accounts using remote banking services reached 50%, while that of payments made through remote channels was 80% of all customer payments.

Bank Vozrozhdenie is planning to develop a system for remote banking, enhance functionality and develop new capabilities that enable customers to use convenient and high-quality services, including via the internet.

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## Development priorities

In 2012, the key priorities in the corporate business will be Optimizing existing business and reducing costs. Bank Vozrozhdenie plans to adjust pricing to continue the practice of creating user-friendly tariff plans and benefits for active corporate clients. An important task will be to attract new clients and retain existing ones. The Bank will maintain its focus on SMEs by developing a full range of services and promoting loan programs tailored to the needs of that segment.

Bank Vozrozhdenie intends to build a sustainable resource base while maintaining the income margin and boosting non-interest income. At the same time, maintaining profitability and loan portfolio quality will remain among the most important issues.

#### Breakdown of corporate loan portfolio by sector, 2011

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## IR contacts

Tel.: +7 (495) 620 9071
Fax: +7 (495) 620 1953
Web-site: http://www.vbank.ru
Email: investor@voz.ru

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Related sections:

- Financial Statements
- Portrait of the Bank
- Risk management

See also:

- News for Investors
- Achievements and Awards
- Annual Reports