VTB Annual Report 2008

2008
to new heights
From solid foundations
Annual Report
2008
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 worlds 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 Russias financial sector is a key
focus of the governments 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
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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, VTBs 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 Banks 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 Banks 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. VTBs net profit
was US$ 212 million. At the same time, the Groups
assets grew 36% to US$ 126 billion. All of VTBs
divisions showed stable growth, confirming the
Groups status as one of Russias leading financial
institutions.
The impressive growth in VTBs 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,
VTBs market share in Russias 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
5
Given the limited access to liquidity, one of the
Groups 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 Banks 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 VTBs strategy
to develop actively its retail business. By the end
of 2008, the Groups 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 VTBs 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
Groups 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 VTBs 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 Banks 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 VTBs 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
9
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
11
Key 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 Generales results, VTB ranked 3
rd
by the size of the retail portfolio in 2006 and 2
nd
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 Poors BB+ BBB BBB+ BBB+ BBB BBB
Moodys 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 VTBs website, devoted to the Banks 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 Kazakhstans 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, VTBs corporate magazine, was voted 2008 Best Corporate Title for Customers at the 5
th

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 9
th
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
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 20042008, 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
Russias national debt,
US$ billion
The banking sectors 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 worlds 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
2. Overview of the Russian economy and banking sector
2006
2004 7,137
947
178
2005 9,750
1,242
262
14,046
1,693
372
2007 20,125
2,672
508
2008 28,022
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 ratio
2
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
VTBs 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 VTBs 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 Banks operations, in
particular on interbank and currency markets.
Net fee and commission income, excluding the one-
off gain
3
, increased 17.8% year-on-year in 2008 to
US$ 656 million (from US$ 557 million), mainly due
to the growth of the Banks 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 items
3
, 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 VTBs 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 Banks 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 VTBs own bonds had a positive impact on
the Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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
19
segment
4
(19% of the Groups 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 Groups 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 VTBs 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
VTBs 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 VTBs resource base was accompanied
by significant changes in its structure. The share of
customer deposits in VTBs 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 Groups 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.
VTBs 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
VTBs 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. VTBs 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
Singapore
3
Vietnam-Russia Joint Venture
Bank
4
VTB Group
1
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
Europe CIS
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 strong
1

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 Groups 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 Groups 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
Kazakhstan
France
Great Britain
Azerbaijan
Georgia
rmenia
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 Groups Russian branch
network comprised 693 points of sale.
VTB Groups 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-Bank
6
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 Groups 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 Groups 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 Groups
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 clients industry.
Breakdown of corporate loans by industry
as at 31 December 2008

Finance (22%)

rade 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 Groups 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
25
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 Groups
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. VTBs 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 Banks 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 VTBs 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 Groups
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, VTBs 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 VTBs 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
2,974
2,886
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 Groups market share in the
corporate lending segment rose to 12.7% from
10.7% in 2007.
to perfected technologies
33
34
Annual Report 2008
The growth of VTB Groups 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-Wests retail
customers and small business clients with VTB24s
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 Banks 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 Groups
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 Capitals 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 Groups 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
VTBs extensive corporate client base.
To enable VTB Capital to enhance its positive impact
on the Groups 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 Groups
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 Banks 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 Banks 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 35
th
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 Groups 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 Groups
ongoing business and its future development plans.
The Groups priorities in the current environment
have shifted towards improving the efficiency of
its operations and maintaining the profitability of
the Groups 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 Groups 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 VTB24s 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 Groups 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 Russias
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 Groups subsidiary banks,
VTB Bank (Austria) and VTB Capital plc
7
, will continue
to specialise in offering corporate and investment
banking services respectively. VTB Capital plc
3

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 Groups 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 Groups 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 Groups
Management Committee) to support this process,
to coordinate information gathering and analysis,
and to harmonise Group-wide policies and
procedures.
VTB Banks risk management policy is aimed at
creating a full-scale, integrated risk management
system adequate for the nature and scale of the
Banks activities and risk profile, and complying
with the Banks 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 Banks structural units. The
division responsible for the development and control
of the Banks and VTB Groups 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
5. Risk management and internal controls
Credit Risk Division;
Market and Operational Risk Division;
Credit Application Examining Service;
Credit and Pledge Operations Division.
2. Consolidated Risk Analysis Division responsible
for VTBs 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 Groups 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 Groups 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
VTBs 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 borrowers
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 20072008 which sets
out the Banks 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 borrowers ranking results, the transaction risk
level for each separate deal/ category, the Banks
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 Banks 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 Banks clients such that they suffered
difficulties in meeting commitments. Under these
circumstances, the Bank took efficient measures in
order to lower the Banks 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 Banks
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 Groups 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
Banks Treasury by prompt (intraday) determination
of VTBs current payment position and forecast future
payment position, taking into account the Banks
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 Banks 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 Banks 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 Banks 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 Banks
internal processes, employees and IT systems,
inconsistencies with legislative requirements or from
external events not controlled by the Bank (primarily,
natural disasters).
The Banks 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 Banks
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 Banks
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
VTBs operational risk. Currently, an analogous
system is being introduced in VTB Groups banking
organisations and participants.
The Banks 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 Banks facilities;
a careful HR policy, staff training and education.
These proactive measures to limit risk are
supported by appropriate insurance programmes.
In 2008, the Banks 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 banks 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 banks 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 banks 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 Banks 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 Banks 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 Groups 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. VTBs 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 Groups assets;
ensure that neither VTB Bank nor the Groups
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 Groups
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 Groups 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
Banks 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
49
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 Banks 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 Banks property;
51
ensuring that the Banks 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 Banks
external auditors by providing information on
the Banks internal control system and any flaws
identified during the period being examined by the
auditors.
VTB Banks 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 Banks Supervisory Council and is also
submitted to the Banks Annual General Shareholders
Meeting.
The Banks 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 Banks Annual General
Shareholders Meeting.
CJSC Ernst & Young Vneshaudit, a Russian subsidiary
of one of the largest international auditing
companies, was appointed as VTB Banks 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 Banks corporate
governance but also confirmed the ability of VTBs
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 Banks 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 Banks 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 Banks 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 Banks corporate governance but also
confirmed the ability of VTBs existing mechanisms to
respond effectively to new conditions.
53
Audit Commission accountable to the General
Shareholders Meeting. The Audit Committee,
which reports to the Banks Supervisory Council,
helps increase the effectiveness of the Banks
internal control system.
VTB Banks 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 Banks 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 Banks public status;
the disclosure of information was standardised
across the Banks divisions.
The Banks 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 Banks 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 Banks development. Together
with VTBs 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 Banks 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 Groups 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 Groups
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 & Poors conducted a survey of
the transparency of information disclosed by Russian
companies. The survey concluded that the Bank
improved two positions, from 23
rd
to 21
st
. 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
Banks own trading activities;
a list of measures aimed at preventing the illegal use
of sensitive information in the Banks 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 Banks 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 Banks Charter and the Regulations
on the Supervisory Council.
The Supervisory Councils 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 Banks 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 Banks 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 Banks 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 Banks 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
Banks 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
Banks 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 Banks 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 Banks 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 Banks Charter;
preliminary consideration of the annual report of the
Bank;
appointing and dismissing the head of the Banks
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
2007present 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:
20042007 Finance Minister of the Russian
Federation.
20002004 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
JanuaryJune 1999 First Deputy Chairman of
the Management Board of RAO UES of Russia.
19961997 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
2008present 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.
20042008 Head of the Economics and
Financial Department of the Russian Government
Administration.
20032004 Deputy Head of the Russian
Government Administration.
19992003 Head of the Financial Department of
the Russian Government Administration.
19941999 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.
20042008 Head of the Presidential Experts
Directorate.
20002004 Advisor and later Deputy Minister of
Economic Development and Trade of the Russian
Federation.
19942000 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.
19962002 Chairman of Vnesheconombank.
19951996 First Deputy Chairman of the National
Reserve Bank.
Awards: Order of Honour (1999); Russian
Governments 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
2008present 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 Corporations 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.
20042008 Deputy Head of the Federal Agency for
the Management of Federal Property.
20002004 First Deputy Ministry for Property
Relations of the Russian Federation.
19982000 First Deputy Minister for State Property
of the Russian Federation.
19971998 Authorised Representative of the
President of the Russian Federation in the Volgograd
Region.
19921997 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).
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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.
20072008 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.
20022004 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
2004present 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.
19922004 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
Member of the Supervisory Council
of VTB Bank
2005present Deputy Finance Minister of the
Russian Federation. Member of the Collegium, Ministry
of Finance, since 24 August 2004.
20042005 Director in the Department
of Interbudgetary Relations in the Finance Minister of
Russia.
20032004 Deputy Finance Minister of the Russian
Federation.
19972003 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 200
th
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 300
th
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.
20002004 First Deputy Finance Minister of the
Russian Federation.
19992000 Deputy Director of the Fund Institute
for the Economy in Transition.
19981999 Deputy Director of the Institute for the
Problems of Economy in Transition.
19961998 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
2006present 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.
20052006 Chairman of the Board of Directors of
CJSC Dresdner Bank.
20042005 Chairman of the Managing Committee
of Dresdner Kleinwort for Russia and the CIS.
20022004 President of CJSC Dresdner Bank.
20002002 Chief Coordinator of the Dresdner Bank
Group in Russia.
19992000 General Director of the St. Petersburg
office of BNP-Dresdner Bank (later renamed CJSC
Dresdner Bank).
19971999) Deputy Director of the Moscow Branch
of BNP-Dresdner Bank.
19811990 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
2008present 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.
20062008 First Deputy Rector of St. Petersburg
State University.
20002005 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 Banks
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 Committees exclusive functions are to assess:
nominees to be appointed as auditors of the Bank;
the audit report made by the Banks auditor;
the effectiveness of the Banks 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 Banks consolidated financial
statements according to International Financial
Reporting Standards (IFRS) and Russian Accounting
Standards (RAS);
results of the tender for VTB Banks auditor in 2008;
Controllers report on the professional activity of VTB
Bank on the securities market;
reports of the Bank's Internal Control Department;
draft of VTB Banks 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 Banks Chief
Executive Officer are elected by the Supervisory
Council and are responsible for the day-to-day
management and administration of the Groups
activities, regulated by the Russian Federation
legislation, the Banks 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 Banks 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 Banks 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 Banks
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 Banks 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 Banks branches;
approves the standard organisational structure of
branches and remuneration of branch employees;
confirms the results of VTB Banks activity for the
reporting period, and takes decisions on awarding
bonuses to the Banks employees;
examines reports on the work of the structural units
of VTB Bank;
approves the Banks 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 Banks
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 Banks Management
Board consisted of the following members.
Andrei L. Kostin
President and Chairman of VTB Bank
Management Board
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.
20052008 Executive Director of Russian
Commercial Bank (Cyprus) Ltd.
20042005 President and Chairman of the
Management Board of Guta Bank (later renamed to
VTB24).
20022004 Vice President at Vneshtorgbank.
19972002 Head of the Financial Transactions
Department, Deputy Chairman of the Management
Board, Senior Vice President at Probusinessbank.
19941996 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.
19972002 Deputy Chairman of
Vnesheconombank.
19941997 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 Banks 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).
19992002 member of the Moscow Bar Association.
19961997 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.
19962001 Deputy Chairman of the Management
Board of JSC Sberbank.
19912001 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.
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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.
19982002 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.
19961998 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).
19982004 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
Banks 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.
20042007 General Director of OJSC Microsoft
Rus, President of Microsoft Russia and CIS
65
in the Department of Strategic Development of
OJSC Microsoft Rus.
19992004 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.
20012002 Chairman of the Council of Experts
in Project Financing and Forecasts at LANTA BANK
(Moscow).
19942002 Deputy Head of State Programmes
Division, Head of Foreign Economic Relations Division
at Presidential Property Management Department of
the Russian Federation.
19931994 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.
20032007 Deputy CEO of JSC Industrial and
Construction Bank (now VTB Bank North-West).
19932007 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
20022005 Vice President of Finance and
Investments in JSC Mobile TeleSystems.
19992002 Financial Director of the Renaissance
Capital Investment Group.
19981999 Financial Controller at Brunswick UBS
Warburg Investment Bank (Moscow).
19961998 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 thousand
8
) was paid out to
independent members of the Supervisory Council
of VTB Bank. The other members of the Banks
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 million
9
) 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 Banks business
on a day-to-day basis in order to meet the Banks
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 Groups governance is aimed at achieving the
fullest possible benefit from the Groups competitive
strengths, increasing its share of its target markets,
enhancing its performance and strengthening VTB
Groups capitalization.
A fundamental management mechanism used in VTB
Group is its corporate governance, i.e. implementing
the Banks rights as a major shareholder through
participating in the management bodies of its
subsidiaries. An additional management mechanism
is the functional coordination of VTB Groups 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 Groups 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 Groups
development and the key standards, approaches and
principles of the Groups operations, before they are
approved by the relative authorities of VTB Groups
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 Groups performance,
the Management Committee has set up Coordination
Commissions in the Banks main business lines
VTB Groups governance system is designed to comply fully
with the local corporate and antitrust legislation of
VTB Groups member companies.
68
Annual Report 2008
which are managed by the heads of the Banks
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 Groups governance system is designed to
comply fully with the local corporate and antitrust
legislation of VTB Groups 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 Groups
governance system is founded on the principle of its
members independence.
In 2008, the most significant events in streamlining
VTB Groups governance system were:
extending the definition of VTB Group (to include
non-banking financial institutions);
upgrading VTB Groups governance model and
formalising of VTB Groups 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 Groups
Management Committee;
streamlining the Management Committees
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 Groups 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 Groups Credit
Committee.
VTB has consistently improved the Groups
governance system by applying best practices for
holding companies and plans to take the following
steps in this direction in 20092010:
improve VTB Groups corporate governance through
upgrading the efficiency of Supervisory Councils and
Boards of Directors);
streamline the organisation structures of VTB Groups
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 VTBs 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 Groups 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 Banks 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
VTBs 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 Groups companies
promptly, as required.
7.2. Health and safety
Health and safety measures are an integral part of
VTBs 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. VTBs 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 Banks top management with
shareholders, fund managers, financial analysts
and brokers. During 2008, the Groups 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 Banks 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 Groups
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 Groups 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
VTBs 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.Voloshins 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 3
rd
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 12
th
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 9
th
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 20082009
academic year.
Sport
Funds for training the Russian national mens
volleyball team and the womens 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 11
th
IAAF World Championship in Valencia,
Spain, and the 7
th
World Athletics Final in Stuttgart,
Germany, and other international athletics
competitions.
A friendly mens 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 childrens healthcare institutions within the
framework of its charity programme World Without
Tears:
Inspiration LS, a modern machine for artificial lung
ventilation, to N.Filatov Childrens Hospital No. 13 in
Moscow;
Special equipment for a sensory room to the
Childrens 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 Childrens Orthopedic
Institute, and the antifungal medicine Considas for
four Hematological Oncology departments of the
Russian Childrens Clinical Hospital;
Rehabilitation equipment for preventive treatment
(to protect children from tuberculosis) to the Regional
Childrens 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 childrens
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 Groups 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. VTBs 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 VTBs
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 VTBs 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 banks
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 VTBs
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 Governments 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 VTBs 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. VTB24s 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
VTBs 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 VTBs 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 Banks Dividend Policy.
This Regulation establishes the basic principles of
the Banks 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 Banks financial performance as of the
year-end, amounting to at least 10 per cent of the
Banks 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, VTBs 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 Groups 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 Banks 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 Banks 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 Banks 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 Groups 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 Groups 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 Groups 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 Banks website: www.vtb.com.
*
81
Independent 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

, 115035, ,
., 77, . 1
Te.: 7 (495) 705-9700
755-9700
: 7 (495) 755-9701
00139790
CJSC Ernst & Yong Vneshaudit
Sadovnicheskaya Nab., 77, bld. 1
Moscow, 115035, Russia
Tel.: 7 (495) 705-9700
755-9700
Fax: 7 (495) 755-9701
www.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
10. Summarised consolidated financial statements in accordance with IFRS
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)
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
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)
87
Summarised consolidated statements of cash flows for the years
ended 31 December (continued)
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
89
Attributable to shareholders of the parent Minority
interest
Total
equity Unrealised 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. 003246, 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 report
on the annual report of VTB Bank (open joint stock company)
prepared on the basis of its results for 2008 year
Translation 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
Banks 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
(Auditors Qualification Certificate No. 021414,
issued on 23 December 2004
for an indefinite period of time,
Order No. 8 dated 14 February 2005)
93
11. Summarised financial statements in accordance with RAS
Balance sheet
(published form)
as at 1 January 2009
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 Banks 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
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
JSC VTB bank
Postal address
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 2009
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 (1) 10.0 16.1 19.0
2 Instant liquidity ratio (2) 15.0 127.5 42.9
3 Current liquidity ratio (3) 50.0 143.5 93.9
4 Long-term liquidity ratio (4) 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 banks insiders (H10.1) 3.0 0.0 0.0
9 Allocation of equity funds (capital) to purchase shares (stake) in other
legal entities (12) 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 (16)
12 Provision of loans to borrowers granted on behalf and for account of
NSCA, excluding customers participating in settlements (16.1)
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)

99
JSC VTB bank
Postal address
Annual
thousand RUB
Cash flow statement
(published form)
for 2008
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 3.13.4), total (9,010,036) 203,130,360
IV
Effect 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: info@vtb.ru
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
E-mail: info@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
E-mail: odk@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
E-mail: info@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
E-mail: info@vtbd.ru
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
E-mail: info@vtbins.ru
LLC MultiCarta
Address: 43 Vorontsovskaya str., Moscow 109147
Telephone: +7-495-784-60-55
Fax: +7-495-785-12-24
E-mail: info@multicarta.vtb.ru
CJSC VTB-Capital
Address: Capital Plaza, 7
th
floor, 4, 4-i Lesnoi lane,
Moscow 125047
Telephone: +7-495-960-99-99
Fax: +7-495-664-47-00
Website: www.vtbcapital.ru
E-mail: info@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
E-mail: service@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
E-mail: general@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
E-mail: rcb@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
E-mail: info@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
E-mail: info@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
E-mail: info@vtb-bank.by
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
E-mail: headoffice@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
E-mail: admin@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
E-mail: info@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: 5
th
, 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
E-mail: m.volkov@vtbitalia.com
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
E-mail: chinavtb@public3.bta.net.cn
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 Banks financial performance for the year ended
31 December 2008. The amount of dividend payments for the years 20032007 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: investorrelations@vtb.ru
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
GDR
11
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 0.1218
1
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 info@vtb.ru
Website www.vtb.com
Public Relations +7-495-783-1717
pr1@vtb.ru
Investor Relations +7-495-775-7139
investorrelations@vtb.ru
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

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VTB Annual Report 2008

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2008

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