STATEMENT OF THE CHAIRMAN OF THE SUPERVISORY COUNCILSTATEMENT OF THE CHAIRMAN OF THE SUPERVISORY COUNCIL

Dmitry Grigorenko
Dmitry Grigorenko Chairman of the Supervisory Council

Dear shareholders, clients and partners,

The year 2020 was marked by unprecedented challenges for the economy, business and society in Russia and throughout the world. The COVID-19 pandemic and related restrictions put considerable pressure on entire sectors of the economy and, consequently, on the banking sector. VTB Group promptly responded to negative external changes and was able to achieve its most important goals: protecting the health of its customers and employees as well as supporting borrowers facing financial difficulties. At the same time, the Group greatly accelerated the technological transformation of its business and enjoyed impressive performance across operating metrics and key banking revenues, thus creating a solid foundation for further growth.

In a challenging macroeconomic environment, the Group demonstrated strong growth in its operating performance metrics. As of the end of 2020, VTB’s total loan book had increased by 15% thanks to the expansion of both corporate and retail lending in the second half of the year. Growth in lending to individuals was facilitated by VTB’s involvement in a state mortgage support programme launched in April 2020. During the year, the Bank issued over 63 thousand mortgage loans at preferential rates worth a total of RUB 198 billion. Today, the state support programme accounts for about a third of VTB’s mortgage lending. The Group continues to work on improving the convenience of mortgage lending, including through the development of online mortgages.

From the very beginning of quarantine restrictions in 1Q 2020, VTB Group played an important role in taking measures to support the hardest-hit segments of the Russian economy. The Bank quickly developed programmes for loan restructuring and refinancing for all groups of customers facing financial difficulties. The total volume of loan restructuring for such customers exceeded RUB 1.8 trillion. The Bank maintained constant dialogue with borrowers, informing them about state support measures and launching new online formats for communication with entrepreneurs and individuals. As part of the state loan programme to stimulate business activity, VTB helped more than 20 thousand legal entities that provide jobs for more than 1 million people. In addition, about 400 thousand of our retail borrowers were able to take advantage of the Bank’s repayment holidays.

Despite the negative backdrop, the Group continued to implement its Development Strategy for 2019–2022 and achieved success in key strategic areas, including improving the quality of services for customers, the technological transformation of its business and the creation of new digital partnerships. At the same time, the fast-paced changes made to the Bank’s customer service model in the context of the pandemic required rapid acceleration of the digitalisation of customer service and business processes, as well as the ability to provide most of our services remotely, without compromising outstanding reliability. VTB was up to the challenge, demonstrating excellent performance and the adaptability of its technology platform. During the year, important projects were implemented, and new state-of-the-art products and services based on machine learning technologies were launched, thus allowing the Bank to significantly increase the number of remote services provided for all categories of customers. VTB was the first major bank to make it possible to open an account remotely using biometrics, giving all Russians an opportunity to become a Bank client without leaving their home.

In the context of the Group’s further strategic development, VTB’s Supervisory Council approved, in December 2020, the Bank’s Long-Term Development Programme for 2020–2023. Among the Bank’s priority development goals formalised in the programme are achieving and maintaining leading positions in financing and attracting investments in infrastructure, making housing more affordable and developing the market for green financing and digital technologies. VTB’s Programme is in line with Russia’s main national development goals and is aimed at improving the prosperity of all of the country’s citizens.

Thanks to its accelerated technological transformation and persistent efforts with customers, the Group managed to maintain high growth rates in terms of banking income. Combined, net interest and net fee and commission income grew by 19% year-on-year. At the same time, the downturn in business activity and the volatility in capital markets caused by the coronavirus pandemic greatly affected the financial position of some corporate and retail customers, which led to a sharp increase in provision costs. This factor, along with the impairment of non-core assets, had a negative impact on net profit.

In 2020, the Group continued to develop its corporate governance system. The Bank’s Supervisory Council reviewed the assessment of its performance, which, for the first time, involved an independent consultant. The work of the Council was commended by both the members of the Council itself and by external experts.

As a result of the measures taken by the Bank in this area, VTB’s corporate governance rating was raised to 8, corresponding to best corporate governance practice. The Bank’s management and Supervisory Council plan to further develop corporate governance practices, including through the implementation of measures recommended by experts based on the results of independent evaluations of the work of the Supervisory Council and of the best corporate governance practices.

During the year, the Bank paid particular attention to communication with shareholders and investors. The Bank remains one of the few issuers in the Russian market whose system of interaction with shareholders is not limited to mandatory corporate procedures, and the Bank’s shares are among the most popular Russian securities in the investment portfolios of individuals. The total number of VTB shareholders doubled in 2020, and the number of individual investors holding shares of the Bank exceeded 330 thousand. The Bank’s priority was to continue its active dialogue with shareholders with the help of remote communication tools.

Due to the growing importance of sustainable development principles (ESG) for the Bank and the entire financial sector, VTB has been playing an active role in implementing a green agenda by introducing ESG initiatives in all key areas of its operations. In 2020, a pilot green lending programme was launched through which the Bank provides customers with financing to implement ecological initiatives and initiatives to improve their performance in terms of sustainable business development. Moreover, VTB organised several issues of green bonds during the year, as well as the first issue of social Eurobonds in Russia.

On behalf of the Supervisory Council, I would like to thank VTB’s shareholders, customers and partners as well as the Group’s employees for their engagement and fruitful work in 2020. With the combined efforts of all stakeholders, we were able to respond in a meaningful way to the challenges posed by the pandemic and to create a foundation for continued growth amid a recovery in business and economic activity in 2021.

Sincerely,


Dmitry Grigorenko Chairman of the Supervisory Council