A. Kostin
Andrey Kostin President and Chairman
of the Management Board

Dear VTB Group clients, shareholders and partners,

The year 2020 will go down in history as a time of serious challenges to durability and efficiency. The COVID-19 pandemic forced us all to be prepared for sudden and unpredictable changes. In a short time, millions of customers and thousands of employees were compelled to radically change their habits and lifestyle. Many enterprises and companies had to suspend their operations.

During these difficult months, VTB remained close to its clients. We quickly agreed to take part in government programmes to support businesses and individuals, and launched our own assistance measures. This enabled companies to save jobs and helped people to cope with temporary financial hardships.

It would have been impossible to achieve our objectives in addressing the impact of the pandemic without the extensive digital transformation of our business, a process that began as part of our current three-year strategy. The end-to-end digitalisation of products and services made it possible to adapt to the new reality, created the necessary conditions for the rapid development and launch of innovative new products, and made it possible to fully meet the needs of our customers for high-quality remote services and, despite the challenges, achieve good operating results.

Today I can say with satisfaction that VTB Group passed the COVID-19 test with dignity. Our results in 2020 included significant growth of our client base, expansion of our business and considerable increases in core income lines. Our strategy remains unchanged: we are developing as a modern high-tech bank and in partnership with the leaders of the Russian economy. We expect that the recovery in business activity in 2021 will enable the Group to once again meet its strategic goals in terms of net profit, which, in turn, will ensure higher returns for shareholders.

Our response to the COVID-19 pandemic

From the first days of the pandemic in Russia, our key priority was to ensure the health and safety of our customers, partners and employees.

Within a month, about 90% of the Bank’s employees switched to remote work, all the necessary safety measures were implemented at our branches and offices, and our customers were informed about financial services that were available remotely.

VTB’s digital infrastructure – our systems and apps – functioned reliably in the face of a fivefold increase in the volume of online transactions in April 2020 and in subsequent months. Also in April, VTB issued Russia’s first-ever online mortgage loan and first-ever online car loan.

VTB took part in government measures to help customers facing financial difficulties due to the pandemic. As part of Russian government programmes, we provided concessional loans to companies in strategic sectors and to enterprises from the sectors hit hardest by the pandemic, enabling employers to save jobs and continue their operations without interruption. As part of a state-run loan programme to stimulate business activity, VTB helped more than 20 thousand legal entities that provide jobs for more than 1 million people.

At the same time, the Bank promptly developed its own programmes to support retail customers, major companies and small and medium-sized enterprises. During the course of 2020, about 400 thousand of our retail customers facing a decrease in income were able to take advantage of repayment holidays worth a total of more than RUB 300 billion. For small and medium-sized enterprises, we restructured around RUB 230 billion of loans; for large businesses, about RUB 1.3 trillion. In total, the Group provided financial assistance to about one-third of the Russian Federation’s systemically important enterprises.

Excellent operating results and a focus on efficiency

VTB’s customer base in Russia grew by 1 million individuals and legal entities, reaching 14.9 million active customers.

In 2020, the total loan portfolio, net of foreign currency revaluation, increased by 9% thanks to healthy increases in both corporate and retail lending. Organic growth in customer funding was 11%.

Despite the challenging economic conditions, we achieved strong growth in key banking revenues. Net interest income increased by 20.7% in 2020, while net fee and commission income increased by 12.5% on the back of higher volumes of customer transactions on our online platform as well as a significant increase in the volume of brokerage commissions.

We continued to cut costs and improve operational efficiency. As of the end of the year, the ratio of operating expenses to total assets had decreased to 1.6%, down from 1.7% a year earlier.

In the reporting year, all of our key business lines – Corporate-Investment Business, Retail Business and Medium and Small Business – enjoyed successful growth.

VTB Capital retained first place in the investment banking services market in Russia and achieved considerable success in expanding its brokerage business on the VTB My Investments platform.

By the end of the year, the Medium and Small Business team increased its client base by 25% to nearly 640 thousand clients, increasing both the loan portfolio and the amount of customer funding thanks to the launch of new products that make the day-to-day work of entrepreneurs more convenient.

VTB’s Retail Business saw a double-digit increase in lending, with its portfolio of loans to individuals expanding by 15% by the end of the year. Mortgage loans remain an important driver of this growth. VTB has traditionally been one of the most active participants in state-run mortgage support programmes. By making housing loans more affordable, we are helping improve the quality of life for people and expanding our customer base.

The total volume of our mortgage portfolio increased by 24.3% in 2020 to more than RUB 2 trillion. As a result, the share of secured loans in the Group’s retail portfolio increased by 3.4% in 2020 to more than 55%.

Amid a steady increase in banking income, external factors, nevertheless, had a considerable impact on our financial results. Above all, these factors included the objective deterioration of the economic situation as well as the volatility of oil prices and the exchange rate. Like the entire sector, we faced a sharp increase in the cost of risk, which forced us to increase provision charges to RUB 250 billion, up by 2.4x compared with the previous year. In addition, we recognised a considerable impairment of a number of non-core assets.

These factors, which were one-off events, prevented us from achieving our net profit targets. At the same time, the strong results in our core business lines and the recovery in business activity in 2021 give us every reason to expect a return to the profitability envisaged by our strategy.

Management will be recommending that the Supervisory Council recommence the payout of 50% of IFRS net profit as dividends.

Building an ecosystem through partnerships

Rapid technological development is leading to major changes in the financial industry, which is reflected, most notably, in the development of ecosystems involving the participation of banks. At the same time, the ecosystem phenomenon is not a radical innovation or something previously unknown in the banking business. In the past, banks also expanded possibilities for physical and digital interaction with customers by creating their own services and developing partnerships.

Today, however, the bank itself can do more for its customers. Its intermediary function is now no longer limited solely to financial services provided by the bank but can be expanded to non-financial partner spheres: retail, telecommunications and real estate.

VTB supports the development of an open ecosystem through partnerships. There is no aim to control all the non-banking elements of our ecosystem. We believe it is much more effective to build strategic partnerships with market leaders in other industries. The digitalisation of our business will enable us to integrate into their business models and offer their clients high-quality financial services. At the same time, we are not competing with our partners in their core business; instead, we are strengthening and expanding their range of offers for customers.

We have identified several priority industries where we plan to implement joint solutions – retail, e-commerce, Internet and media, telecom and communications, housing and utilities, transport and logistics – and we are working closely with market leaders in selected industries.

I think it is important, however, to stress that, regardless of the size and structure of the ecosystem, what is not changing is the Bank’s core competency: the provision of first-class financial services that customers can receive in the location and format that is most convenient for them, be it through one of our branches, our apps or the apps of our ecosystem partners.

Accelerating the digital transformation

The unprecedented circumstances that we faced in 2020 confirmed that we chose the right path for the technological transformation of VTB’s business. Thanks to the work that was done in previous years, we were able to meet the exploding growth in demand for online services and to greatly accelerate the rollout of our omnichannel platform for individuals and businesses.

In the second half of 2020, we brought to market a new version of our flagship retail app VTB Online, which had more than 10 million users as of the end of the year. We also updated the mobile bank for entrepreneurs and launched new functionality in the brokerage app. At the same time, the introduction of robotic services and solutions based on machine learning continued for both retail and corporate customers.

The digitalisation of our business and customer service will play an increasingly important role in further consolidating our market position. More than 70% of our retail clients are active in digital channels, and the share of retail business sales through these channels is 30%, up from 15% in 2019. Our strategic goal is to offer 100% of our products online and to increase the share of remote sales to 50%.

In accordance with our current strategy, we have begun the difficult work of radically updating our digital architecture. So far, 56% of the transformation has been completed. At the same time, the system continues to function in such a way that customers do not notice the move from the old platforms to a single new one. In the context of the ongoing transformation, we have been strengthening our focus on the mass-market segment since 2020.

Thanks to our new IT setup, the time needed to introduce a new service to market has been reduced eightfold (to 30 days), the time needed to make a decision on a digital loan has been reduced to 1–2 minutes, more than 400 thousand digital debit and credit cards have been issued, the first fully digital mortgage transaction in the market was completed (more than 20% of mortgage applications come through digital channels), and our Paperless Bank programme was launched, which will drastically reduce the use of paper in our document workflow.

The market – both our customers and peers – have taken note of the pace of VTB’s digitalisation. We have received a number of awards for our functional updates and for the quality of our mobile applications.

We are setting new standards in a number of areas. For example, the VTB My Investments application provides Russian citizens with access to a wide range of savings instruments, and it is now recognised as the most user-friendly investment platform in the market.

We are introducing a new format for VTB branches, and in the coming years we are going to completely revamp our retail network. The new format has demonstrated an increase in efficiency of 40% while reducing floor space by 25% and at the same time reducing visitors’ waiting time by a third.

We are also developing biometric solutions and expect to digitalise 100% of all our services. In the near future, we plan to offer customer identification by means of facial recognition at Bank branches as well as the use of facial biometrics to confirm risky transactions.

Responsible business practices

Our strategic goal is to offer 100% of our products online and to increase the share of remote sales to 50%.

By developing state-of-the-art banking technologies of the future, VTB at the same time remains a responsible and socially oriented company. In 2020, an important decision was taken that consolidated the transformation of VTB’s Sustainable Development policy from individual projects and initiatives into a full-fledged integrated part of the business, a cross-cutting component of all processes.

ESG factors are becoming increasingly important for our development and for our investment case. Currently in its final stage of development, VTB’s Sustainability Strategy is designed to formulate targets for responsible banking based on ESG criteria. Key areas include responsible investing, interacting with customers to improve the ESG features of their businesses, engaging customers in ESG projects and initiatives, supporting public-interest projects, sponsorship and charity, as well as building an ESG management model.

At the same time, VTB has been implementing most of the initiatives included in the Strategy for a long time. These include responsible investment instruments, financing for renewable energy projects, environmental requirements in the context of VTB-supported infrastructure projects, charitable assistance in the environmental sphere and environmental initiatives for retail customers. We have financed a large number of projects for the construction of medical, sports and tourism infrastructure facilities. We launched responsible investment funds in 2020, which involve asset management in line with ESG principles.

In 2020, the VTB team did excellent work in addressing the impact of the pandemic, strengthening relationships with customers and ensuring the quality growth of the Group as a leading technological bank and digital ecosystem. Today we have a broad, loyal customer base, a strong omnichannel platform with a range of unique products and services, as well as a business model and strategy that successfully passed a test of durability in 2020. All of this gives us every reason to expect the continuation of the Group’s successful development in accordance with our strategic priorities and in the interests of shareholders, the Russian economy and all of the country’s citizens.


Andrey Kostin President and Chairman
of the Management Board