Alfa-Bank Leadership Strategy
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Table of Contents
Table of Contents Introduction 4 Banking Industry in Russia 7 Banking sector structure 8 Regulations and their influence 10 Alfa-Bank History 12 Alfa-Bank Branch Network Structure 13 Alfa-Bank Goals and Development Strategy 14 Alfa-Bank Finance Structure 17 Review of Current Alfa-Bank Financial Indicators 18 Asset Management Policy of Alfa-Bank 21 Alfa-Bank: Market Positioning and Competitive Analysis 24 Position of Alfa-Bank in the Russian Market 24 Standing of Major Competitors 26 Banking Sector Development and Trends 30 Applications 34
This case offers students an opportunity to develop the leadership strategy for Alfa-Bank, the biggest Russian private bank. As part of this case, modern banking trends shall be studied and analyzed, and Alfa-Bank position in the financial market shall be evaluated. In order to maintain the leading pace in the context of fierce competition on part of major state and international banks, Alfa-Bank has to establish the cohesive strategy of growth and leadership. The goal of the bank is to become one of the top 3 Russian banks in terms of assets aggregate volume within next four years. At the same time, the bank aims to maintain the high level of margin and the No.1 place for positive customer response.
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Introduction
Introduction Alfa-Bank has a huge advantage in winning customer loyalty thanks to its high level of service, strong team, cutting-edge technology and attractive product line.
Alexey Korovin Head of Retail Business, Member of the Executive Board
1 7th Summer Davos took place in Dalian, Liaoning province, Northeast China, in September 2013. The theme of this year’s World Economic Forum is «Meeting the Innovation Imperative»
As the assets grow, the profit generated from each client should be on par with the current value 2
Artyom, the first vice-president of Alfa-Bank, just returned from World Economic Forum held in China (Summer Davos international forum1). Artyom regarded his trip as a great opportunity to meet with many of his colleagues and business partners, discuss topical business issues, exchange experience, and learn about worldwide economic trends in more detail and from the first hand sources. This year over one thousand people from almost 90 different countries took part in Summer Davos. The forum, which took place in Dalian, focused on international issues, world economy growth prospects, and business opportunities in the emerging markets (Russia being one of the latter). The forum participants yet again concentrated on the issue of varying speed of economic growth. A lot of attention was paid to the best practices of giant Chinese banks development with the same level of interest demonstrated to BRIC banks. Artyom had been heading Alfa-Bank strategic development department for the past few years. Following the instruction of the Board of Directors, in a week’s time Artyom had to provide the bank’s management and shareholders with the draft version of new strategy for growth and development of AlfaBank. The shareholders set a very clear goal: Alfa-Bank should become one of the top 3 Russian banks by 2017.
While pondering over the results of the global forum, analyzing top manager speeches and reports on extensive experience of Chinese banks as well as the pace of their development, Artyom felt he would succeed with his aims as well. Most definitely, becoming one of the top three banks would be a considerable challenge for the leading private bank, but Alfa-Bank did have enough power and possibilities to pursue this bold goal! Upon his return to Moscow, Artyom held an urgent meeting of the new Alfa-Bank development and leadership strategy work team that comprised key vice-presidents. “Colleagues as you already know our goal is to become a leading Russian Bank and to join the ranks of top 3 banks in terms of assets volume by 2017”. These were Artyom’s opening words after a quick welcome. “At the same time we are not striving to achieve leadership at any cost — the bank should be growing seamlessly, without any damage to the interests of our customers and shareholders! At the moment, the bank owners do possess large cash reserves after the sale of TNK-BP and the bank may build upon these monies, but only if the bank will acquire large return on assets. I would also like to turn your attention to the fact that we would like to reach a leading position not just through the
increase of loan portfolio — the share of risk-related profit should be limited. It is also desirable to keep the balanced portfolio for individuals and legal entities. I don’t think I have to remind you that the main merits of our bank are speed and quality of service, reputation and customer satisfaction! Our new strategy must reflect these advantages in full. Furthermore, it should secure balanced customers portfolio and offer products for all categories of the bank clientele”.
Artyom then proceeded to the summary of his speech: “In a week we need to prepare the draft version of Alfa-Bank leadership strategy till 2017 for the Board of Directors. We have to maintain the high level of our margin2, the portfolio should be balanced, and the bank should keep leadership when it comes to customer satisfaction and loyalty. Our goal is to become one of the top three banks in terms of assets volume!
llion assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio PetrUSD Aven Alexey Marey Alexey Korovin Vladimir Tatarchuk Ildar Andrei Sokolov Rushan Khvesyuk Mikhail million employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 million equity 511Karimov branches and offices 21 238 4 151 151 USD USD millionFridman equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets Member the 31 Chiefloan Executive Officer, Member of the Executive Deputy82 Chairman Member the portfolio Board Chairman the assets 511 branches and offices Member of employees the Board 82 000 corporate Member of the clients Board million equity portfolio 45 511 and employees 000 millionof total 21 238 8.9 millionof loan 45 932 USD corporate clients clients 8.9 retail retail clients 829 829 USD USD million million profit profit 44 151 151 USD USD millionof equity 31825 825USD USDmillion million loan portfolio 45932 932USD USDmillion milliontotal totalassets assets 511branches branches andoffices offices21 21238 238First employees 82 000corporate corporateclients clients88 quity 31 825 USD Board 8.9 of Directors Member the Board Directors, Head loan of Retail of million the Executive Board 511 Directors Executive Board of Directors retail million profit 44151 million USD portfolio total equity 31 825 USD million loan portfolio of 45Directors 932 USD million total assets 511 branches and million profit 4 151 USD million branches and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 retail clients clients 829 829USD USD millionof profit 151ofUSD USD millionequity equity31 31825 825Board, USDmillion million loan portfolio45 45932 932USD USD million totalassets assets 511branches branchesan a tail clients 829ofUSD Member000 of the Executiveclients Board Business million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82 000corporate corporate clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million USD million million profit profit 4 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprof pro lio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000co co Edward Kaufman Oleg Sysuev Maxim Pershin Igor Kolomeisky Sergey Vasiliev Andrei Kosogov Andrew Baxter Petr Smida million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalasse asse orate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million Member of the First Deputyoffices Chairman 238 employees 82 Member of the Member of the Executive Board, Member of the Board Member of the Board Deputy Chairman Chairman of the 44151 million equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511branches branchesand and offices21 21 238 employees 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit 151USD USD millionequity equity31 31825 825US U 11 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity Board of Directors of the Board of Directors Executive Board Head of Investment Business, of Directors of Directors of the Executive Board, Board of Directors retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients82 8 llion loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail Corporate Annual & Investment Bank Chief Financial Officer A lfa - Ba n k AlfaBank Annual Report 2012 Report 2012 offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238ee SD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932US U oyees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 4 151 151 USD USD million million equity equity 31 31 825 825 USD USD million million loan loan portfolio portfolio 45 45 932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillio milli llion total assets 511 branches and offices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 corporate clients clients 8.9 8.9 retail retail clients clients 829 829 USD USD million million profit profit 44 151 151 USD USD million million equity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesand andoffices offices21 21238 238employees employees82 82000 000corporate corporateclients clients88 quity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches and offices 21 238 employees 82 000 corporate branches and and offices offices 21 21 238 238 employees employees 82 82 000 000 corporate corporate clients clients 8.9 8.9 retail retail clients clients 829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanportfolio portfolio45 45932 932USD USDmillion milliontotal totalassets assets511 511branches branchesan a tail clients 829 USD million profit 4 151 USD million equity 31 825 USD million loan portfolio 45 932 USD million total assets 511 branches million loan loan portfolio portfolio 45 45 932 932 USD USD million million total total assets assets 511 511 branches branches and and offices offices21 21238 238employees employees82 82000 000corporate corporateclients clients8.9 8.9retail retailclients clients829 829USD USDmillion millionprofit profit44151 151USD USDmillion millionequity equity31 31825 825USD USDmillion millionloan loanpor po fices 21 238 employees 82 000 corporate clients 8.9 retail clients 829 USD million profit 4 151 USD million equity 31 825 USD million
Board of Directors and Executive Board
02
7
Banking Industry in Russia
Banking Industry in Russia
Many Alfa-Bank assets and customers are located in Russia. As a result, Alfa-Bank is affected by Russian economic conditions. Therefore, if one is to consider Alfa-Bank business and assets structure,it is important to review the economic conditions of the bank area of presence. The Russian Federation consists of 83 political bodies, which include republics, territories, regions, federal cities, autonomous regions, and autonomous districts. Russia is a vast country with Europe’s largest population at 143.3 million people as of January 1, 2013.According to the data and forecasts of the IMF, Russia is among the fastest growing large global economies. Russia is one of the world’s top 10 largest economies, with GDP of US$2,030 billion in 2012, according to EIU, giving it the eighth place overall globally, ahead of such countries as Italy, India and Canada (based on nominal GDP comparison). It is also the largest economy in Central and Eastern Europe as well as the CIS. Russia also has enjoyed dynamic rates of real GDP growth of 3.4 percent in 2012 and 4.3 percent in 2011, ahead of most developed Western economies, as well as its BRIC peer nation Brazil, which grew by 0.9 percent in 2012 and 2.7 per cent in 2011. It has also shown very high rates of growth of personal incomes at 4.6 percent in 2012 and 1.9 percent in 2011. This high growth is partly explained by the convergence of Russia’s still low per capita GDP and per capita personal income levels in comparison to advanced
economies. For instance, in 2012, Russian per capita GDP was US$14,210, while in the US, Germany and UK per capita GDP amounted to US$49,959, US$41,622 and US$39,229, respectively according to EIU. At the same time, Russian average gross income per capita is still far below the levels of advanced economies, amounting to US$9,885 in 2012 versus US$46,960 for the US or US$36,446 for the UK, according to Euromonitor and EIU, which implies there is room for substantial further growth in Russia as development levels converge. However, Russian population is relatively wealthy when compared to some other high growth economies, such as China or India, where per capita GDP in 2012 was US$6,290 and US$1,520, respectively, according to EIU. This relatively high and growing level of per capita GDP, coupled with one of highest levels of educational attainment of Russian population (with a 2012 HDI Education index of 0.788, compared to Brazil, China and India which had 0.730, 0.699 and 0.554 respectively, as reported by HDI) creates a favorable environment for growth of retail financial services, as well as take-up of internet and mobile connectivity to take advantage of the latest technological developments in the financial sector. An important factor in Russian growth has been the level of disposable income, personal consumption and adoption of financial products. In 2009 — 2012 personal consumption grew at an average annual
rate of 14.1 percent, and is expected to increase by a further 10.7 percent average per annum in 2012-15 as per data and projections from the Economist Intelligence Unit. This high level of consumption growth would also drive growing demand for loans from individuals, in turn leading to substantial growth of opportunities in the retail lending segment. Russia enjoys relatively high level of adoption of online and mobile technologies,with its 2012 internet penetration of 52 percent, according to Euromonitor, outstripping China and Brazil, and 2012 mobile phone penetration of 165 per cent being ahead of virtually all large advanced and emerging global economies, according to the World Cellular Information Service. The combination of low penetration and vast growth potential in Russian retail financial services with the country’s high level of adoption of online/ mobile consumer technology represents a tremendous opportunity for an innovative, IT-driven retail financial services provider such as Alfa-Bank. Its upside looks particularly attractive in light of its focus on and leadership in one of the most dynamically growing areas of retail financial services— credit card lending—where the number of active credit cards (including plastic cards with overdraft) in circulation is expected to rise by 11.2 percent per year in the period from 2012 to 2015 according to the Frank Research Group.
8
Banking Industry in Russia
Banking sector structure The Russian banking sector consists of the CBR and credit organisations which, in turn, consist of banks, that provide a wide range of banking services, and non-bank credit organisations, which provide only limited banking services, such as maintaining accounts and making payments. As of July 1, 2013, there were 1,091 banks and non-banking credit organisations registered and 956 banks and non-banking credit organisations conducting banking operations in the Russian Federation. Poor corporate governance, inadequate risk management, lack of transparency, absence of developed regional networks and weak management remain strongly characteristic of some Russian banks, particularly smaller ones. Despite the active growth of debit and credit cards, online banking, mobile and other electronic payments, cash remains overwhelmingly the main payment vehicle in Russia. In 2012, 54% of all transactions were of a pure cash nature, 40% were ATM withdrawals and only 6% were effectively card payment transactions at sales outlets, according to Euromonitor. On
these metrics, Russia is clearly lagging behind most of its peers. This cash dependence of the Russian economy is also visible in terms of the distribution of PoS payment terminals (such as in retail stores) and ATMs. There are only four PoS payment terminals per 1,000 people in Russia, which is clearly lower than in other countries (29 in Turkey and 19 in Brazil). The latter underpins the cash-based nature of the Russian economy, as ATMs are currently used primarily for cash withdrawals. In 2012 banking industry faced a number of challenges, but the increment rate of assets proved fairly satisfactory. During 2012 the assets of national banking sector increased by 19%, reaching 49.5 tln. RUR. This is less than the figure of 2011, when the assets of Russian banks grew by 23%, but in the face of current issues related to development of global and national economies this slowdown trend is indeed expected. Apart from that, account must be taken that in 2011 strengthening of foreign currencies against rouble facilitated asset growth, while in 2012 it was rouble that tightened its defenses, leading to negative currency revaluation. As a positive outcome of 2012 we can consider the fact that assets dynamics cleaned of currency exchange rates fluctuations accelerated quarter on quarter.
In 2012 the liabilities of Russian banking system increased by 7.88 tln. RUR in money terms. However, the growth rate of own capital turned out lower than that of liabilities. Internal funds of banking industry increased by 16.6%, liabilities by 19.3%. The drivers for liabilities increase in 2012 were funds received from the Bank of Russia, debt securities in issue, and retail deposits. Russian banks have been very actively raising funds in international debt capital markets in recent years. Their fundraising efforts have benefited from strong demand among international investors. The low interest rate environment is encouraging issuers to replace their older and costlier facilities with fresh money raised on much more favourable terms. The biggest growth among all asset categories demonstrated a group of readily obtainable assets (monetary resources, funds in the Central Bank of Russian Federation, correspondent accounts in banks), that has increased in value by 1.6 percentage points per annum, reaching by January 1st, 2013 10.5% from total assets of domestic banking system. The reason for this, according to experts of RIA Rating, was the banks’ aspiration to accumulate liquid resources before the beginning of next year in order to avoid
9
Banking Industry in Russia
real liquidity challenges following the example of early 2012, when the lack of liquidity nearly transferred into a full-fledged deficit. Profit and profitability: In 2012 Russian banks set a new profit record, having earned 1011.9 bln. RUR. At the same time, post-crisis trend of profit growth starts to gradually decline. Following the results of 2012, profit increased by 19.3% as compared to the results of 2011, while in 2011 it grew by half. Speaking about profitability figures, in 2012 they showed multidirectional behaviors. While the profitability of assets declined by 0.1 percentage points, and by the end of 2012 amounted to 2.3%, capital profitability grew by 0.7 percentage points to 18.2%. This can be explained by capital increasing slower, as compared to profit. Total loans of Russian banks increased by 18.3 percent in 2012 to RUB 34.0 trillion as of January 1, 2013 and increased by 10.1 percent by June 30, 2013, to RUB 37.4 trillion as of July 1, 2013. Total deposits of Russian banks increased by 15.5 percent during 2012 to RUB 30.1 trillion as of January 1, 2013, and increased by 9.5 percent by June 30, 2013, to RUB 33.0 trillion as of July 1, 2013.
According to the Central Bank data, the average balance on credit cards had risen to about R30,000 by the end of 2012. We note, however, that this refers to all outstanding credit cards. In reality, we think that about 50% or maybe less of outstanding cards are likely to be actively used, implying that the average balance may be closer to double that shown below, or still higher. The credit card market has been the fastest growing segment of retail lending over the past couple of years; loan volumes rose 86% in 2012 based on Central Bank data and 25% in 1H13, reaching almost R840 bln ($26 bln). As in the other segments of the retail market, Sberbank is the biggest credit card lender with a 23% market share, which it won primarily from the credit card pioneer Russian Standard Bank, which now has 16% of the market (marking a notable decline since 2007 when it held half of the market). Strong credits with an established track-record of international borrowing are likely to retain access to the debt markets in 2013. Prevailing favourable market conditions have prompted a significant volume of Eurobonds issuance this year. Russian banks in 2014 are unlikely to experience meaningful difficulties in repaying, or rolling over, maturing debt.
However, the sharp division between high- and low quality credits persists, and this limits the funding options for many privately owned Russian banks.
10
Banking Industry in Russia
Regulations and their influence
The Russian government is committed to maintaining stability in the banking system and seems prepared to cover any shortfall in funding should it arise. Russian politicians appear to assign a high priority to the stability of their banking system amidst the global financial turmoil.The government has committed significant financial resources to helping banks weather the continuing market turbulence. The relatively low level of banking penetration in the country should present growth opportunities. As stated by the government, the 2013 budget will contain a reserve fund aimed at supporting the economy and the financial sector. Three main tendencies are enforced by government:
Capital adequacy and Basel III.
Starting from May 1, 2013, Russian banks will be reporting their capital in a new regulatory framework based on Basel III. The new regulations change the way capital adequacy is calculated and increase minimum capital requirements. However, the starting date for mandatory compliance has not been determined yet.
3
www.bis.org/publ/bcbsca.htm
4
www.bis.org/bcbs/basel3.htm
The new regulations set the minimum value of the core equity Tier 1 ratio at 5.6% and Tier 1 at 7.5%, while the existing total capital ratio remains at 10%. These requirements exceed the minimum requirements stipulated by Basel III, which sets ratios of 4.5% for core capital, 6% for Tier 1 and 8% for total capital.
The CBR expects the new calculation of capital ratios to have a negative impact of no more than 1% on the capital adequacy of the Russian banking sector. This appears moderate and should secure a smooth transition to the new regulatory framework. Banks continue to have considerable flexibility in reporting risk exposures that determine their capital needs, and this additionally mitigates the impact of the new measures. In addition to boosting the capital requirements, the CBR also intends to improve its supervision apabilities. The new draft law, which was submitted to the State Duma for its second reading in April 2013, introduces consolidated supervision, requires a higher level of disclosure, and defines terms such as banking group and banking holding. In Russia Alfa-Bank is one of the first to fulfill Basel II3 program.The transfer to Basel III will not be hard for Alfa-Bank as well, provided that it already complies with new requirements towards capital and utilizes internal ratings based approach when defining loan values. Following stricter requirements to capital adequacy by 2015 Alfa-Bank is also ready to capitalize profit. Generally, introduction of Basel II and Basel III4 requires to create modeling methodology, to implement a new approach to risk management, to gather and maintain data quality, to reorganize business processes and ways of their implementation. An equally important novelty is introduction of technological platform. Of no less importance is the introduction of technical
service platform, particularly analytical and statistical instruments to manage risks and comply with Basel requirements. It is in the process of implementing various new technologies that Alfa-Bank incurred major costs. The new regulatory framework and the introduction of Basel III capital requirements should strengthen the banking sector. Cooling credit expansion. The CBR has been active in trying to cool-off consumer credit growth, while increasing the system safety mechanisms; several measures have been or are likely to be implemented in 2013-14. In particular, the CBR has imposed higher provision requirements on loans issued from January 1, 2013. The second such change is stricter riskweighting (effective from July 1, 2013) compared to the previous risk weight requirements including 100% on all ruble credits and 150% on foreign currency credits. Putting pressure on deposit rates. The CBR recommends a 200 bp limit on deposit rates against the benchmark, which is calculated as the average of the top-10 banks’ rates, in order to limit risky expansion of lenders. However,Russia continues to be a high political risk country and this could influence the pricing of public debt. The relatively high level of political and economic uncertainty may at times lead to higher volatility in the bonds of Russian banks.
03
12
Alfa-Bank
Alfa-Bank
History Alfa-Bank Russia, founded in 1990, has developed rapidly to become one of Russia’s leading privately owned banks. It provides a full range of banking services — corporate banking, retail banking, investment banking, asset management and trade finance.In 2012, Alfa-Bank Russia had 511 branches over nine time zones in Russia, the Netherlands and the United Kingdom, and also had presence in the United States and Cyprus5. Its story began in 1990, on the 20th of December,AlfaBank was established as a commercial bank in the form of a limited liability company in the Consortium Alfa-Group — one of the largest private investment groups in Russia. In January 1998, after 8 years, Alfa-Bank was reorganized into open joint stock company. Numerous subsidiary banks opened in both Moscow and regions, as well as abroad. Alfa-Bank merges with Alfa-Capital, then a sister company of Alfa-Group, contributing to the creation of new divisions in the promising areas of investment banking.
5
www.alfagroup.org/press-centre/news/top-stories/?id=7936
6
www.en.wikipedia.org/wiki/Alfa-Bank
7
www.alfabank.com/media/news/2013/11/06/
This merger, the Bank’s efficiency and professional management allowed AlfaBank to tide it through the economic crisis in Russia in 1998. In the 2000s, Alfa-Bank demonstrated steady growth, entered into a strategic
partnership with a number of companies opening dozens of new branches and developing new solutions for customers. For several years in a row, the bank was dubbed the “Best Bank in Russia” according to the European financial magazine Euromoney. In 2001 Alfa-Bank opened a subsidiary in New York City, Alfa Capital Markets. In addition, Alfa-Bank became the 100 percent owner of Amsterdam Trade Bank N.V. and thereby acquired a full banking license in the European Union. In 2005 S&P, Fitch, and Moody’s upgraded Alfa-Bank’s rating. In 2006 Alfa-Bank completed the country’s first securitization of diversified payment rights with a $350 million deal6. In 2010, the Alfa-Banking Group established a “mass business” segment, which combined features of the Alfa-Bank retail banking and SME banking businesses and aimed to serve and develop the micro and small corporate segment (companies with an annual turnover of less than U.S. $5 million). At the date the mass business segment was considered to be a standalone business category, and was neither a part of the corporate and investment banking segment nor of the retail banking segment. The head of the mass business segment reported directly to the CEO
of Alfa-Bank. As of December 31, 2012, the mass business segment had 57,300 customers, representing an increase of 64.7 percent compared to 34,800 customers as of December 31, 2011. In 2011, Alfa-Bank approved the development strategy, striving to maintain the status of a leading private bank in Russia with a focus on reliability and profitability, as well as the focus on industry-leading customer service, technology, efficiency and integration of the business. In the same year the Bank celebrated (together with its customers) the twentieth anniversary in the market. Alfa-Bank organized a variety of events across the country. In Moscow the Bank held a 4D laser show on Sparrow Hills, listed as the largest by area of the projection in the Guinness Book of Records, with the audience of more than 800 thousand people. In 2013 Alfa-Bank stays the largest Russian private bank by total assets, total capital, the size of the loan portfolio and deposits. The bank has 511 branches and offices in Moscow, Russian regions and abroad, including a subsidiary bank in the Netherlands and financial subsidiaries in the United States, the United Kingdom and Cyprus7. The bank clientele consists of more than 80 thousand corporate customers and over 9 million individuals.
13
Alfa-Bank
Alfa-Bank Branch Network Structure As of July 1st, 2013 Alfa-Bank provides services to around 103.5 thousand corporate customers and 9.6 mln. private persons. In Moscow, regions of Russia, and abroad the bank has 552 branch offices and affiliates, including a filial bank in the Netherlands, and financial affiliates in the USA, the UK, and in Cyprus, as compared to 511 as of December 31st, 2012, and 465 as of December 31st, 2011.
In the autumn of 2011, the Alfa Banking Group launched an updated retail banking strategy to aggressively expand its retail loan portfolio and increase the volumes of personal installment loans issued and credit cards provided to customers. The Alfa Bank is continuing to expand its presence and penetration both in the major cities and the regions of Russia,adapting its offerings through physical or virtual channels, depending on the profile of specific regions, and adopting its risk assessment models to keep them current to minimize losses through fraud and default.
In addition, the Alfa Banking Group began to use “micro� branches since 2012, which offer a more streamlined range of services to customers, as part of its strategy to increase its retail banking presence in the Russian regions, without incurring the cost of establishing traditional branches. Further, the Alfa Bank tailors its services to retail customers within the framework of particular regions’ socioeconomic and cultural conditions to allow it to better satisfy the needs of its regional customers.
14
Alfa-Bank Goals and Development Strategy
Alfa-Bank Goals and Development Strategy According to the strategy of the Alfa-Banking Group adopted in 2012, the strategic priority is to maintain its status of the leading private bank in Russia, while enhancing stability and profitability, and to set the industry standards in key areas such as customer experience, technology, efficiency and teamwork. The Alfa-Banking Group has three main segments: • • Corporate and investment banking, which provides a broad range of commercial and investment banking services and products, including corporate lending, leasing, corporate deposit services, factoring, trade finance operations, structured corporate lending, securities trading, debt and equity capital markets,
derivatives, structured financing, foreign exchange trading, corporate finance and merger and acquisition advisory services to large corporations, small and medium sized enterprises (“SMEs”), and other financial institutions; • • Retail banking, which provides a wide range of retail banking services, including retail demand account and term deposit services, credit and debit card services, lending (including consumer, personal instalment loans, credit card lending, auto loans and mortgages), money transfers and private banking services to individuals; • • Treasury operations, which manage the Alfa-Banking
Group’s own funding activities and internal funding reallocation, liquidity and risk management activities and investment in liquid assets, as well as short-term money market and promissory note operations.
To achieve this strategic goal Alfa-Bank concentrates on three main elements:
Technology, efficiency: technological and process efficiency as a competitive advantage8.
Focus on customer
Alfa-Banking Group’s general strategy is to maintain the status of the leading private bank in Russia, while enhancing the bank’s stability and profitability. The Group also aims to set the industry standards in key areas such as customer experience, technology, efficiency and teamwork.
• customized approach to sales and services for target customer groups.
Alfa-Bank collaboration with leading Russian companies is based upon a wide range of products and its in-depth knowledge of the industry sectors in which its customers operate, and of its customers’ businesses. The tailor-made solutions that the Alfa-Bank is able to offer its customers give it a competitive advantage over some of its competitors.
• Large range of products to meet the customers’ needs;
Team and team work • efficient cooperation: among and within business units; • hiring and retaining best people, maximum usage and development of employees’ potential; • tailored motivation systems.
One of Alfa-Bank general strategic objectives is to develop its retail banking business. In particular this includes increasing the profitability of the segment by providing more loans to customers, increasing the number of customers, and the volume of products and services sold to customers,
15
Alfa-Bank Goals and Development Strategy
increasing margins, reducing costs and continuing the strengthening and optimizing of its operational infrastructure. Another strategic objective is to differentiate the product line, network and marketing — all components of the business — depending on the needs of each specific customer segment. Next year, Alfa-Bank plans to further expand the distribution network and open 50% more new branches than in 2012 and to build a new network for the high-volume segment, which will include micro-branches and consumer lending centers. The bank will continue to pay special attention to lending in 2013. According to our forecasts, this segment of the market will continue to grow rapidly, while Alfa-Bank’s objective is to stay ahead of the growth curve and build on the success achieved last year. As before, e-business will be one of Alfa-Bank’s priorities. The objective is to be the
leader in technology solutions for customers, because simple, convenient and free access to banking services are crucial to customers and will become more important each year. The bank will pay particular attention to its employees, since their dedication and loyalty are key to building successful relationships with customers. For Alfa-Bank management, people are not merely raw material, but human capital. A manager’s path to success depends on the achievements of his colleagues, and the keystone to success for Alfa-Bank as a whole is steady work as part of a unified team. The task of managers is to achieve results by developing their people, keeping them abreast of what is happening at Alfa-Bank and helping them feel they are part of a team. The excellent results achieved in recent years show that this personnel policy works and lies at the heart of achieving success. Another important element of AlfaBank’s development strategy is focusing on the customer and
his or her needs and wishes. This is the key to the long-term success of its business, and the bank is certain that interacting with customers in a way that is convenient for them is vital to successful operations. That is the Alfa-Bank way of doing things — it does not sell specific financial products; rather, the bank provides its customers with convenient, contemporary solutions that not only meet their current banking needs, but also anticipate future needs and expectations. In order to make the right decision, the bank studies the world around. AlfaBank constantly looks at itself through the eyes of customers, listening to the opinions of those who choose Alfa-Bank as their «home» bank. This is why the bank makes a special effort to obtain feedback, both through Alfa-Bank’s branches, as well as with the help of cutting-edge communications channels, like social networks. «The Bank through the Eyes of the Customer» is Alfa-Bank’s motto for 20139.
Social Responsibility Naturally, the most important area of customer relations is improving customer impression. Looking at the business through the eyes of the customer, Alfa-Bank sees that customers expect to get efficiency, innovation, novelty and convenience from AlfaBank. Alfa-Bank has a huge advantage in winning customer loyalty thanks to its high level of service, strong team, cuttingedge technology and attractive product line. Each year, Alfa-Bank makes new strides towards maximizing customer convenience, pursuing improvements based not only on its own experience, but also on the wishes and expectations of the people who use its services and place their trust in Alfa-Bank. The bank is confident that the ranks of these people will continue to grow in 2013. As one of Russia’s leading financial institutions, Alfa-Bank puts special emphasis on social and charitable activities, supporting cultural projects and providing assistance to those in need. Alfa-Bank charitable initiatives
include helping seriously ill children through the Lifeline Foundation, numerous volunteer projects in which Alfa-Bank employees play an active part, co-operating with the World Wildlife Fund (WWF), and a variety of educational programs for talented youth. Alfa-Bank’s cultural projects including organizing tours by international stars and popular Russian performers to all corners of our country, as well as supporting a variety of creative initiatives in Russian literature and the arts10.
8
www.alfabank.com/corporate/strategy
www.alfabank.com/f/1/investor/financial_ reports/annual_reports-ifrs/ab_report2012.pdf
9
www.alfabank.com/f/1/investor/financial_ reports/annual_reports-ifrs/ab_report2012.pdf 10
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17
Alfa-Bank Finance Structure
Alfa-Bank Finance Structure
It can be quite difficult to understand banking, since banks are very different from most other businesses. For one thing, they are highly leveraged, with more than $20 in debt for every $1 of equity. Also, it can be hard to understand what banks actually do, since they don’t create any “hard” products. A lot of people seem to think that banking is “free”, probably because banks keep checking accounts, direct deposits, bills payment, etc. free for advertisement purposes. There are three main sources of revenue in retail banking today: • Net interest margin: this is the difference, or “net”, between the interest paid to depositors and the interest received from borrowers. • Interchange: every time customers swipe a card at a store, the merchant pays a small percentage of the money to the bank that issued the card, called an interchange fee. • Fees: These are the fees that banks charge their customers, including ATM fees, overdraft fees, late payment fees, penalty fees, etc. Financial statements for banks present a different analytical problem than
statements for manufacturing and service companies. As a result, analysis of a bank’s financial statements requires a distinct approach that recognizes a bank’s unique risks. Banks take deposits from savers and pay interest on some of these accounts. They pass these funds on to borrowers and receive interest on the loans. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system. By managing this flow of funds, banks generate profits, acting as the intermediary of interest paid and interest received, and taking on the risks of offering credit. Banks serve multiple financial purposes. There is the depository section of banks, which is where people place their savings, and there is the commercial section of banks, which is where the bank pursues investment opportunities. Some banks are both commercial and depository, such as Alfa-Bank. Banks take deposits from savers and pay interest on some of these accounts. They pass these funds on to borrowers and receive interest on the loans. Their profits are derived from the spread between the rate they
pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system. By managing this flow of funds, banks generate profits, acting as the intermediary of interest paid and interest received, and taking on the risks of offering credit.
18
Alfa-Bank Finance Structure
Review of Current Alfa-Bank Financial Indicators
Alfa-Bank’s financial statements give a clear picture of its market standing. The number and correlation of key indicators may demonstrate the bank quality, its focus as well as strengths and many other important aspects. Assets, liabilities and capital show bank’s position over a certain period of time (for the last six months or year). The list of assets reflects bank’s resources, i.e. where it channels its funds to and what makes its profit. Liabilities reflect amounts that the bank owes to its depositors. And the bank’s capital characterizes shareholders’ equity, i.e. the amount of contributions from bank shareholders. A detailed review
of each area and special attention to every item-line are required for development of a successful bank development strategy. Alfa-Bank’s financial performance is as follows: Alfa-Bank is currently the largest privately owned bank in terms of the amount of its total assets, aggregate capital and amount of deposits. Alfa-Bank is seventh in terms of assets, and fifth in terms of shareholders’ equity in the overall rating of all Russian banks. As of October 2013, assets of Alfa-Bank accounted for 1,474 billion rubles — this parameter is significantly higher compared
with its nearest competitors. The loan portfolio increased again in 2012 and equaled 1,065 billion rubles. Net profit for the first ten months of 2013 equaled 23.3 million rubles. Over the entire period of its making, Alfa-Bank had demonstrated continuous increase in assets and loan portfolio up until 2008. During the crisis the bank slowed down the lending rates and focused on improving of available assets and handling of troubled loans. In 2009 and 2010, the above efforts resulted in the reduction of the bank’s loan portfolio as well as its aggregate assets.
Liabilities structure across segment players as of 2012
100 90 80 70 60 50 40 30 20 10 0
16
11
20
24
18
30 47
72
OTP
76
SBER
64
ALFA
61 55
64
RSB
HCF
VTB
47
TCS
Other liabilities Overall debt Deposits Bank funds Source: company data
19
Alfa-Bank Finance Structure
Net assets, billion rubles (July 2013)
Sberbank
The end of the global financial and economic crisis had a positive impact on Alfa-Bank’s operations. As domestic debt capital markets re-opened for Russian issuers, Alfa-Bank was able to access such debt capital markets and use the financing proceeds to grow its loan portfolio again in the second quarter of 2010.
14644,57
VTB
4767,65
Gazprombank
3120,1
Russian Agricultural
1767,90
VTN 24
1700,21
Bank of Moscow
1589,63
Alfa-Bank
1362,64
Unicredit
767,96
Promsvyazbank
710,88
Rosbank
704,32
In the second half of 2010, Alfa-Bank reactivated its lending activities within the framework of positive macroeconomic trends, and as early as by 2011 the bank has increased its loan portfolio by 32% compared with 2010 while its total assets grew by 37% (up
to 801 billion rubles). Rapid growth of the portfolio continued in 2012 and in the 2013. This growth was possible due to increases in real disposable money income and real wages of the Russian population which positively affected demand for Alfa-Bank’s loan products. As of January 2013, the bank’s total assets increased up to 1,307 billion rubles while credit commitments — up to 1,003 billion rubles. Alfa-Bank focuses on granting of corporate loans — their share amounted to 85% of the overall loan portfolio as of October 2013. Loans to natural persons (individuals), including installment
Staff cost as % total operating costs (2012) 70 60
61
60 54
50
52
47
46
OTP
HCF
40
42
30 20 10 0 Source: Company data
ALFA
RSB
SBER
VTB
TCS
credit cards, account for a considerable portion of the bank’s retail business (10 % of the overall loan portfolio). Other retail lending areas — consumer loans, mortgage loans and car loans — account for the lesser portion of its loan portfolio. Please refer Appendix 2 for graphics. The bank’s loan portfolio structure by sectors is sufficiently diversified: multiple major companies representing various sectors are corporate customers of the bank. As of early 2013, the number of granted loans exceeded the same parameter for the previous year by 64.6% and amounted to 456 billion rubles. Improvement of financial performance was followed by a noticeable increase in the target customer base. Its key target sectors include machine building, construction, retail trade and agricultural sector. The loan portfolio quality improves each year: as of the first half of 2013 the share of overdue loans did not exceed 3.5% which equaled half of the overdue loans share in 2010. Alfa-Bank’s efforts aimed at efficient restructuring and repayment of troubled debts improved significantly its assets quality.
20
Alfa-Bank Finance Structure
International Credit Ratings
Fitch Ratings Alfa-Bank ABHF Long-Term BBB- BB+ Short-Term F3 B National scale rating AA+ Outlook Stable Stable
Moody’s
Alfa-Bank
Long-term Ba1 Short-term NP Financial strength rating D Outlook Stable
Standard & Poor’s Alfa-Bank ABHF Long-Term BB+ BBShort-Term B B National scale rating ruAA+ Outlook Stable Stable
As of 1 July 2013, the top-5 credit card lenders — Alfa-Bank, Sberbank, Russian Standard, TCS, VTB24– jointly controlled 59% of the Russian market compared to 48% in 2008. In 1H2013, the top-5 players added 68% to their aggregate credit card portfolio. The structure of Alfa-Bank’s liabilities shows that bank customers’ loans constitute the main portion of bank’s commitments (private loans account for 31% while corporate loans account for 26%) — they accounted for 57% of the overall bank’s liabilities as of the end of the first half of 2013. Since 2008, the structure of customers’ funds has been quite evenly distributed between corporate customers and natural person (individuals). In terms of the correlation between current bank accounts and deposit accounts, funds accumulated on deposit accounts slightly exceed funds kept on current bank accounts. By 2013, the shareholders’ equity of Alfa-Bank equaled 150 billion rubles — it increased by 18 billion rubles plus for the last year. As of the first half of 2013, the Capital Adequacy Requirement amounted to 16.3%, and its growth was mainly triggered by the increase in its shareholders’ capital and Tier 1 Capital .
According to forecasts, if the current strategy and the risk level are maintained, net assets of Alfa-Bank will increase approximately by 7% over the next year, corporate loans will grow by 10 to 15%, loans to natural persons (individuals) will increase by 25 to 30%. CIR will be less than 50%, ROE will be more than 20% while CAR will tentatively equal 14 to 16% which will facilitate further proactive growth. While reviewing bank’s financial performance, it would be interesting to look through bank credit ratings. A credit rating is an assessment of financial solvency or creditworthiness of a borrower and/or issuer in compliance with the established procedure for loan return probability evaluation. Ratings and accompanying surveys assist customers and investors in reviewing credit risks linked to investments into fixed-income securities, and provide detailed information on the ability of issuers to meet their liabilities. A credit rating assigned to an issuer of fixed-income securities may ensure higher liquidity of securities issued as well as lower operational costs.
Leading international rating agencies rate Alfa-Bank as one of the best among Russian private banks. In 2012, FitchRatings improved the long-term credit rating of Alfa-Bank up to BBB-, Outlook Stable. Alfa-Bank became the first Russian private bank which received an investment rating from a leading international rating agency. Standard&Poor’s improved Alfa-Bank’s credit rating up to ВB+, Outlook Stable.
21
Alfa-Bank Finance Structure
Asset Management Policy of Alfa-Bank There are many ways of increasing bank’s assets, however not all of them are indeed good as they may seem at the first glance as they may entail multiple negative consequences. When planning further actions, AlfaBank adheres to certain rules and limitations within the framework of its strategy: • objective of creating a top quality loan portfolio; • consideration of risks (increase assets at the same risk level); • maintenance of a highly diversified loan portfolio; • sustainable development of the bank (straightforward intentional investments from shareholders will not secure a positive longterm effect). All assets of banks are generally characterized by three key closely interconnected features: liquidity, risk and return on assets. And the equation is
quite simple — the more liquid the assets are, the higher is the risk factor and consequently returns on them. In terms of the liquidity level assets are divided into highly liquid assets (including monetary funds of a bank and public securities) which actually bring no return, liquid assets, slow and illiquid assets (bad debts, buildings) which bring no return as well. Alfa-Bank’s portfolio mainly consists of liquid marketable securities. Two key factors incentivize operations with derivative securities: the need to hedge one’s own risks (predominantly with the use of foreign currency, securities and interest-bearing derivatives) and customers’ demand. Availability of the sufficient quantity of liquid assets is extremely important for efficient bank operations as the contrary situation provokes the liquidity risk — the risk of a situation when the bank is not able to meet timely its liabilities before customers and counteragents in the required volume. Alfa-Bank pays significant attention to financial risk management. Banks’ objectives and customers’ wishes are simple — ensuring of maximum possible profitability at the minimum risk level. Key efficient management elements include: a well-developed credit loan policy and procedures; good quality portfolio management;
efficient control of loans; and, most importantly, personnel well trained for work within this system. Over the last two years, the bank carried out reassessment of internal and external risk factors at the level of the current bank’s portfolio and in terms of future possible transactions which resulted in improved quality of the loan portfolio and increase in profits under current economic conditions. Alfa-Bank’s risk management strategy includes several key components: risk identification, assessment, management and control. The bank assumes the loan risk which envisages that customers would not be able to meet their liabilities to the full or in time. Various risk value limits are set (to be revised from time to time) depending on the product, borrower, type of company activities and loan amount. An important task of the bank is to increase its assets rather than to increase its debt, i.e. to focus on assets and decrease the share of bank’s risk profits. Of note, in reality banking activities bringing profits envisage purchase and sale of risks rather than monetary operations. That is why bank managers speak so rarely about increasing profits or margins — rather they usually speak about risks. Risk management is quite complicated activity as it requires continuous monitoring and an optimum
22
Alfa-Bank Finance Structure
Loan portfolio, billion rubles (July 2013) 9000
8296
8000 7000 6000 5000
1750
2000
1517
1000
986
977
805
462
448
380
364
Unicredit
3000
Bank of Moscow
4000
Rosbank
Promsvyazbank
471
405
366
Promsvyazbank
Nomos Bank
Rosbank
Alfa-Bank
Russian Agricultural
VTB 24
Gazprombank
VTB
Sberbank
0
Deposit portfolio, billion rubles (July 2013) 9068
695
Alfa-Bank
851
Bank of Moscow
939
Russian Agricultural
1209
VTB 24
2079
Gazprombank
VTB
2173
Sberbank
10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0
ratio between assets quantity, quality and return on assets. For example, if a simple decrease in price is observed, the risk will increase without fail. Of course different banks have different policies and approaches to risks. Some major banks have programs for bankrupt corporate customers envisaging 70% annual rate loan proposals. Only one of five companies repays such loans — this way the bank achieves returns usual for credit cards. The highly diversified loan portfolio and customer diversification constitute an integral part of Alfa-Bank’s development strategy. Any misalignment is extremely undesirable for a bank as it increases its risks. A correct structure of a bank is when each customer balances himself. Due to the above reasons the bank shall not have one or two major customers accounting for the bulk of its portfolio — rather the bank shall have various multiple small customers for the purpose of efficient development. A weighted mean portfolio is considered to be favorable. Alfa-Bank intends to maintain the current ratio of legal entities and private customers in the future.
Source: companies data
For the purpose of long-term effect and natural development, Alfa-Bank implements the sustainable development policy avoiding additional monetary investments. In the past, when it was necessary, the shareholders supported Alfa-Bank with monetary funds, and they are able to do it in the future in case of sudden external shocks. However such measures are not taken unless really required — first of all because they would bring a positive short-term effect, however most likely they will not influence the bank significantly in the long term. Intentional investments of additional monetary funds may also improve bank’s position in a rating, however other banks whose ratings are deteriorated as a consequence of the above may take similar measures and move the bank back (to the previous position in the rating).
05
24
Alfa-Bank:
Market Positioning and Competitive Analysis
Market Positioning and Competitive Analysis
Position of Alfa-Bank in the Russian Market The Russian market for financial and banking services is intensely competitive. The Alfa Banking Group faces competition from both domestic and foreign banks. As of January 1, 2013, there were 956 credit organizations operating in Russia. Banking sector in Russia has four main business lines: • large state-owned banks, • Russian affiliates of foreign banks, • large private Russian banks • small private banks (concentrated in the regions) Alfa-Bank belongs to the third group, which for the last two years has been showing the highest growth rates. Apart from Alfa-Bank, major private Russian banks are Nomos-Bank, PromSvyazBank, Bank Saint-Petersburg, etc. Alfa-Bank is the leader among private banks, but it also has
quite a strong position in the market in general, enjoying its competitive edge in every area of business. State-owned banks continue to play a leading role in the Russian banking sector. Several state-owned banks focus on the implementation of Russian government programs, such as Russian Agricultural Bank in the agriculture sector and Roseximbank in respect of import-export operations. Other banks have provided loans in politically-related contexts, including Sberbank (the largest bank in Russia by assets as of May 31, 2013), VEB and VTB. Yet, compared to state-owned banks, Alfa-Bank is more flexible, agile, and sophisticated, while its openness and desire to make financial operations understandable makes the bank more transparent. As compared to affiliates of foreign banks, Alfa-Bank has an undisputed advantage of better understanding the local market of Russia, together with a vast number of partners and effective services. Foreign banks are prohibited by Russian law from directly conducting banking operations in Russia, but can do so through a Russian-incorporated subsidiary and are subject to applicable requirements of Russian law. Although certain foreign-owned banks focus primarily on servicing multinational corporations operating
in Russia or cash settlement operations for non-residents, many foreignowned banks, such as UniCredit Bank, Raiffeisenbank and Rosbank (majority owned by Societe Generale) have increased their presence in Russia in the last 10 years and offer a full range of services to both retail and corporate customers. Other Russian banks are primarily locally owned and normally focus on certain regions or product segments. Compared to the top 30 Russian banks by total assets, these smaller banks are in some cases characterized by lower levels of corporate governance and risk management, as well as lower transparency of operations. Taking into account that the number of credit organisations in Russia has been steadily decreasing over the past several years, as well as tightening regulatory requirements, there is a chance that these smaller private banks could be the subject of future merger and acquisition activity in the banking sector. Alfa-Bank competes with Sberbank, VTB, Russian Agricultural Bank, Gazprombank, Bank Saint Petersburg, UniCredit Bank, Nomos-Bank, Bank Petrocommerce and Rosbank, as well as a number of other national and regional banks and certain number of the world’s largest international banks.
25
Market Positioning and Competitive Analysis
Rating of banks by assets, billion rubles (июль 2013) 16000
14644
14000 12000 10000 8000 6000
4767
1700
1589
1362
Alfa-Bank
1767
2000
Bank of Moscow
3120
4000
767
710
704
In the Russian retail banking market, the Alfa Banking Group’s principal competitors are Sberbank, VTB-24, Raiffeisenbank, Bank of Moscow, Citibank, Russian Standard Bank, Home Credit and Finance Bank, Russian Agricultural Bank, National Bank Trust, Vostochny Express Bank, OTP Bank (Russia), Svyaznoy Bank, Promsvyazbank and Tinkoff Credit Systems, as well as a number of other national and regional banks and Russian subsidiaries of foreign banks.
In addition to facing competition in Russia, the Alfa Banking Group’s subsidiaries, branches and representative offices elsewhere compete with national and/or international banks and non-banking credit organisations in the jurisdictions in which they operate. Another strong competitive edge of Alfa-Bank is its focus on innovation backed by well-developed information technologies. We are living in a century when “banks turn into IT companies having a banking license” and technologies have become crucial to attract customers, and Alfa-Bank is an undoubted leader today. Today Alfa-Bank aims to create the ideology of multichannel bank. This trend
Rosbank
Promsvyazbank
Unicredit
VTB 24
Russian Agricultural
Gazprombank
VTB
Sberbank
0
has been around for quite a while in Western countries, and it presupposes that customers do not want to start communication over and over again, while after contacting the call-center they can carry on contracting with the bank in a branch office from the very point they stopped when speaking on the phone. Alfa-Bank plans to implement the infrastructure allowing every branch office to have all information about previous interactions with the customer.
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Market Positioning and Competitive Analysis
Standing of Major Competitors Sometimes competitors’ activities may fundamentally alter bank’s behavior or result in revision of its short-term strategies. Awareness of competitors’ activities makes it possible to evaluate chances of market success, identify priorities and respond faster to competitors’ actions. Review of bank’s competitive environment enables informing of bank employees, improvement of its training system, upgrading of personnel qualification and incentivizing them to a certain degree. The possibility to develop a strategy for neutralization of competitors’ strengths and bank competitiveness and efficiency improvement is a meaningful result of the review. Please find below description of strategies of AlfaBank’s main competitors.
Sberbank can be considered a close proxy for Russian sovereign risk. The state has a controlling ownership with 50% + 1 share. The bank has an unmatched franchise in the Russian banking system. It has accumulated 45.7% of total retail deposits in the country on its books. It also provides 32.7% of all retail loans and 33.6% of total corporate loans, and has a 43.0% market share of Russian debit and credit card business. The bank has solid credit metrics and has proved resilient to economic downturns. Downside risks might include a significant deterioration in market shares and depleting capitalisation due to its extensive international expansion. According to management, previous development strategy from 2008 to 2013 the state-owned bank has largely fulfilled: it has increased assets and profit above forecasted, return on capital has surpassed 20%; the bank survived the crisis successfully without losing its position, and improved its service.
For the last five years the bank could not substantially lower the relation of net operating costs against net operating profit (from 46% to 40%, as it was planned). This target was transferred to the new strategy until 2018, which has been recently adopted by Sberbank. By 2019 the bank aims to double profit and assets, which for the last 5 years will demonstrate the growth of 3.5 and 3 times respectively. Understanding that the number of customers will not grow as fast as before (now Sberbank has around 65 mln. active customers), Sberbank intends to sell them more products and increase the share of operations available via remote access. Sberbank plans to keep the dividend at the level of 20% from net IFRS profit, but can increase this figure provided a favourable situation. Some experts believe that in order to reach the announced goals Sbarbank instead of direct acquisition of other banks may probably consider a possibility to transfer ownership of their quality assets on its balance.
27
Market Positioning and Competitive Analysis
VTB Bank’s credit profile is closely linked to that of the Russian government. State support has been forthcoming in the past, and remains strong. In 2011, the bank was used extensively as a governmental bail-out mechanism for failing financial institutions and corporate bodies. In 2013, the bank raised RUB102.5bn (USD3.3bn) and the government diluted its ownership to 60.9%. Downside risks might include deterioration in capitalization and poor integration of Bank of Moscow and Transcredit Bank. Upside risks include further improvement in credit metrics on the back of expanding market share. At the moment, the bank operates under the “Road to 15” strategy adopted in 2010. The main goal of the strategy is to provide for the bank capitalization increase. VTB focuses on efficient growth, which implies a considerable increase of incomes coupled with qualitative improvement of income structure and improved business efficiency. Different from the previous stage, when the main goal was an aggressive increase of market share and business volume, today the priorities are improving efficiency, return on investment, and the Group capitalization growth. The VTB
Group key goals for the end of 2013 are to attain at least 15% ROE for the Group in general and ROE exceeding 20% for high margin products; considerable growth of market capitalization; qualitative improvement of income structure and increased stability of the Group financial results. The seamless integration of Bank of Moscow, recently acquired by VTB, is also an important item on the agenda. Future plans of the bank include development of retail sales chain, services technical level upgrade, and corporate business efficiency improvement.
Gazprombank is controlled by Gazprom, the world’s largest gas producer, which directly owns 35.5% of the bank’s equity, while its pension fund Gazfond owns another 47.4%. Hence, Gazprombank’s creditworthiness is closely aligned with that of its main shareholder, and is also dependent on its close ties with the Russian government. The bank has maintained good asset quality. Downside risks might include a failure to improve profitability or a sudden deterioration in asset quality and capitalisation. The bank strategy focuses on four directions: • Corporate business in terms of developing cooperation and offering a full range of products, strengthening long-term partnership with major customers, and increasing the share of medium-sized enterprises in the loan portfolio
• Retail business in terms of applying established corporate relations to attract retail customers and increasing bank growth rates through introduction of state-of-the-art technologies, service, product range and sales chains. • Improving investments business by adapting investment products to the customers’ needs and increasing commission derived incomes from consulting and other services, creating best in its category broker business in the corresponding financial markets, maintaining diversified direct investments portfolio. • Upgrading regional network by means of expanding geographical presence in Russia and providing for sustainable growth of regional chains, unification of products offering and integrating bank subsidiaries into the federal network of Gazprombank
28
Market Positioning and Competitive Analysis
The bank actively implements the strategy of universal retail bank: the priority areas of activity are providing loans and rendering a full spectrum of retail financial services to purchase consumer goods directly at points of sale, granting plastic card loans and cash loans through its own chain of offices, together with partner network.
Under the approved strategy the bank achieves its potential as a universal retail bank with multichannel distribution, wide network of branch offices, simple products and processes, high level of customer service. Further plans include customer service development focused on speed, flexibility, simplicity of communication, availability, and high product standardization.
The largest shareholder of the NOMOS Bank is ICT Group with a 48.75% stake. The ICT Group is one of the biggest privately owned conglomerates in Russia, controlled by Mr. A.Nesis. The bank reported strong results in 2012, increasing its loan book by 31.9%. Asset quality remained stable, the bottom line benefited from falling provisions and significant fee generation. Upside risks include a substantial increase in profitability and capitalisation. Downside risks include asset quality deterioration and a squeeze in capitalisation. NOMOS Bank has approved a small business development strategy until 2015 focusing, inter alia, on development of product offers covering microcredits, commercial mortgage loans and loans for purchase of equipment. In addition the implementation of the above strategy envisages an increase in the number of subdivisions servicing small businesses as well as personnel compensation/incentive plan improvement and cross-selling optimization with the aim to increase commission earnings.
In compliance with the plan for integration of NOMOS Bank into the structure of the Otkritie Financial Corporation, it will own the controlling interest in Otkritie Bank (17%) and Khanty-Mansiysky Bank. NOMOS Bank will continue to focus on the corporate sector while Otkritie Bank will deal with retail business and Khanty-Mansiysky Bank will represent interests of the Group in the Khanty-Mansi Autonomous Area and Tyumen Region. It is expected that the take-over would result in NOMOS Bank’s assets growth by 20% — mainly in the retail, small and medium business segments. In August 2013, Otkritie Financial Corporation presented its new development strategy for NOMOS Bank according to which the bank should remain public.
29
Market Positioning and Competitive Analysis
Promsvyaz Capital B.V., a holding company jointly owned by Dmitry and Alexey Ananievs, controls 88.25% of Promsvyazbank (PSB), while the European Bank for Reconstruction and Development holds the remaining 11.75%. PSB’s strong 2012 results were mainly driven by expansion in lending operations, improving profit margins and falling impairment charges. The loan book expanded by 16.6%, with retail lending gaining more weight. Profitability ratios are at a five-year high, while capitalisation remains stable. The bank’s strategy is to achieve ROE of 25% and 1 billion USD profits by the end of 2015 as well as play leading roles in all market segments where the bank is present and remain a reliable partner in resolution of financial issues for corporate, small, medium, retail and investment businesses. In the near future PSB plans to develop itself as a multi-purpose financial institution while maintaining its leading standing in the corporate business. At the same time, taking into account that the retail and small business
segments have the biggest potential, PSB will focus on development of the above areas thus improving significantly diversification and sustainability of its business. Further customer service quality improvement is the priority for all PSB’s business lines within the framework of the strategy type selected. Promsvyazbank will focus on establishment of longer-term, pro-active and personalized relations with customers, increase in the speed of decision-making and servicing in general, customizing of the product line, development of the multi-channel approach to sales and servicing via creation of a network of “lite” and technologically sophisticated offices, innovative electronic channels, and personnel development.
Saint Petersburg Bank is the largest commercial bank of the north-western region accounting for 12.7% of the market; its cost/income ratio is 32.6%. The customer basis accounts for 1.2 million natural persons (individuals) and 37,000 legal entities. The basis of the bank’s strategy is to maintain the model of a strong regional bank capable of quick and flexible response to customers’ demands while maintaining close contacts with them. Long-term improvement of bank’s processes and improvement of the quality of provided services are the key aspects of bank’s development until 2014. With a view to implementation of the above strategy the bank plans to focus on the mass retail segment and become the leader in the quality of services provided as well as the main settlement bank for Saint Petersburg residents and entities making payments to and settlements with customers and suppliers.
According to the Chairman of the bank’s Board, “for nearly ten years we have demonstrated annual growth of 100% focusing on business development, IPO, ratings and loans. And now we are a major public bank and can afford to focus on improvement of internal processes, efficiency and customer service. We are a local bank which is to our advantage. We do our best to reach the customer, and steps taken as of today generate results which allow us moving in the right direction, attain targets set and in the short run become a service leader in the banking sector”.
30
Market Positioning and Competitive Analysis
Banking Sector Development and Trends
within the framework of the multi-purpose model in parallel with the major Russian banks, Russian private banks have started focusing on their niche market segments where they may become local leaders.
increased by 3.8% (or by 1,687 offices). The trend shows that banks still expect that the market would grow and accessibility of banking services for the population and entities would gradually increase.
Growth rates of a particular bank are mainly influenced by the development model selected by the bank. Lately multi-purpose focus of a lending institution as a rule slows down asset growth rates. Banks demonstrating fastest grow rates focus on promising development niches, for example they focus on mortgage, consumer lending, small and medium business lending. Banks representing the above segments have demonstrated faster growth compared to their competitors which tried to be represented in parallel in many banking segments. There were no radical changes in the banking system over the last two years; however a number of quite important trends may be observed which will determine the “profile” of the Russian banking sector in the near future. The major trend is that more and more Russian banking sector players have started amendment of their business strategies shifting from the multiple-purpose model (when all banking services develop more or less evenly) to specialization in target niches. After taking the decision that it would be impossible to develop successfully
In addition, 2012 saw the continuation of the post-crisis trend towards withdrawal of foreign players from the Russian market. Such foreign players as WestLB Vostok, Absolut, Svenska Handelsbanken and others exited the Russian market in 2012. During the full period of the crisis many foreign banks curtailed their business in Russia as competition and risks proved to be much higher than they had expected while profitability and prospects, on the contrary, were frustrating. Weakening of foreign banks’ standing in Russia is mainly the consequence of the crisis in European countries and correspondingly complications in operations of parent banks rather than problems in the Russian economy. For some foreign financial institutions the withdrawal from the Russian market is an obligatory condition for receipt of aid from a relevant financial regulator.
The future growth of the market and development of the banking sector are to a large extent related to new products and technologies. The secret of successful development in the future is simple — banks shall give their customers what they need and satisfy their key demands. Successful banks shall recognize future trends ahead of their competitors and realize them.
Despite the decrease in the number of banks in the market, the remaining banks on the contrary continue to expand and make bigger efforts aimed at in their development. Over 2012, the number of bank offices in Russia
The most important areas of the banking sector development may be compressed to a single line — Go Digital, Be Simple and Build Loyalty. It is not clear who will be the most successful provider of financial services neither globally nor in Russia in ten years, however it is safe to say that by 2020 the market will see multiple new players that even do not exist today. They will be high-tech, innovative and create simple and user-friendly products. Major banks and financial institutions working today shall think now about the future and develop their own technologies to be able to compete head-to-head with the new players.
31
Market Positioning and Competitive Analysis
The world is going more and more digital, and new technologies for customers are becoming more and more attractive and convenient — it may serve as another signal for the banking sector. For example, internet music was such a signal for the music industry as it preceded the global trend which fundamentally changed the business model of the entire industry. Today manufacturers and distributors of clothing move to internet, and major on-line clothing stores see their customer base growing on a daily basis. Banks shall similarly try to recognize such signals indicating changes in trends and ways of rendering the services. Major process innovations, changing customers’ demands, government novelties, etc. may be such signals. First of all, it is worth reviewing carefully the e-banking prospects again. A lot has been said about it, and a sufficient number of e-services exists, however in several years bank branches, which now are main channels of retail banks, would turn into quite fictitious components. Many skeptics refuse to believe the above statement saying that bank customers like to visit bank offices personally and that they need them. In 1980-ies bank branches were the only and hence most efficient method of interacting
between the bank and its customers, however in the future internet would become the most efficient sales channel and site for interactions with customers. Of course, bank branches would be required for some time but not for the current quantity of operations and in an ever-decreasing scale. It is worth giving more serious attention to social networks and web-sites as they represent a cheap but quite efficient channel, and if one manages to use its advantages correctly then it would be possible to gain a lot of benefits: • it would be easier for banks to interact with their customers while in parallel it would be easier for customers to communicate with banks (which is also important) • banks will be able to get feedback directly from their customers • full information on services in internet would allow customers to study them better straight on the web-site and compare between each other as well as with services provided by competitors
• it is a more profitable sales channel as costs per one operation in internet are 22 times lower (if mobile banking is used, then 50 times lower) compared with physical operations in bank branches • internet channels may ensure transparency of banking operations and thus improve bank’s reputation • opportunity to reach a younger generation (Generation C11) and communicate with them in the language they are using thus inventing and introducing simpler and more user-friendly products.
32
Market Positioning and Competitive Analysis
Big Data12 technologies are noteworthy — they allow handling large datasets that may be reviewed only with the use of high capacity equipment and sophisticated tools. Banks and many other entities are used to working with structured data (data from questionnaires on current customers, questionnaire surveys, web-site view statistics, quantity of links clicked, customers’ credit history, other banking operations and data on them). Raw data most often represent data created by bank customers and showing who is the user within the internet environment. They include customers’ retrieval requests, web-sites viewed, mouse movement patterns, internet access points, use of social networks, etc. Raw data represent huge arrays of information which may not be processed with the use of standard methods. However if one manages to collect and review correctly such information in compliance with the data collection strategy (with the understanding of what the bank is looking for and collecting, and what is bank’s target), then it would be possible to improve significantly interaction with its customers and develop/ implement more efficient strategies. Connected Generation – generation connected to internet; it includes urban residents born after 1990.
11
Tools and approaches to processing of large datasets which volume exceeds capabilities of conventional software – for the purpose of further collection, storing and review.
12
The main global key trends of the banking sector over the next two to three years are closely connected with new raw data collection software and methodologies. The main of them include: • development of the Bid Data technology for the purpose of successful introduction of new products. Banks would be able to use in the future various Big Data technologies and approaches to assess risks, prevent frauds, review customers’ behavior and use of new marketing tools. The technology will be disseminated and introduced in banks in the following areas: generation of financial statements (via better quantitative assessment of risks), market and customer surveys, development of analytical forecasts, review of bank frauds, and pricing;
• higher investments into market and customer reviews. Development of analytic forecasts in the future will base on Big Data approaches taking into account various market trends and behavior patterns; • Big Data use for more accurate assessment of risks and development of bank’s risk management.
06
34
Applications
Attachment 1
Attachment 2
Bank ranking by assets
Bank ranking by loan portfolio
Bank
Net assets, billion rubles (July 2013)
Net assets, billion rubles (July 2012)
Bank
Loan portfolio, billion rubles (July 2013)
Loan portfolio, billion rubles
1
Sberbank
14 644,57
12 088,67
1
Sberbank
8296,5
7 301 557,13
2
VTB
4 767,65
3 867,91
2
VTB
1750,6
1 306 695,38
3
Gazprombank
3 120,10
2 504,23
3
Gazprombank
1517,8
1 214 961,81
4
RussAgricultural
1 767,90
1 532,33
4
VTB 24
986,7
692 207,19
5
VTB 24
1 700,21
1 256,44
5
RussAgricultural
977,3
821 911,66
6
Bank of Moscow
1 589,63
1 356,13
6
Alfa-Bank
805,6
582 008,00
7
Alfa-Bank
1 362,64
997,57
7
Bank of Moscow
462,9
306 146,21
8
Unicredit
767,96
829,94
8
Unicredit
448,5
398 926,36
9
Promsvyazbank
710,88
609,82
9
Rosbank
380,4
356 460,83
10
Rosbank
704,32
662,78
10
Promsvyazbank
364,9
334 810,20
Source: RIA Rating
Source: RIA Rating
35
Applications
Attachment 3
Attachment 4
Bank ranking by corporate loans
Loans to individuals
Bank
Corporate loans, billion rubles (July 2013)
Corporate loans, million rubles (June 2012)
1
Sberbank
5540,756
5 143 565,27
2
VTB
1750,5
1 306 681,02
3
Gazprombank
1305,2
1 084 663,47
4
RussAgricultural
761
650 256,83
5
Alfa-Bank
641,6
481 824,79
6
Bank of Moscow
357,5
238 371,79
7
Unicredit
333,3
310 573,42
8
Nomos Bank
305,6
200 972,78
9
Promsvyazbank
299,9
289 254,93
10
Raiffeisen Bank
211,4
212 419,00
Source: RIA Rating
Bank
Customer loans, million rubles (July 2013)
Customer loans, million rubles (July 2013)
1
Sberbank
2755,7
2 157 991,86
2
VTB 24
891,7
638 003,10
3
HCB
263,4
140 231,12
4
Rosbank
217
182 005,83
5
RussAgricultural
216,2
171 654,83
6
Russian Standard
215
129 953,70
7
Gazprombank
212,5
130 298,34
8
Orient Express Bank
189
131 206,63
9
Alfa-Bank
164
100 183,21
10
Raiffeisen Bank
145,7
103 439,30
Source: RIA Rating
36
Applications
Attachment 5
Attachment 6
Bank ranking by deposit portfolio
The most profitable Russian banks in Q1’2013
Bank
Deposit Portfolio, billion rubles (July 2013)
Deposit Portfolio, milion rubles (July 2012)
Bank
Profit, million rubles (July 2013)
Profit, million rubles (July 2012)
Deviation (%)
1
Sberbank
9068,5
7 480 788,48
2
VTB
2173,9
1 677 666,50
3
Gazprombank
2079,4
1 589 148,97
1
Sberbank
191 800,17
182 978,65
4,82
4
VTB 24
1209,5
890 888,71
2
VTB
45 874,36
18 632,31
146,21
5
RussAgricultural
939,8
807 913,52
3
Alfa-Bank
15 263,21
14 988,39
1,83
6
Bank of Moscow
851,9
762 934,03
4
Gazprombank
11 742,48
20 449,39
-42,58
7
Alfa-Bank
695,6
476 134,95
5
VTB 24
10 352,60
16 628,01
-37,74
8
Promsvyazbank
471,4
404 879,22
6
Raiffeisen Bank
7 599,74
5 854,64
29,81
9
Nomos Bank
405,5
261 003,91
7
Unicredit
5 081,58
7 171,95
-29,15
10
Unicredit
366,3
364 671,02
8
HCB
4 786,23
5 463,57
-12,4
9
Promsvyazbank
3 988,50
4 582,27
-12,96
10
Sovkombank
3 751,07
860,96
335,69
Source: RIA Rating
Source: RIA Rating
37
Applications
* Starting from 2005 incl. minority interest. ** Calculated as operating expenses/(operating income + share of profit of associated company + monetary gains — provisions).
Attachment 7
Alfa-Bank at a glance 1H 2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
Net interest income ($ mln)
1074
1715
1 414
1 307
1 075
1 381
899
550
402
312
312
190
Operating income ($ mln)
1455
2108
1 739
1 542
871
1 214
1 011
799
653
522
421
337
Net income ($ mln)
479
829
641
553
77
230
254
190
181
153
106
105
Total assets ($ mln)
45 438
45 932
31 365
28 478
21 646
27 052
22 695
15 210
9 836
7 025
5 884
4 118
Total loans ($ mln)
33 009
31 825
23 172
18 175
14 953
19 160
15 711
9 480
5 728
4 100
3 466
2 440
Total liabilities
40 931
41 780
27 930
25 399
18 948
24 890
20 840
13 900
8 980
6 314
5 331
3 684
Total equity ($ mln)*
4 507
4 152
3 435
3 079
2 698
2 162
1 855
1 310
856
708
547
431
BIS capital ratio
16,3
15,6
16,7
18,2
20,2
9,2
11,8
11,4
12,4
10,4
10,3
10,4
BIS core capital ratio
11,2
10,2
11,9
12,6
13,1
8,2
9,5
9,5
9,8
10,3
10
9,4
ROE (%)
22,1
21,9
19,7
19,1
3,2
11,5
16
17,6
23,1
24,4
21,6
29,5
ROA(%)
2,1
2,1
2,1
2,2
0,3
0,9
1,7
1,5
2,1
2,4
2,1
3,1
Cost/Income (%)**
42
46,3
51,6
44,3
51,3
36,6
54,9
57,8
52,7
60,3
65,2
62,1
Branches and representative offices
552
511
465
364
326
364
303
229
121
111
123
93
Number of employees at the end of the period
22 731
21 238
17 174
15 349
13 392
14 866
12 342
11 252
6 695
4 919
6 256
6 358
I nc o m e stat e m e nt
B alanc e sh e e t
R ati o s
B usin e ss figur e s
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