Social Report 2016 - VTB€¦ · Social Report 2016 Conscious Responsibility World Without Barriers. VTB Group. 2 Contents VTB Group in 2016 4 Abbreviations 6 Statement of the President

Social Report 2016

Conscious Responsibility

World Without Barriers. VTB Group

http://www.vtb.ru/group/

2

Contents

VTB Group in 2016 4Abbreviations 6Statement of the President and Chairman of the Management Board of VTB Bank (PJSC) 81. About VTB Group 101.1. Group development strategy 121.2. CSR management 131.3. Internal (compliance) control 161.4. Stakeholder engagement 172. Market environment 262.1. Support for the public sector and socially significant business 272.2. Support for SMBs 342.3. Quality and access to banking services 352.4. Socially significant retail services 383. Internal environment 443.1. Employee training and development 463.2. Employee motivation and remuneration 49

3.3. Internal communications and corporate culture 503.4. Occupational health and safety 534. Social environment 564.1. Development of the business environment 574.2. Support for sports 634.3. Support for culture and the arts 654.4. Support for health care and education 694.5. Support for vulnerable social groups 715. Natural environment 745.1. Sustainable business practices 745.2. Financial support for environmental projects 776. About the Report 807. Appendices 847.1. Membership in business associations 847.2 GRI content index 867.3. Independent Assurance Report 90

54

VTB Social Report 2016 VTB Group in 2016

VTB Group in 2016

RUB 51.6 billion earned in net profit

Over 2,000 sales offices

21.1 million individual customers

Over 40 awards and a top-three spot in 60 international rankings (VTB Capital)

72.7 thousand people employed by the Group

900 athletes from seven countries took part in the 9th VTB Spartakiad

2,600 applications submitted to enroll in the VTB Junior and VTB Rost programs

61.8 hours spent on training per employee

RUB 5.1 billion spent on charity

RUB 43 million spent on the World Without Tears corporate charity program

Over 1.3 million people visited exhibitions supported by VTB Bank in the major Russian museums

356 contracts worth RUB 1.46 trillion signed at the St. Petersburg International Economic Forum

274.9 thousand MWh of electricity consumed

5,833.3 thousand liters of fuel consumed

4,161 tons of paper consumed

300 kg of batteries collected for recycling by VTB employees

Market environment Internal environment Social environment Natural environment About the Report AppendicesAbout VTB Group

76

VTB Social Report 2016 Abbreviations

Abbreviations

ARB Association of Russian Banks

Bank of Moscow OJSC Bank of Moscow

Bank, VTB Bank VTB Bank (PJSC)

CBR Central Bank of the Russian Federation

CIB GBL Corporate Investment Banking global business line

CJSC Closed joint-stock company

CSR Corporate social responsibility

DIA Deposit Insurance Agency

FATCA US Foreign Account Tax Compliance Act

GBL Global business line

GMC VTB Group Management Committee

GRI Global Reporting Initiative

GRI Guidelines GRI Sustainability Reporting Guidelines

GTE Gas turbine engine

Hals-Development HALS-Development PJSC

IFRS International Financial Reporting Standards

Leto Bank PJSC Leto Bank

LLC Limited liability company

MC Dynamo CJSC Management Company Dynamo

MCB GBL Mid-Corporate Banking global business line

MCC Moscow Central Circle

MultiCarta MultiCarta LLC

NFC Near Field Communication

NSPK National Card Payment System

OJSC Open joint-stock company

OHS Occupational health and safety

PJSC Public joint-stock company

Post Bank PJSC Post Bank

RB GBL Retail Business global business line

Report VTB Group Social Report for 2016

RSMB Corporation Russian Small and Medium Business Corporation

RSPP Russian Union of Industrialists and Entrepreneurs

SC State company

SDO State defense order

SMB Small and medium-sized business

SUE State unitary enterprise

Supervisory Council Supervisory Council of VTB Bank (PJSC)

VTB Bank (Armenia) VTB Bank (Armenia) CJSC

VTB Bank (Austria) VTB Bank (Austria) AG

VTB Bank (Belarus) CJSC VTB Bank (Belarus)

VTB Bank (Belgrade) VTB Bank JSC Belgrade

VTB Bank (France) VTB Bank (France) SA

VTB Bank (Georgia) JSC VTB Bank (Georgia)

VTB Bank (Kazakhstan) Subsidiary Organization JSC VTB Bank (Kazakhstan)

VTB Bank (Ukraine) PJSC VTB Bank (Ukraine)

VTB Capital CJSC VTB Capital

VTB Factoring VTB Factoring, Ltd.

VTB Insurance VTB Insurance, Ltd.

VTB Leasing JSC VTB Leasing

VTB Northwest Regional Center Northwest Regional Center of VTB Bank (PJSC)

VTB Pension Fund JSC NPF VTB Pension Fund

VTB Registrar CJSC VTB Registrar

VTB, Group, VTB Group VTB Group (within the scope of the Report)

VTB24 VTB24 (PJSC)

6.5 Program SMB lending promotion program

Market environment Internal environment Social environment Natural environment About the Report AppendicesAbout VTB Group

98

VTB Social Report 2016 Statement of the President and Chairman of the Management Board of VTB Bank (PJSC)

mention. The project allows female employees to work from home while on child-care leave in order to make money and keep their skills current. Moreover, companies of the Group actively promote mentoring practices in Russia and abroad.

For many years, Group companies have been implementing large-scale sponsorship and charity activities, placing a special focus on seamlessness and continuity. Upon completion of Bank Moscow’s integration, VTB Bank continues to support Bank Moscow’s most important sponsorship projects, including the intellectual TV game show “What? Where? When?”, the Velobike bike rental system, the VTB Kremlin Cup and the Moscow Urban Forum.

Supporting high-profile business events is a key area of VTB’s sponsorship activities. Some of the biggest events of 2016 were the St. Petersburg International Economic Forum, the Eastern Economic Forum and the Army 2016 Military Technology Forum.

A major cultural event in 2016 was the exhibition of Ivan Aivazovsky’s paintings at Moscow’s Tretyakov Gallery timed to the bicentenary of the artist. VTB was the general sponsor of the exhibition, which drew over 600,000 visitors. The year was marked by another important event: the signing of an agreement with the Pushkin State Museum of Fine Arts to support exhibition, restoration and publishing activities.

VTB Group is committed to supporting education, and many of its members maintain close ties with leading local universities. In 2016, we continued to run the VTB Junior and VTB Rost programs. Over 350 young specialists have participated in the programs since their inception five years ago. Among other accomplishments was the opening of the Banking

Automation and IT Department at the Financial University under the Government of the Russian Federation. Students now gain practical professional skills working directly at business units. The launch of the joint innovative educational program has become a new milestone in our long-term fruitful cooperation with this leading specialized university.

As we head into the Year of Ecology in Russia, we place particular emphasis on various environmental initiatives and promoting a more sustainable use of resources. To prove our commitment, in 2016 we established VTB Ecology, a separate legal entity within the Group. VTB Ecology will act as a single center for managing the Group’s environmental projects, the most notable of which are cooperation with the World Wildlife Fund (supporting its effort to conserve the population of wild cats), projects with the Ministry of Natural Resources and Environment of the Russian Federation and international programs including a series of initiatives aimed at restoring the balance in the ecosystem of the Arctic. We also continued the Plant a Tree as a Gift project, aimed at encouraging tree planting to restore forest habitats in Russia.

Looking forward, we aim to maintain strong economic performance, improving our corporate culture, and continuing sponsorship projects and environmental initiatives. We hope that 2017 will allow us to implement our ambitious plans and will justify the highest expectations of our stakeholders.

Regards, Andrey Kostin

Statement of the President and Chairman

of the Management Board of VTB Bank (PJSC)

Sustainability matters hold an important place in VTB Group’s corporate culture and the Group’s practical activities in all regions of activity.

We are pleased to present our ninth Social Report, which summarizes VTB Group’s accomplishments in the area of corporate social responsibility in 2016. We hope you will find this information useful and interesting.

In 2016, we examined the results of the VTB Group Development Strategy for 2014-16 and set new targets in the strategy document approved for the following two years. The priority areas of VTB’s development for the next three years will

be to increase the profitability of our business and achieve a higher net profit, to build a single full-service bank, and to modernize the Group through large-scale technological transformation. The key task for 2017 is to finish the main part of the activities, which aim at integrating VTB24.

In 2016, VTB retained and strengthened leading positions in all main business segments. The Group’s investment business unit VTB Capital was named Best Trade Finance Bank in Russia. It received more than 40 awards and confirmed its high position in international rankings and the title of the best investment bank in Russia. Among the most notable events of 2016 were the completion of Bank of Moscow’s integration and the establishment of Post Bank by reorganizing Leto Bank and FSUE Russian Post.

One of the landmark initiatives on this front was the 6.5 Program, a lending promotion scheme that was launched with the support of VTB Bank and VTB24 to offer soft loans to the SMB sector. Over RUB 30 billion has been advanced since the scheme was set up in late 2016.

We place great value in our people and pay particular attention to developing their professional competencies and improving the environment they work in. In December 2016, a special training program, Project Mindset, was introduced. It aims at providing insight into effective project and risk management techniques and teamwork communication skills for employees. Over 200 employees participated in the program in December 2016.

Among innovative HR projects in 2016, Post Bank’s Client Service from Home warrants special

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VTB Social Report 2016 1. About VTB Group

Table 2. Key ratings of VTB Bank at 31 December 2016

Rating agency Forecast Rating

Credit ratings

Standard & Poor’s Stable BB+

Moody’s Investors Service Negative Ba1

National Corporate Governance Score

Russian Institute of Directors - 7++

Figure 1. Direct economic value generated and distributed

2015 2016

Fee and comission income

Other non-interest income

Interest income less impairment provisions

Interest expenses

Fee and commission expenses

Other non-interest expenses

Social investments (charity)

Other administrative expenses

Salaries and other payments and benefits to employees

Paid out dividents

Taxes

Generated economic value

167,2

98,6

933,4

Distributed economic value

Generated economic value

96,9

109,7

963,1

803,1680,8

149,7

27,9

145,7

5,1

51,1

83,1

18

13,1 27,0

87,7

137,9

3,6

82,0

Distributed economic value

22,4

1. About VTB Group

1 For details, see Section 4.3. Review of operating performance of the VTB Annual Report at www.vtb.ru, as well as individual websites of Group companies.

2 In accordance with the VTB Group’s IFRS audited consolidated financial statements for 2016.3 Excluding in-store offices (desks).4 Regions with below-average population that are in the lowest quartile by per capita income in accordance with state statistics.

VTB Group is Russia’s second-largest financial group and one of the leading players on the international financial services market. The Group comprises over 20 financial and lending institutions that are active in all of the major segments of the financial market. VTB’s subsidiaries and associates operate both within and outside of the CIS, including Europe, Asia and Africa, expanding the Group’s presence in the world’s key financial centers and promoting its international relations.

VTB is a strategic holding company that has a group-wide development strategy linking and integrating business objectives for all subsidiaries and banks under one brand. The Group has centralized financial and risk management functions and a unified control framework. Group companies operate in corporate investment banking, mid-corporate banking, and retail business segments1.

Table 1. VTB Group key operating highlights234

Indicator 2015 2016

Key financial indicators2

Assets, RUB billion 13,641.9 12,585.5

Loan portfolio, RUB billion 10,110 9,487

Customer deposits, RUB billion 7,267.0 7,346.6

Shareholders’ equity, RUB million 1,454.1 1,410.2

Net profit, RUB million 1.7 51.6

Non-financial indicators

Corporate customers, thousand 491.9 535.1

Individuals, million 19.0 21.1

Total number of sales offices3 2,040 2,008 (√)

Number of sales offices in Russia 1,779 1,788

Number of sales offices in less-populated or economically disadvantaged Russian regions4 464 471

Average headcount, thousand 75.6 72.7 (√)

Number of shareholders, thousand 90.5 90.0

Free-float voting shares and GDRs, % of ordinary registered shares 39.1 39.1

About VTB Group Market environment Internal environment Social environment Natural environment About the Report Appendices

http://www.vtb.ru

http://www.vtb.com/ir/statements/ifrs/

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Employee engagement initiatives include promoting a close-knit corporate culture, developing professional and managerial skills among employees, setting up a pool of candidates for internal hire positions, as well as implementing social initiatives and programs aimed at maintaining diversity and inclusiveness.

As a responsible business, the Group is fully aware of the potential economic, social and environmental impacts of its activities and takes a holistic approach to promote the sustainable development of society. VTB is committed to creating a favorable environment in all regions where it has a presence, both internally and externally, and assumes additional obligations to society beyond complying with local laws and regulations and offering quality products and services. Corporate social responsibility (CSR) activities aimed at making positive changes across the Group and society at large are thus in tune with VTB’s strategic intent to be an open and transparent business that people can trust.

CSR activities are voluntary and have a tangible impact on strategic and tactical business decisions that are meant to cater to the interests of all stakeholders. VTB develops its CSR framework drawing on both its own experience with various stakeholders, and leveraging global sustainability and non-financial reporting standards.

5 VTB Bank Code of Ethics, approved by VTB Bank Supervisory Council (Minutes No. 18 of 20 December 2013).

1.2. CSR management

Corporate social responsibility is a key element of the Group’s conduct that helps to improve its image both in Russia and abroad, unite its financing and lending companies around common values, and mitigate strategic, reputation and operational risks. Ultimately, this enables the Group to grow its market value and consolidate its status as a major international player.Vasily TitovFirst Deputy President and Chairman of the Management Board of VTB Bank (PJSC)

VTB Bank’s CSR Policy (the “Policy”) is a fundamental document, which defines the Group’s principles and activities in the area of corporate social responsibility. The Policy has been developed and implemented with an aim to increase the transparency of the Group’s business processes, improve business management practices and communications with key stakeholders, and enhance the reputation, image and investment attractiveness of the Group.5

Corporate social responsibility principles (VTB Bank) CSR key principles are closely linked to the principles of VTB Bank Code of Ethics5 and comprise the following:

Commitment to the Bank’s mission, common goals and visionProvision of quality services owing to a high level of professional competenceRespect for human dignity and worth Integrity and mutual respect in dealing with stakeholders Fairness of decision-making by management Legal compliance and responsibilityProfitability Protection of employees’ health Openness to stakeholders

1.1. Group development strategy

Building a successful business is only possible if employees and management strive towards common goals, ensuring an efficient and seamless work flow between the Head Office and subsidiaries. This is especially true of our Group, which has a presence across all segments of the financial services market. A formalized strategy and regular performance reporting against targets also play an important role in improving stakeholder confidence and strengthening the corporate brand. With the establishment of a single bank in 2018, VTB will be in a position to optimize its business processes, further enhance interaction between global business lines, achieve substantial cost savings and increase the transparency of corporate governance. This synergy will enable business lines to realize their joint strategic agenda and will help to improve VTB Group’s overall financial performance.Vladimir LevykinHead of Strategy and Corporate Development, Senior Vice President of VTB Bank (PJSC)

In 2016, VTB Group adopted a development strategy for 2017-19 (the “Strategy”), focused on the following priority tasks:

Increase profitability and achieve a higher net profit. The Group expects lending to recover in the Russian banking sector enabling it to expand its loan portfolio by at least 10% per annum. Under the strategy, the Group is expected to outperform the market in terms of retail lending growth rates, increasing the segment’s share in the overall loan portfolio.

Complete the VTB Bank – VTB 24 merger and build a single full-service bank. Merging VTB Bank and VTB24 into an integrated bank is a key project in the Strategy. The initiative is expected to improve the Group’s management structure by creating a single, highly-competitive entity, efficiently leveraging its business lines to deliver common objectives.

The merger will also enable the Group to streamline costs and improve its overall financial performance.

Modernize the Group through large-scale technological transformation. Technological transformation entails rapid development of digital channels, significantly reducing the time it takes to introduce new products and services, developing data analysis tools and an integrated system for streamlining and automating processes.

The Strategy also includes initiatives aimed at promoting the Group’s sustainable development, improving customer service and experience, increasing employee engagement and optimizing costs.

The initiatives aimed at improving customer service and experience will be delivered in each of the three key business lines. The CIB GBL will focus on streamlining the development and introduction of customer strategies, implementing a new “all-in” pricing mechanism based on the comprehensive assessment of value derived from a given customer, and introducing a unified customer relationship management (CRM) framework across the Group to drive common standards of service, transparency and better performance among account managers.

On the mid-corporate front, it is planned to enhance the existing service model in the high-end customer segment and to introduce a new comprehensive service model for bottom-end customers with a focus on transactions business.

The RB GBL will adopt new analytical tools to obtain a better understanding of customer needs and the potential for differentiated offerings. The integrated VTB Bank and Post Bank are both expected to become leading players in terms of the quality of service and customer loyalty in their respective sectors. With this as a focus, significantly improving the quality, convenience and functionality of digital channels, the mobile and the online bank, is a key priority. A regular assessment of customer satisfaction will be introduced across business lines.


http://www.vtb.com/upload/iblock/741/Code_of_Ethics_20.12.2013.pdf

http://www.vtb.com/group/social/

http://www.vtb.com/group/strategy/

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Figure 3. 2016 materiality matrix

3

18

19

1

9

6

23

4

15

24

21

26

27

14

17

2

2511

20

12

8

22

10

13

16

5

7

Rel

evan

t to

exte

rnal

sta

keho

lder

s

Relevant to internal stakeholders

Social impact

7. Sponsorship and charity8. Employee education and development9. External and internal communications10. Gender equality11. Headcount management12. Non-financial incentives 13. Occupational health and safety 14. Socially significant retail services

Overall impact

17. Affordable and accessible services18. Corporate governance19. CSR management20. Financial incentives for employees21. Financial support of government-initiated projects22. Initiatives for young people23. Import substitution24. Social and economic development of regions25. Support for customers in difficult life circumstances26. Support of major industries27. Support of SMB's

Environmental impact

15. Responsible approach to financing16. Resource efficiency

Economic impact

1. Business ethics2. Customer satisfaction3. Financial results and market share4. Innovations5. Promotion of the image of Russia6. Transparent procurement processes

Higher significance compared with the previous reporting periods

Lower significance compared with the previous reporting periods

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Figure 2. Corporate conduct management

Managing impacts

on the market

Managingenvironmental

impacts

Managingimpacts

on employees

Managingsocialimpacts

Corporate conduct

The Policy describes governance matters relating to the Group’s corporate conduct and its impact on corporate, market, social and natural environments. VTB performs its CSR management alongside the following five directions:

Internal environment Local market environment Local social environment (Economic) social ecology Corporate conduct, which overlaps each of the above four areas and is defined as another major area for the Bank’s CSR activities.

The Policy applies to all of the Bank’s divisions and is binding for all employees. CSR officers in each division are responsible for Policy enforcement and compliance with its provisions. All functions and management bodies, both at the Group and Bank level, are involved in the management of various aspects of CSR activities. The elements of CSR are also considered by some coordinating bodies established under the GMC. At the Bank level, the CSR vision is defined by the Supervisory Council and its Committees, while its implementation is within the remit of the relevant functions and departments. There are also dedicated teams and groups with a narrow CSR focus.

To further improve its non-financial reporting, the Group continues to follow the Global Reporting Initiative Sustainability Guidelines (G4 GRI Guidelines), with the selected performance indicators subject to independent assurance for the fifth consecutive year.

In line with GRI recommendations, the Group conducts an annual analysis to establish topics for further inclusion into a corresponding matrix that reflects the most material aspects for sustainable reporting based on their influence on both internal and external stakeholders.


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The Bank’s key efforts and achievements in the area of regulatory (compliance) risk management in 2016 include the following:

Establishing a dedicated committee to consider any matters related to the management of operational and regulatory (compliance) risks that are inherent in the Bank’s products and activities; Introducing bank-wide self-assessment on operational and regulatory (compliance) risks; Approving threshold values (triggers and limits) for key indicators of regulatory (compliance) risk, with the introduction of a quarterly KRI data collection process;Transitioning the Automated Operational and Compliance Risk Management System into the live environment;Conducting internal checks on VTB Bank’s regulatory (compliance) risk management system.

The Bank plans to further improve its regulatory (compliance) risk management practices in 2017, including by monitoring the efficiency of regulatory (compliance) risk management on a regular basis, adapting the risk management system to cater to the needs of the merged retail business, and introducing self-assessment practices across retail business units and business support functions.

FATCA compliance

For the purposes of compliance with FATCA and current Russian legislation, the Bank has an internal document regulating the production of 2015 reports, which must be prepared and filed to meet the requirements of domestic legislation governing financial dealings with foreign nationals and legal entities, as well as the Foreign Account Tax Compliance Act (FATCA) enacted in the US.

In 2016, the Bank successfully submitted its 2015 reports to relevant tax authorities, including reports on foreign tax residents, filed to Russia’s

Federal Tax Service, and FATCA forms, filed to the US Internal Revenue Service. FATCA training materials and regulatory documents are regularly posted on the Bank’s corporate information portal and the Group’s Compliance Web Portal.

1.4. Stakeholder engagement

VTB provides its shareholders with an opportunity not only to earn dividends, but also to have their say in the running of the Bank and control over its business. They may also directly contact any competent person, from an employee to a member of the Supervisory Council, with their queries and proposals. We highly value the trust of our shareholders and strive to build it further. Vladimir Khotkin Head of Shareholder Relations Service, Public Relations Department of VTB Bank (PJSC)

Stakeholder trust is one of the key elements of a successful banking business, as it contributes to financial attractiveness. In its dealings with stakeholders, the Bank is committed to an open and constructive dialogue, drawing on best international practices and codes of conduct, as well as the highest standards of corporate governance. VTB also carefully considers the social and environmental impact of any decisions it makes. The Bank’s key stakeholders include the following:

Shareholders and investors Customers Employees Business partners Local communities and residentsGovernments, regulatory authorities and media

The Bank produces timely financial and non-financial reports, focusing on increasing their reliability, transparency and accuracy, aligning approaches

1.3. Internal (compliance) control

Maintaining a strong compliance culture is an integral part of the Bank’s performance. A system of internal control extends to all employees who have even the slightest involvement in dealing with customers and serving their accounts.Alexander Yakovlev Head of Compliance Control and Financial Monitoring, Vice President of VTB Bank (PJSC)

The Bank implements internal (compliance) control functions, as defined by the current version of Regulation No. 242-P6. In accordance with the requirements of this Regulation, as well as with a view to preventing any violations of law (including anti-corruption legislation) and internal regulations, in 2016 the Bank introduced a revised Policy on managing regulatory (compliance) risk that establishes relevant principles and methodology for managing and assessing the impact of regulatory (compliance) risk, which is defined as the risk of loss resulting from a failure to comply with laws, internal regulations and standards for self-regulatory organizations (to the extent such standards or rules are binding on the Bank), as well as loss resulting from sanctions or other actions by supervisory authorities.

The Policy on managing regulatory (compliance) risk contains a structured list of risk categories and factors, key risk indicators (KRI) relating to the risk of corruption and business process violation, among other risks, as well as a list of

6 Regulation No. 242-P of 16 December 2001, “On the Organization of Internal Control in Credit Institutions and Banking Groups”.

control procedures by type. Based on the available information, a corresponding risk map that enables the Bank to identify the most risk-prone business processes has been formed. A report on the establishment of risk management and internal control framework to prevent and combat corruption was submitted to the Supervisory Council in 2016.

A priority task in the context of developing a group-wide internal (compliance) control function is to ensure that internal controls are designed, implemented and operated effectively across the Group using a unified approach. In 2016, there were five meetings held by a special GMC coordinating commission for compliance and internal controls aimed at countering money laundering and the financing of terrorism.

With a view to adopting a unified approach to internal (compliance) control that reflects past experience and is designed to improve functional interaction and communication between Group companies, VTB made a number of decisions that are binding on all Group companies. These include a requirement to update internal regulations and processes to the extent such updates are not in conflict with local and extraterritorial laws.

Under the current internal reporting system, a total of 14 submissions were made in 2016 through a whistleblower hotline, a special communication tool to report suspected or actual wrongdoings. No evidence pointing to a conflict of interest or corruption-related offense was established from the investigation of these reports.

Compliance and anti-corruption training (VTB Bank)The Compliance Control team provides Bank employees with regular advice aimed at preventing the violation of law. In 2016, the Bank introduced Compliance, a distance learning course, which is mandatory for all new hires and has to be taken by all employees every year. Combating Corruption is another distance learning course available for new hires.


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VTB established Shareholder Relations Centers in Moscow, Yekaterinburg and St. Petersburg in order to maintain day-to-day contacts with shareholders in cities where many of them reside. The Centers have proved to be efficient in providing shareholder advice, performing transfer agent functions, and serving as a source of information on the agenda of upcoming General Shareholders’ meetings.

The Bank leverages various communication channels to better reach out to and engage with its shareholders. Each shareholder may contact VTB Bank using the channel that is most convenient to them: in person, by telephone, via email, social networks, a mobile application or other channels.

Investor Days, Workshops and Open Days (VTB)Investor Day is an event that is attended not only by current shareholders but also by prospective investors, journalists and representatives of investment companies. In 2016, Investor Days were held in Moscow, St. Petersburg, Yekaterinburg and Krasnodar – the four cities where many of the Bank’s shareholders reside. The choice of the city was also determined by the economic and financial activity of local residents, their level of wealth and interest in investment products. Along with Investor Days, specialized workshops for private investors were held in nine cities (Samara, Stavropol, Cheboksary, Kazan, Rostov-on-Don, Khabarovsk, Vladivostok, Irkutsk and Ufa). Participants explored top-of-mind issues and discussed them with experts who were invited to share their expertise on specific topics. Nineteen Open Days were held for minority shareholders at VTB branches and outlets.Around 1.7 thousand people took part in Investor Days, workshops and Open Days in 2016, with shareholders showing more interest in these events than last year. An extensive program of meetings covering a broad range of topics, from VTB’s operations to tax reliefs for private investors, was highly appreciated by participants.

In 2016, the Bank received a total of 11 thousand queries, with an average of 915 handled per month. Queries covered a wider range of subjects than the year before. Shareholders were mostly interested in share records and custody, dividends and their distribution, the timing and agenda of General Shareholders’ meetings, regional events for minority shareholders, VTB share prices and their growth outlook.

For 2017, the Bank plans a number of major initiatives to promote shareholder relations, including the launch of privileges and special products that were developed by the Retail Business division in collaboration with the Shareholder Relations Service. Key privileges will include favorable deposit terms, lower interest rates on cash loans and credit cards, premium service and discounts.

To bring the Bank closer to its shareholders, it is also planned to promote and leverage electronic technologies and channels, e.g., a full-fledged electronic voting at General Shareholders’ meetings (including via a remote connection or a terminal), supplementing the VTB Shareholder mobile application with additional features and capabilities, etc.

Investor relations

Russia’s investment climate has improved since 2014 and 2015. Positive takeaways from investor meetings, both at the level of senior management and the Investor Relations team, signal a change in investors’ attitude towards investing in Russia’s banking sector and VTB in particular.

to data collection and consolidation, improving feedback mechanisms and expanding senior management’s involvement in the public disclosure of operating results and business plans. The Bank

7 For details, see PJSC VTB Bank Report on relations with minority shareholders in 2016 and planned activities for 2017, posted on the Bank’s website.

conducts its business in strict compliance with laws and regulations, and acts upon the recommendations of local regulators. It pays taxes and makes other mandatory payments in full when due.

Table 3. Stakeholder engagement

Stakeholder communication mechanisms 2015 2016

Total number of references to VTB Group in mass media 340,481 350,412

References to VTB Capital 37,616 43,184

Number of unique users participating in VTB’s online projects 74,125 73,017

Number of visitors to the vtbrussia.ru website 3,023,127 3,082,844

Number of visitors to the vtb.ru website 5,311,800 6,687,195

Total print run of The Energy of Success corporate magazine, copies 51,600 51,600

Shareholder relations

Safeguarding the interests of shareholders, promoting sound corporate governance and maintaining transparency are high on the Bank’s agenda, as these are the important drivers of market value7.

There were no significant changes in the Bank’s shareholder structure in 2016. The main changes in the share capital were related to the conversion of previously placed preference shares, held by the Russian Ministry of Finance, and class A preference shares, held by the State Corporation Agency for Deposit Insurance, into Type 1 and Type 2 preference shares, respectively. The Russian Federation, represented by the Federal Agency for State Property Management, continues to be the Bank’s major shareholder, with its interest remaining unchanged from the previous year at 60.9% of ordinary shares. At 1 September

2016, the number of shareholders decreased by 0.54% year-on-year to around 90 thousand, around 89 of which thousand are individuals.

In 2016, VTB Bank and its subsidiaries (VTB Registrar, VTB24, VTB Insurance) continued to implement a comprehensive shareholder and investor relations program, aimed at maintaining contacts with shareholders across Russia and develop ties with the local representatives of investment companies and key mass media. During the year, the Bank held over 70 events in various formats, including investor days, workshops, open days, master classes for students, media briefings, a roundtable in Yekaterinburg, meetings with analysts and investment companies, etc. The Annual General Shareholders’ Meeting and Investor Days were streamed live at Shareholder Relations Centers.


http://www.vtb.ru/docs/vtb/ir/information/news/20170215/otchet_o_rabote.pdf

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Figure 5. Investors participating in investor meetings in 2016

By geography:

Great Britain (45%)

Europe (23%)

USA and Canada (19%)

Russia (6%)

Asia and the Middle East (3%)

Others (4%)

By funding type:

Growth (56%)

Hedge funds (17%)

Value (12%)

Others (15%)

In response to requests from shareholders and investors, the Bank has continued to improve the Investor Relations page of its corporate website that provides the latest news for investors and analysts, information about upcoming conferences and road shows, the most recent financial reports, investor presentations, share and GDR quotes, analyst recommendations and much more. A concerted effort of VTB’s top executives and the Investor Relations team allowed the Group to mitigate the adverse impact of economic and

geopolitical factors on its shareholder base and maintain a high share of foreign investors.

The management of VTB Group and the Investor Relations team make every effort to maintain a strong investor base and diversify it further. The Group will continue to strengthen its ties with the investment community in 2017.

Figure 4. Investors by type, % of free-float shares

Value Growth Index Broker / dealer OthersStrategic and anchor investments

2014

2015

2016

21% 20%18%

5%8% 8%

6%4%

6% 6%4% 5%

7%9% 9%

54%53%57%

Over 2016, the Bank has kept the investment community fully abreast of VTB’s operating and financial results and any factors affecting its performance. The Investor Relations team has continued to diversify the shareholder base and work closely with portfolio managers of major investment funds that hold VTB stock and bonds, as well as with prospective investors. In 2016, VTB’s management team placed a strong focus on relations with strategic and anchor investors who have maintained their share in the Bank’s capital, regardless of negative developments in the Russian economy.

In 2016, the Bank held over 250 meetings with institutional investors and analysts; the Group’s representatives took part in eight investment conferences organized by major international investment banks.

An Investor Day in London, attended by the Group’s top executives, was one of the most notable events targeted at institutional investors. A session on macroeconomics, with its participant mix of senior Russian officials, including Deputy Finance Minister, Deputy Minister of Economic Development and First Deputy Chairman of the Bank of Russia, drew much attention from investors.

The Investor Relations team prepares quarterly statistics, containing particular information information on the investor mix by type, geography, etc. VTB also keeps the investment community informed of its CSR activities. For example, VTB Bank prepared and provided official responses to queries from investors regarding its financial support of environmentally sensitive projects.

Table 4. Meetings with institutional investors

Format 2015 2016

Meetings during conferences 126 103

Meetings outside of conferences 104 102

Meetings during Investor Days 0 62


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In collaboration with the Russian National Committee of the International Chamber of Commerce (ICC Russia), the Bank organized a conference for its clients and other professional market participants. The conference, themed Independent Guarantee: International Experience and Russian Practice, sought to identify ways to develop a unified approach to the use of bank guarantees in Russia. The Bank teamed up with the ARB to set up a number of working sessions and meetings with the representatives of the Russian Finance and Economic Development ministries, the Moscow Government Public Advisory Council for Liaison with Credit Institutions, Russia’s Federal Customs Service and other government agencies in order to develop a common view on the following matters:

Optimizing the issuance of bank guarantees under Federal Law No. 44-FZ8; Extending the Register of Bank Guarantees to guarantees issued under Federal Law No. 223-FZ9; Introducing an electronic format for bank guarantees issued to meet obligations under contracts concluded in accordance with Federal Law No. 223-FZ (at the request of the Moscow Government Department for Competition Policy) to the Moscow Government’s bidding practice;Transitioning to the electronic management of guarantees issued to customs authorities, etc.

8 Federal Law No. 44-FZ of 5 April 2013, “On the Contract System for the Procurement of Goods, Work and Services for Public and Municipal Needs”.9 Federal Law No. 223-FZ of 18 July 2011, “On the Procurement of Goods, Work and Services by Certain Entity Types”.

Government relations

As a major bank with state interest, VTB Bank forms its strategy and business model taking into account tasks set by the Government, and it works to achieve national strategic goals. Bank experts are consulted in drafting laws, while the Bank itself actively cooperates with government authorities, state corporations and public organizations, participates in state financing programs and supports initiatives aimed at encouraging small and medium-sized businesses.

VTB Bank is committed to national development priorities, playing an important role in the successful performance of many domestic industries and, thus, contributing to the social and economic stability of the Russian Federation. The Bank promotes the interests of the business

community through participation in activities of the Russian Union of Industrialists and Entrepreneurs (RSPP), with VTB President and Chairman being member of the RSPP Bureau.

VTB’s top executives take part in meetings and working sessions with the Russian President and the head of the Russian Government in order to foster communication, introduce new forms of business and discuss the situation in the national economy in the light of emerging trends. Contacts with senior officials from the Economic Development and Finance ministries have now become regular.

Over the past year, the management of the Bank and its local teams actively assisted the core committees of the State Duma, the Finance Ministry, the CBR, the RSPP and the ARB in their lawmaking efforts.

Figure 6. Investors by geography, % of free-float shares

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

Russia Asia and the MiddleEast

Europe (inc. Great Britain)

USA and Canada Others

2014

2015

2016

48 %51 %

58 %

18 % 19 %17 % 16 %

12 %10 % 9 %

4 % 3 %1 %

16 %18 %


Balanced social progress is achieved only through significant financial results

Advancing to Excellence through Daily Choices

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VTB Social Report 2016 2. Market environment

2. Market environment

10 For further details about the 6.5 Program, see Section 2.2. “Support for SMBs”.11 All customers, including customers with zero balances (Group banks).12 A small business is defined as a firm with annual revenues of up to RUB 300 million, and a medium-sized business is defined as a firm with

annual revenues of RUB 300 million to RUB 10 billion.

VTB is actively working to improve business performance. We expand the structure and sources of funding - we increase the share of client funds. We are actively working with small and medium-sized businesses. We put high hopes on a joint project with the Russian Post - Post Bank. In addition, we are optimizing the Group within the framework of the strategy of creating a single bank. One of the key tasks for us is to increase the availability of services, including through the development of remote banking channels. Yuri Solovyev First Deputy President and Chairman of the Management Board of PJSC VTB Bank

While the macroeconomic environment remained challenging in 2016 against the backdrop of Western sanctions, lower domestic consumer spending and significant uncertainty, Russia successfully steered the economy toward stability. Growth was back on track as the industrial production index increased by 1.1% compared with 2015. Despite the unfavorable market environment, VTB Group continued to drive Russia’s economic growth by providing considerable support to the public sector, socially significant businesses and backbone companies.

The Group maintained its strong foothold in Russia’s banking market, improving the performance of its corporate investment banking business, propelling retail banking growth and strengthening its position in the SMB segment. In 2016, VTB Bank took over the core assets of Bank of Moscow. More than 10 million individuals and small-sized enterprises became VTB Bank’s new clients. All products and services provided previously by Bank of Moscow remained in place, offered to customers on the same terms. VTB expects that the new, one-brand strategy and platform will translate into extra competitive advantages and improved financial results in the medium and long run.

As part of the Bank of Moscow takeover, VTB Bank transformed its operations support model. It integrated the regional office of centralized loan back-office operations into its structure in order to streamline operating processes in loan and deposit management for large, medium and small-sized enterprises and to ensure staff compatibility.

By actively participating in the 6.5 Program10, VTB Bank and VTB24 played an important role in the development of Russia’s SMB sector. In 2016, VTB expanded the range of so-called “socially significant” retail services and opened new branches to improve access to banking services for individuals.

Table 5. Number of the Group’s customers in 2015-1611 12

Customers of Group companies 2015 2016

Large business, thousand 23.2 19.5

Medium business, thousand12 70.04 88.9

Small business, thousand12 398.65 426.7

Individuals, million 19.0 21.1

In 2017-19, the Group is determined to maintain market leadership in corporate lending and investment banking, achieve higher-than-market growth in retail banking and increase its customer base in the medium business segment. In addition, VTB will continue to focus on its high-profile projects such as the development of the newly established Post Bank and the contemplated merger of VTB24 and VTB Bank. Increasing the use of the MIR National Payment System is another top priority.

2.1. Support for the public sector and socially significant business

VTB is ready to consider funding the most ambitious projects aimed at supporting Russia’s important industries and promoting import substitution initiatives. Today we have more than 1,500 customers in the public sector and the defense industry that represent all kinds of companies in terms of revenue, personnel numbers and the size of manufacturing facilities. Our customer base includes both businesses employing thousands of workers and ‘mono’ enterprises with a focus on the production of one component or assembly unit that is, however, essential for the construction of a finished product, be it an airplane, a vessel or a rocket.Valery Lukyanenko Deputy President and Chairman of the Management Board of PJSC VTB Bank

As one of Russia’s major state-run banks, VTB Bank provides extensive support to key industries and socially significant companies that are critical to Russia’s economic stability. A large retail network allows the Bank to establish robust relations with clients in the regions, including holding companies with subsidiaries across Russia.

The Bank cooperates with a number of Russia’s socially significant companies, including

13 Companies/groups of companies with annual revenues exceeding RUB 10 billion.

FSUE Russian Post (payment processing), SUE Mosgortrans (payment instruments for passengers) and OJSC Russian Railways (transport services at the Moscow Central Circle).

In 2016, loans provided by Group banks to major customers13 totaled RUB 7,121.3 billion.

Figure 7. VTB Group’s loan portfolio by industry as of 31 December 2016

Individuals (22,9%)

Oil and gas (11,6%)

Building (10,3%)

Metals (8,6%)

Government bodies (8,3%)

Manufacturing (6,3%)

Trade and commerce (5,1%)

Energy (4,9%)

Finance (4,7%)

Transport (4,5%)

Chemical (4,4%)

Others (5,2%)

Telecommunications and media (3,2%)

The CIB GBL provides a broad range of documentary services to large companies across different industries, with the Bank’s customer base including both Russian and foreign companies. In 2016, the largest beneficiaries of VTB Bank’s


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Table 7. Select loans provided for regional and city authorities in 2016

Region/city Number of contracts awarded through auctions, RUB million

Perm Krai 7,500

Nizhny Novgorod Region 6,000

Moscow Region 4,000

Krasnoyarsk Krai 4,000

Kursk Region 3,000

Omsk 1,400

Nizhny Novgorod 1,300

Voronezh 1,000

Krasnodar 700

15 Federal Law No. 275-FZ of 29 December 2012, “On Government Defense Contracts”.

Support for state and municipal authorities

VTB provides various kinds of support to state and municipal authorities as part of its commitment to drive the social and economic development of the country. Under bilateral cooperation agreements, VTB provides both financial and non-financial support, with the former including loans and lending commitments and the latter focusing on developing lending and other banking infrastructure and improving general financial literacy.

Support for the defense industry

Pursuant to Federal Law No. 275-FZ15 and its commitment to drive Russia’s import

substitution policy, VTB Group provides strong support to the defense industry, cooperating with the following holding companies:

Rostec PJSC United Aircraft CorporationJSC Russian HelicoptersJSC United Engine CorporationJSC High-precision SystemsJSC United Instrument Manufacturing Corporation

VTB Group extends loans to defense companies to financially support their day-to-day operations, and help them deliver on government procurement and export contracts, run upgrade projects and develop new products.

Strategic cooperation with JSC United Engine-building Corporation - Perm Engines (VTB Bank) VTB Bank has been a longstanding strategic financial partner of JSC United Engine Corporation - Perm Engines. It has opened a credit line to fund the company’s working and fixed capital needs associated with the implementation of engine-building projects for Russia’s civil aviation and gas transportation industries. In 2016, VTB Bank opened three credit lines worth a total of RUB 4.2 billion for the company. Gas turbine engines built by JSC United Engine Corporation - Perm Engines are used to pump natural gas on the entire Nord Stream 2 pipeline, a new, Yamal-Baltic Sea-Germany route for transporting Russian natural gas into the European Union under export contracts.More than 500 gas turbine engines made by the company are currently in operation at Russia’s main gas pipelines, including the Nord Stream, Blue Stream and Yamal-Europe pipelines that are strategically important to Russia. The company has also shipped the first gas turbine engines for the Southern Gas Corridor and signed a delivery contract for the Power of Siberia project.

documentary services (bank guarantees and letters of credit) provided at the request of major customers were from the following industries14:

Oil and gas (20%)Infrastructure construction (11%)Transport (8%)

In 2016, VTB Bank placed a particular emphasis on the development of distant banking channels, implementing the following initiatives:

New electronic document forms have been introduced to help customers streamline their operations, including an application for foreign cash receipt, a payment order against acceptance sent by the Bank, a statement of acceptance or acceptance denial, and an advance acceptance of a payment order sent to the Bank;Another initiative has enabled customers to file electronic applications via their user accounts to request a limitation on the number of IP/MAC addresses or a technician’s visit; The Bank also introduced electronic payroll registers to save labor costs for its payroll customers.

The CIB GBL has a history of successful performance recognized by multiple awards. In 2016, VTB Capital

14 The list was compiled based on the number of documentary services agreements concluded in 2016.

was three times named Best Trade Finance Bank by Euromoney Awards for Excellence 2016, EMEA Finance Europe Banking Awards and Global Finance World’s Best Investment Banks Awards, as well as Best Investment Bank in Great Britain according to the research and the market players poll by the British periodical Finance Monthly. VTB Capital analytical team was among the leaders of the surveys by Institutional Investor 2016 EMEA Research Team and Extel Survey 2016, including the first place in the ‘Transport’ category in the EMEA region. As of year-end 2016, VTB Capital received more than 40 awards, and was ahead of the curve in such international rankings as Dealogic, Thomson Reuters, Bloomberg и Mergermarket. In particular, VTB Capital was internationally recognized for its unique concept of dialogues with leading international investors within the framework of the World Economic Forum in Davos in 2016 and a new concept of a studio discussion with investors during the Investment forum ‘RUSSIA CALLS’, being the best in the categories of Corporate & Financial Awards 2016 as ‘Most innovative financial communication’, ‘Best communication with international investors and mass media’, ‘Best interaction with investors and analysts’, and ‘Best sustainable development campaign’.

Table 6. Select cooperation agreements with governmental agencies

Constituent entity of the Russian Federation Agreement

Arkhangelsk Region Agreement on strategic partnership and development of long-term efficient cooperation

Far East and Baikal AreaAgreement on cooperation with the Far East and Baikal Area Development Fund under the aegis of the Eastern Economic Forum

Kaliningrad RegionAgreement on cooperation with Kaliningrad Region Development Corporation in implementing regional investment projects

Murmansk Region Agreement on strategic partnership and development of long-term efficient cooperation

Nenets Autonomous District Agreement on strategic cooperation

Republic of Tatarstan Agreement on cooperation in fostering the SMB sector and pursuing investment, innovation and R&D projects

St. Petersburg Agreement on cooperation providing for the implementation of RUB 20 billion worth of investment projects


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Support for a wheat deep processing project (VTB Bank)In the reporting period, VTB Bank opened a RUB 1 billion credit line for CJSC Yubileiny Stud Farm, a fully-integrated pork products company based in the Tyumen Region. The funds are designated for the construction of the first pig feed plant in the Urals that will have a wheat deep processing capacity of 120,000 tons a year.

Support for the agriculture industry

Import substitution measures have translated into vibrant growth for Russia’s agricultural industry in 2016 which grew by 4.8% compared with the previous year. As VTB Group continued to cooperate extensively with agricultural companies in the reporting period, its industry loan portfolio increased by 0.2%.

In 2016, VTB Bank provided funds in the form of a RUB 2.5 billion revolving line of credit for CJSC Sodruzhestvo-Soya that is part of the international agricultural group Sodruzhestvo. The funds are intended for replenishing the company’s working capital.

The Bank also provided financial assistance to OJSC Zainsk Sakhar, an entity of JSC Agrosila, for upgrade projects and other purposes. In addition, the Bank granted a RUB 88 million loan to LLC Rassvet Plyus YUG for increasing the production of grain crops.

Transport infrastructure development

As manufacturing industries strongly rely on transportation, strong transport infrastructure is crucial to the social and economic development of the country. In 2016, VTB Bank placed a strong focus on supporting transport companies, taking part in a number of large industry projects.

Table 9. VTB Bank’s key 2016 projects supporting the agriculture industry

Organization/ customer Purpose SupportAmount, RUB

million

PJSC Roskar Poultry Farm Partial financing of the farm’s upgrade project Loan 1,000

LLC LISKo Broiler (part of PJSC Cherkizovo Group)

Working capital financing, including purchases of agricultural raw produce for plant primary and industrial processing, grains for animal feed purposes, and animal feed Credit line 789

LLC Kala Ya Maryapoyat and JSC Kala-Ranta

Two trout farms: assistance under the SMB Lending Promotion Program run by SMB Corporation in partnership with Bank of Russia Loan 689.5

LLC LegendaSupport of the company's current operations, including sunflower seed purchases Credit line 600

JSC Agrarian Group (part of the holding company JSC Siberian Agrarian Group) Business expansion, implementation of investment projects Loan agreement 500

Financing of a large poultry farm in Russia (VTB Bank) PJSC Roskar Poultry Farm is a major agricultural company in Russia making a broad range of chilled and frozen chicken meat, eggs, chopped and minced half-finished goods, and finished poultry products. The company also makes essential egg products for the food industry, including white, yolk and mixture. In 2016, the Bank opened a RUB 600 million five-year credit line as part of a RUB 1 billion credit line extended to the farm. The funds are intended for the partial financing of the upgrade project proposed by the farm that has an annual production capacity of 690 tons of poultry meat and 195 million eggs.

In addition, the Bank provides support for Government Defense Contracts, consultations and training.

In 2016, the Bank was the general sponsor of the Army 2016 International Military and Technical Forum held at the congress hall of the Patriot Military and Patriotic Park of the Armed Forces of the Russian Federation. At the forum, VTB Bank signed a cooperation agreement with United Aircraft Corporation and United Instrument Manufacturing Corporation, the holding company Tekhnodinamika and FSUE Atomflot. In addition, VTB Bank President

and Management Board Chairman Andrey Kostin and Russian Defense Minister Sergei Shoigu signed an agreement on cooperation in the military and patriotic education of Russian citizens.

Support for value-added industries

Russia’s value-added industries that are strategically important to the country’s economy ended the year 2016 with positive financial results. VTB backed value-added industries using traditional mechanisms of support for priority industries and delivering on its commitments under the DIA’s capital boost program.

Customer training: support for Government Defense ContractsAs part of its commitment to improve performance on Government Defense Contracts, VTB Bank held workshops for its customers in 2016 to address agendas on contract support services provided by the Bank. VTB Bank experts shared details on recent legislative changes and the Bank’s payment management practices for defense contracts, as well as answered participants’ questions. Those who attended included the Bank’s current customers that have contracts with the Russian defense ministry, prime contractors and contractors of other governmental agencies that consider turning to the Bank for contract support services.

Table 8. VTB Bank’s key 2016 projects supporting Russia’s value-added industries

Customer PurposeType of

supportAmount, RUB

million

OJSC Chelyabinsk Electrometallurgical Integrated Plant and OJSC Kuznetskie Ferrosplavy (part of OJSC Chelyabinsk Electrometallurgical Integrated Plant) Financing of current operations Credit line 5,000

SC RusTekhnologii United CompanyMaterial procurement for a newly-constructed metalworking plant in the Vladimir Region Credit limit 3,000

SC Vologodskie Lesopromyshlenniki

Financing of group companies’ working capital needs, purchases of forest harvesting and wood pellet production equipment, and the provision of guarantees for tax authorities Credit limit 2,000

CJSC Yubileiny Stud FarmThe construction of the first 120,000-ton capacity wheat deep processing plant in the Urals Credit limit 1,000

LLC BelozersklesFinancing of a project to build a value-added wood processing facility in the Belozersk District, Vologda Region Loan 1,000

In addition, VTB Bank provided financial assistance to LLC Lestekhsnab, a timber processing company in the Kirov Region, issuing a RUB 280 million loan for its working capital needs.

The Bank also helped the company to partially finance its investment project focusing on the construction of a new timber production facility.


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Table 11. Key 2016 projects supporting the housing industry 16

Group company Organization/customer Purpose SupportAmount,

RUB million

VTB Factoring RostecFinancing of energy efficiency initiatives at the corporation's entities

Cooperation Agreement 100,00016

JSC Far East Generation Company Financing of current operations Loan 20,000

OJSC Mosenergosbyt Financing of current operations Credit line 3,000

VTB Bank LLC KVS Development

Partial financing of infrastructure development at the Yasno.Yanino microdistrict in the Leningrad Region, including sustainability initiatives Loan 1,095

16 Finance provided in 2016: RUB 10 million.

Social infrastructure development

Improving the quality of socially significant services is key to better living standards.

In 2016, the Group continued to pursue health care and education projects.

Table 12. VTB’s key social infrastructure development projects in 2016

Group company Organization/ customer Purpose SupportAmount,

RUB million

LLC VIS InfrastructureConstruction of a district maternity and children’s clinical center Credit line 6,500

VTB BankMD Medical Group Investment plc

Financing of a project to build a regional-level perinatal center in Samara Loan 2,000

As part of efforts to advance the development of the regional market of health care services and improve living standards, the Bank also granted a RUB 70 million loan to LLC Veris Diagnostics and Treatment Center for the purchase of modern equipment for a new health care facility. In addition, the Bank opened a credit line with a credit limit at RUB 1 billion for LLC GEROPHARM for the construction of a modern pharmaceutical plant.

Education, another essential component of social development, is also a key priority for VTB. In the reporting period, the Bank provided a RUB 365 million loan to OJSC KCUS to partially finance the construction of a general education school in the city of Kirov.

Construction of a perinatal center under a public-private partnership project (VTB Bank)VTB Bank intends to participate in the construction of a perinatal clinical center by providing project finance in the amount of RUB 6.5 billion for an eight-year period. Apart from VTB Bank, the public-private partnership project involves the government of the Khanty-Mansi Autonomous District, Yugra Development Fund and the VIS group. It is expected that the center will be able to accommodate up to 10,000 births a year.

Table 10. VTB’s key transport infrastructure development projects in 2016

Organization/ customer Purpose SupportAmount, RUB

million

LLC Vozdushnyye Vorota Severnoi Stolitsy

Refinancing of the company’s portfolio of loans obtained for the Pulkovo airport reconstruction and upgrade project Loan 36,000

LLC Magistral Severnoi StolitsyFinancing of the Western High-speed Diameter highway project Loan 16,000

LLC Magistral Dvukh StolitsFinancing of the Moscow-St. Petersburg M11 high-speed highway project Loan 10,200

Further cooperation with OJSC Russian Railways (VTB Bank)In the reporting period, VTB Bank continued cooperation with OJSC Russian Railways, which included the signing of a general agreement on the issue of RUB 10 billion bank guarantees under the MCC project. Pursuant to this agreement, the Bank provided a bank guarantee for Moscow Metro against Russian Railways’ default on its obligations to provide transport maintenance services at the MCC’s Small Beltway. In addition, the Bank pledged to provide banking support for projects run by JSC RZDstroy, a subsidiary of Russian Railways. In particular, VTB Bank will be in charge of supervising the use of funds by the company’s contractors.

In the reporting period, the Bank also issued a RUB 382.5 million bank guarantee to Vyatavtodor for road and bridge maintenance in the Kirov Region and provided guarantees against default by JSC Karelstroimekhanizatsiya under a RUB 299 million project to build a flyover over railways in Petrazavodsk. In addition, the Bank provided integrated support for all financial transactions made by companies participating in the MCC project.

Housing industry revamp

Housing construction projects help improve living standards and to contribute overall to the

social the social and economic development of the country. In 2016, VTB Bank continued to support projects in the housing industry.

VTB Bank also actively supports water supply and sewage treatment projects. In 2016, it issued a RUB 200 million bank guarantee to JSC NPP Biotechprogress, a leading R&D firm in the Leningrad Region that is implementing a project focusing on the development of innovative water supply and sewage treatment solutions for the housing sector and various manufacturing industries.

Support for Major Repairs System development (VTB Bank)In 2016, VTB Bank, the Association of Regional Operators of Major Repairs at Apartment Blocks and JSC United Electronic Market Place signed a trilateral agreement on cooperation in the integrated development of a Major Repairs System. The contract outlines various agreements between the parties in improving and developing the framework for major repairs done at apartment blocks, with VTB Bank to be responsible for handling the accounts of regional operators.


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In 2016, VTB Bank and SMB Corporation signed an agreement on cooperation to cement the success of the program by further improving overall access to debt for the sector and providing more loans and guarantees to SMBs.

In cooperation with JSC Russian Export Center, VTB Bank initiated a series of marketing initiatives to promote financial and non-financial support for export-oriented SMBs. Those included seminars for medium-sized businesses and follow-up surveys for the participants. All respondents said that they were interested in participating in similar events, expressing high opinions of the seminar. Among the topics best aligned with business needs, they mentioned documentary instruments for exporters (60% of respondents) and currency controls (57%). Exploring market trends and challenges in relation to exporters was a priority for 45% of respondents.

2.3. Quality and access to banking services

Today we have the capabilities to provide high quality, albeit basic, banking services to people even in remote parts of the country. [...] VTB has a number of projects that are something bigger than just a bank’s story. Among them, I would name the Post Bank project.Dmitry RudenkoChairman of the Management Board of PJSC Post Bank

In 2016, Group banks contributed to increasing overall access to banking services by extending their branch and ATMs networks, implementing improvements in remote-banking tools and launching a number of large-scale projects in retail banking. Among them was the launch of Post Bank, established by reorganizing Leto Bank. The key objective of Post Bank is to improve access to financial services for individuals.

During the reporting period, the key focus was placed on the smooth integration of Bank of Moscow into VTB Bank to retain the customer base and growth

of the loan and deposit portfolios – important integration objectives that were successfully achieved. On 10 May 2016, remote-banking banking channels operated previously by Bank of Moscow were successfully relaunched under the VTB Bank brand. Changes were introduced to the visualization of customer channels, customer documentation and bank data. A well-thought-out integration plan and team efficiency were important success factors, with the Bank not receiving a single complaint from customers over any disruptions in operations. Thus, the integration process provided the smooth continuity of service to all customers.

Current priorities include the development of a robust management framework for the retail banking business line that encompasses VTB Bank, VTB24 and Post Bank in Russia and a number of subsidiary banks abroad.

Development of branch networks

At the end of 2016, VTB Bank’s network consisted of 236 branches in 80 Russian cities.

The number of VTB24 branches reached 1,076 sites, located in 74 regions and 369 cities, with the network covering 80% of the country’s population. Forty-six new branches were opened in 12 more cities in 2016. In addition, the bank implemented more than 40 projects to improve its branch network performance and carried out branch closure initiatives, shuttering 16 underperforming sites in an optimization effort.

VTB has branches providing retail services not only in Russia but also in Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Serbia and Ukraine.

In 2016, Post Bank also pursued a network development program, putting into operation around 5,700 new sites, including 334 customer service centers, in 61 constituent entities of Russia. At the end of the year, its network spanned more than 1.8 thousand localities, with around 2 thousand branches based in cities with a population of less than 100,000 people.

2.2. Support for SMBs

VTB has more than 300,000 customers in the SMB sector. In 2016, the 6.5% program delivered great results exactly because it successfully reached out to its target audience – small and medium businesses. VTB is an absolute leader in this project: six in ten loans issued under the 6.5% Program were provided by our bank. In 2016 alone, we signed 234 loan agreements for a total of RUB 37 billion, Mikhail Oseyevsky Deputy President and Chairman of the Management Board of PJSC VTB Bank

Cooperation with small businesses is a priority area for VTB Bank’s retail banking business line. We keep a close eye on the market to quickly respond to changes, improving access to finance for this segment of entrepreneurs.Maksim LukyanovichLeader of the Small Business Office, PJSC VTB Bank

As support for the SMB sector remained a key focus, VTB provided RUB 662.3 billion worth of loans to SMBs in 2016. The key highlights of the Group’s 2016 activities in the SMB sector include:

17 The facility was dubbed “6.5 Program” in reference to the 6.5% refinance rate offered by the Bank of Russia to participating banks.

Number of small and medium-sized business customers: 426.7 thousand and 88.9 thousand, respectivelyLoans to small and medium-sized businesses: RUB 14.5 billion and RUB 647.8 billion, respectively

In 2016, VTB provided extensive finance under import substitution projects implemented in the agricultural, food, health care, pharmaceutical, transport infrastructure and other industries.

Bank VTB (Kazakhstan) signed an agreement with several national funds under government co-financing and subsidies programs aimed at promoting local entrepreneurship, improving the competitiveness of the sector and increasing access to financial services for farms.

Improvement of the business environment for SMBs

VTB Bank is committed to improving the business climate for SMBs, participating in the SMB Lending Promotion Program sponsored by JSC Federal Small and Medium-sized Business Development Corporation (hereinafter, “SMB Corporation”) in cooperation with the Russian Ministry for Economic Development and the Bank of Russia. VTB Bank was one of the first banks in Russia to extend finance under this Program to SMBs pursuing projects in priority industries. 17

Projects implemented under the 6.5 Program (VTB)In late 2015, Russia launched the SMB Lending Promotion Program, also known as the 6.5 Program17. Under this program, Russian banks offer the sector soft loans in the amount of RUB 10 million to RUB 1 billion at interest rates of 10.2% and 9.2%. VTB Bank and VTB24 are among the participating banks, with the first loan under the program extended by VTB Bank. As of the end of 2016, VTB Bank signed 234 loan agreements, advancing a total of RUB 37 billion. The average loan amount was RUB 158 million and the average interest rate was 10.05%. In particular, finance was provided for the construction of the first phase in a greenhouse farm project in the Novosibirsk Region, the construction, reconstruction and upgrade of an animal breeding farm, the construction of a high-precision bearings plant and other projects. VTB plans to advance no less than RUB 30 billion in loans to SMBs under the program in 2017.


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Table 14. Key distant banking projects20

Distant banking channel Projects completed

Online banking

• New payment options: tax payment, including via the website of the Federal Tax Service, transfer of payments to more recipients (3,500), fine payment with a 50% discount, etc.

• Improved ease of use: adapting registration forms for mobile devices, introducing search options to check the history of transactions, improving access to transactions, etc.

• New sales-oriented features: banners and a currency exchange rate display for currency transactions

Mobile banking

• Distant approval of transactions20

• New payment options• Launch of the SuperTroika cash back card with a top-up option• Mobile banking training for new customers

ATMs

• An increase in the number of payment recipients, including in the government sector (7,000 types of payment)• QR code scanning• Selection of attractive saving accounts using a formula • New training options

Tools for small businesses• Launch of a dedicated mobile banking tool (information options)• Launch of an Internet-Bank-Client website

20 The option is available for Private Banking Program customers, enabling them to approve a broad range of transactions such as payments, cash transfers, opening of saving accounts and currency exchange.

VTB Bank ranked fourth among Russian banks in distant banking customer experience in 2016 according to Private Deposit CX Rank 2016 published by the МarksWebb think tank.

In 2016, VTB24 processed 741 thousand utility bills for a total of RUB 2.7 billion paid via distant banking channels. VTB24 also added 1.4 thousand extra utility providers to the list of utility services that users can pay via the VTB24-Online tool and the bank’s self-service machines. In addition, VTB24 implemented a solution to enable its partners to submit their customers’ applications for mortgage loans to the Bank online, via user accounts, without visiting a branch. Another solution enabled customers to open saving accounts using mobile or online banking tools. There are also plans to implement saving account management on ATM interfaces.

In 2016, VTB24 was one of the first banks in Russia to utilize the Apple Pay and Samsung Pay apps for MasterCard holders. VTB24 is set to further improve the quality of its distant banking services, including by developing an automated payment service, and linking more utility providers

in regions of presence, along with their customer debt updates, to its online utility bill pay system.

Developing distant banking channels is also a priority for Post Bank. The bank’s mobile app allows customers to check their balance, check the date for the next loan payment and place a deposit with a premium of 0.25% of the base rate. The app is available to both customers and non-customers of Post Bank. Users need to download it to get access to a virtual card for purchasing goods and services online and making other payments.

Better quality and personal data protection

Satisfaction levels of the Group’s customers in the banking sector are high. In 2016, VTB24 won the Best Cash Back Product award from Banki.ru, while its loyalty program for MIR card holders was recognized as the best in its class in class by Frank Research Group. VTB Bank’s Operations Support Department conducts quarterly surveys among customers via distant banking tools to measure their satisfaction with the Bank’s services.

Table 13. Number of the Group’s branches in 2015-161819

2015 2016

Total, incl. 18 2,040 2,008 (√)

• branches in Russia, incl. 1,779 1,788

• branches in underpopulated and economically depressed Russian regions19 464 471

• branches abroad 261 220

Limited service branches (desks) 288 264

18 Excluding limited service branches (desks).19 Regions with below-average population that are in the lowest quartile by per capita income in accordance with state statistics.

Most branches of VTB Bank are equipped with ramps or elevators to provide barrier-free access for disabled people.

Development of ATM networks

In 2016, VTB Group’s banks opened more than 2,000 extra ATMs, bringing their total number to around 16 thousand.

The number of ATMs operated by VTB Bank increased by 355 to 1.8 thousand.

VTB24 opened 1.7 thousand new ATMs in the reporting period to deploy a total of 12.6 thousand self-service machines.

Confident growth (Post Bank)At the end of 2016, Post Bank’s ATM network included around 2 thousand machines. There was a distinct focus on extending the network in remote areas where the bank predominately installs POS terminals enabling customers to deposit or withdraw cash, check their balance or pay for goods or services. Post Bank operated around 4.1 thousand POS terminals across the country at the end of 2016. The bank’s main priorities for 2017 include expanding its geographical reach and increasing its customer base.

Development of remote-banking for retail customers

Apart from extending its branch and ATM network, the Group is also committed to enhancing its distant banking tools for retail customers in order to improve access to banking services and their quality. In 2016, around 500,000 retail customers of VTB Bank, accounting for 22.3% of all its customers, were regular users of distant banking services, which was almost double the level of the previous year. Transactions performed using mobile and online banking tools exceeded RUB 111 billion, an increase of 70% compared

with 2015. More than half of all retail transactions handled by VTB Bank were made via distant banking channels. The amount of loans sold by the Bank’s call center nearly doubled to total RUB 31.3 billion in 2016 compared with the previous year.

The Bank primarily pursued three goals in developing its distant banking channels, including

Adding new options and features to increase sales and customer engagementImproving ease of use Increasing customer security


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and canceled loan debts for those affected by deadly 2016 accidents, including the plane crash in Rostov-on-Don, the collapse of an apartment block in Mezhdurechensk, Kemerovo Region, and the crash of the Russian defense ministry’s plane in Sochi. VTB24 also had a priority focus on supporting its mortgage loan customers, shifting around 30% of foreign currency mortgages into Russian rubles.

VTB Insurance also provided support to customers in difficult life circumstances. In 2016, the bank continued to run an array of life insurance schemes, launching new products with extended benefits, including fixed income plans. At the end of 2016, VTB Insurance’s customer base for life insurance products comprised 24.8 thousand individuals.

Table 15. Select insurance programs run by VTB Insurance in 2016

Title Summary 2016 status

Number of signed

agreements

Amount of insurance

premium, RUB thousand

Dolgo i SchastlivoEndowment policy providing financial protection for personal and family plans Completed 54 53,956

Insurance Plan for Railroad Workers

Long-term risk insurance products providing protection from disability loss to railroad workers Completed 177 2,204

Maximum Investment life insurance product Current 9,899 10,346,490

Na VyrostEndowment policy for the insured person’s children and grandchildren Current 905 252,404

Blizkie Lyudi

Endowment policy providing financial protection for the insured person’s close relatives and friends Begun 159 36,467

Personal Plan Endowment product for personal savings Begun 3,167 321,175

Reserve Fund Fully packaged endowment product Begun 379 10,394

Fixed income insurance plan Endowment policy offering a fixed income Begun 85 2,244,783

The launch of the Mir National Payment Card Program was one of the most important initiatives implemented by the Group in 2016 to support retail borrowers amid the macroeconomic instability and the negative impact of the Western sanctions. VTB24 began to issue MIR cards in October 2016. The first issue (140,000 cards) was intended for paying cash allowances to draftees called up for military service during the spring campaign. Starting 24 October 2016, MIR cards have been offered to all VTB24 customers. The bank’s important priority is to make such cards available to employees in the public sector free of charge. More than 14 thousand ATMs and POS

terminals accept MIR cards in Russia. The Group plans to issue 3.5 million MIR cards by the end of 2018.

Support for vulnerable groups

In 2016, the Group actively supported vulnerable groups within the population. VTB Bank extended the scope of various social projects, while Post Bank launched special products for senior citizens, offering them attractive terms on retirement plans.

Senior citizens comprise an important target audience for Post Bank; They are expected to make up as much as one-third of its total customer base

Figure 8. Customer satisfaction assessment results at Group banks

Bank VTB(90%)

VTB24(78,7%)

Post Bank(80%)

The number of customers accepting the invitation to take part in the survey increased by 275% in 2016 – a total of 7.2 thousand submitted filled-in questionnaires compared to 2.6 thousand a year earlier. Group banks received a high average score from their customers in the 2016 survey.

In 2016, VTB24 handled 100% of customer complaints sent via official channels, while Post Bank processed 98% of such complaints. The complaint processing times at Post Bank was reduced from 18 to three days.

Distant banking security is an important priority for Group banks. VTB uses a wide range of data security solutions, including multi-level security systems employing cryptographic protocols and keys that enable encryption and digital signatures.

In 2016, VTB Bank implemented a number of measures to improve its distant banking services. Customers can now limit the number of IP addresses via internet-based customer service to restrict access to the Bank’s distant services on their behalf. In addition, a billing option is now available to customers paying taxes via the website of the Federal Tax Service for generating online payment documents and payment transfers. Customers are not required to fill in their card data or other details, which enhances the security of tax payments.

2.4. Socially significant retail services

A few years ago, we conducted a large-scale survey survey. It demonstrated that civil officers, employees of government-funded and municipal institutions and the staff serving major corporate customers comprise an important business segment for us. That is why we place our bets on widening cooperation with these groups when planning our retail banking business growth and when developing new products and services.Migel MarkaryantsHead of the Retail Business Department,Vice President of PJSC VTB Bank

Providing socially significant services to the population is an important priority for VTB. It drives its retail banking business growth, with services ranging from assistance to people in difficult life circumstances to basic retail services for communities (e.g., the Moscow Resident’s Social Card and the Social Taxi project) and mortgage lending.

Support for customers in difficult life circumstances

In 2016, the Group continued to provide assistance to its customers struggling with unforeseen circumstances, offering them banking products on softer terms and even writing down debts in some cases. In particular, VTB24 and Post Bank offered special deposit programs to customers


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The year 2016 saw an increase in the number of users of the My Travel Pass app launched a year earlier. The app allows owners of mobile devices with NFC capability21 to buy one-ride tickets and passes for the metro, surface transport and intercity train travel, and load them right onto their Troika travel card, skipping ticket windows and terminals. In particular, the number of My Travel Pass active users increased to more than 70 thousand people in 2016, with over 350 thousand tickets and passes bought via the app, which was 11 times more than a year earlier.

Support for home buyers

Group banks have a firm foothold on the mortgage lending market. In 2016, VTB Bank extended 19.7 thousand mortgage loans for RUB 42 billion, an increase of 48% on the previous year. VTB24

21 Near Field Communication is a wireless connectivity technology that enables convenient short-range communication between electronic devices.

issued more than 153 thousand mortgage loans for a total of RUB 294 billion, which was 50% more than in 2015. The bank’s mortgage loan portfolio, which also includes housing loans, went up by RUB 110 billion, or 14%, to total RUB 879 billion.

Group banks run a number of mortgage lending support programs, including a government-sponsored program offering borrowers a base rate of 11.4% per annum and the Lyudi Dela program with discount interest rates on mortgage loans for employees of government-owned and private companies in the education and health care industries, officers of law enforcement agencies and employees of governmental agencies. The Bank issued 60 thousand loans under the program for a total of RUB 30.5 billion.

Government Mortgage Lending Support Program (VTB Bank and VTB24) In 2016, VTB Bank took an active part in a government housing lending support program under which it provided mortgage loans for the purchase of newly built apartments at an annual interest rate of 11.4%. Around half of all mortgage loans extended by VTB24 in 2016 were issued under the program. Since the launch of the program in March 2015, a total of around RUB 235 billion worth of mortgage loans were issued, including RUB 158 billion in 2016, with VTB24 almost reaching its participation quota. VTB24 accounted for an average 25% of all loans granted under the program. At the same time, VTB24 and VTB Bank made a decision in 2016 to extend more program-related loans in the first quarter of 2017. Individuals who applied for them before 31 December 2016 are to be entitled to reduced interest rates ranging from 10.4% to 11.4%.

In addition, Group banks actively pursue corporate lending programs. In particular, VTB24 offers attractive loan deals to its payroll customers. Under a large-scale mortgage lending program for Russian Railways, VTB24 extended more than RUB 4 billion worth of loans to the company’s employees in 2016.

VTB24 also retained market leadership in extending mortgage loans to military servicemen in 2016, granting more than RUB 16 billion worth of such loans to this category last year, with its market share totaling 30%.

Group banks also run regular marketing and promotion events for existing and potential customers. On 24 November 2016, VTB Bank held its first open conference for mortgage borrowers, which focused on pricing mechanisms for newly built apartments and mortgage lending growth plans for a period after the completion of the Government Mortgage Lending Support Program. VTB Bank plans to hold similar events, which it believes enable a positive experience.

by 2023. To attract and retain older customers, Post Bank developed a special retirement program offering senior citizens various discounts, including a reduced annual interest rate of 16.9% on loans and guaranteed monthly income of up to 7% per annum on a saving account’s minimum balance.

VTB Bank offers senior citizens the Retirement Card product in all regions of presence. Retirement Card holders enjoy various advantages, including an interest income of 4% per annum on their account’s balance, no card fee and no fee for the transfer of utility bill payments.

VTB Bank also participates in the Moscow Resident’s Social Card program launched under the aegis of the Moscow City Government to provide various social

benefits to locals. Approximately 1.3 million cards were issued under the program as of December 2016, with balances on them amounting to more than RUB 2 billion at the end of the last year, 6.96% more than in 2015. The Bank offers special benefits to Seniors Card holders, including a 4% year-end bonus and no fee for SMS alerts. The card also offers unique, non-financial advantages to holders, who can use it as an identity card instead of a compulsory medical insurance certificate at outpatient clinics, a concessionary travel pass and an electronic social certificate. In partnership with NSPK and the Moscow City Government’s departments, VTB Bank began preparations for the migration of social cards to the MIR National Payment System scheduled for 2017-18, an initiative that they proposed as part of the working group at the Bank of Russia.

Free rides on subway (VTB Bank)In partnership with MasterCard, VTB Bank launched a new debit card called Super3 - World MasterCard PayPass linked to the Troika travel app that enables users to pay for travel on Moscow’s public transport. Holders of the Super3 card get a cash back of up to 5% on the e-purse linked to the Troika travel card for travel on Moscow’s public transport free of charge.

As a strategic partner of the Moscow City Government, VTB Bank continues to participate in the development, implementation and follow-up support of the Transport and Road Network Department’s parking fee e-payment initiatives. VTB Bank is a leading acquiring bank on the market of city services, offering top-ups for car owners’ parking accounts and options to pay for Moscow residence permits, parking passes and fines for parking offenses, including the removal of vehicles.

In 2016, VTB24 and Bank of Moscow customers were able to save around RUB 130 million on fines for road traffic offenses. When paying them within 20 days after the issue of the penalty via online or mobile banking tools, customers were eligible for a 50% discount. More than 20 thousand customers paid over 130 thousand fines for a total amount of RUB 300 million in 2016.

In cooperation with the Murmansk city government, Post Bank offers a City Support Card product linked to a saving account. The card is available to vulnerable groups such as large families, WWII veterans and both military and civilian veterans of wars involving the Soviet Union and Russia in the post-Soviet as well as people in difficult life circumstances who can use the card to purchase drugs, medical devices, community services and foodstuffs at a discount of 5% and higher.

VTB regularly organizes fundraising events via its distant banking channels, inviting customers to transfer donations for social and charitable purposes with no bank charges, e.g., to Rusfond and the Social Taxi Service. More initiatives are being pursued to increase the number of payment recipients on behalf of My Documents Centers of Public Services and the Moscow Metro.


VTB values its team of competent, highly motivated and loyal employees

Making Ourselves Betterby Streamlining Our Business

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VTB Social Report 2016 3. Internal environment

3. Internal environment

22 The average headcount of VTB Bank for 2016 (15,780) included the average headcount of the Bank of Moscow (3,612) for the period from 1.01.2016 to 09.05.2016. (On May 10, the bank’s integration was officially completed).

VTB Bank is an attractive and socially responsible employer. We are valued because we provide our employees with an opportunity to gain unique professional experience and build a successful career. We actively work with our employees to develop their professional and managerial competencies, a culture of efficiency and responsibility for result. There are many young people in our team; we maintain close ties with universities and invite talented students to work at the Company.Gleb Yermakov Head of Human Resources, Senior Vice President of VTB Bank (PJSC)

Continuous improvement and achievement of set goals are heavily dependent on having a strong team of highly motivated, loyal and competent professionals. Pursuant to its HR policy, VTB is guided by labor laws adopted in Russia and other jurisdictions where it conducts business, as well as by its internal regulations.

The GMC Coordinating Commission for Human Resources is responsible for Group-wide people management. VTB also has an integrated HR Committee, which includes senior executives from VTB Bank, VTB24 and VTB Capital. VTB’s HR policies are focused on the following priority areas:

personnel recruitment, training and developmentemployee motivation and remunerationinternal communications and corporate culture development occupational health and safety

VTB closely monitors the best local and international practices to keep up with emerging trends and to maintain its corporate practices at an appropriate level. The most recent trends and prospects are

discussed at an annual HR conference organized by the Group. In 2016, the conference was attended by 124 participants from 25 companies of the VTB Group. During the conference, the winners of the 2016 Best HR Projects contest were announced: Post Bank, with its Client Service from Home, was awarded for the most impressive HR project; VTB24 was awarded for its contribution to corporate culture, and VTB Factoring was awarded for the active promotion of corporate values.

VTB Group’s average headcount in 2016 was 72.7 thousand employees (√), down 4% from 2015. The reduction in headcount was in particular attributed to increased pressure towards labor productivity, the merging of overlapping functions, as well as Bank of Moscow’s integration into VTB. Top employers in 2016 were VTB24 (44%), VTB Bank (27%), and Post Bank (10%). Personnel age and gender structure remained virtually unchanged from 2015 (see Figure 10).

Figure 9. Average headcount, 2015 and 201622

VTB24

VTB Bank

Bank of Moscow

Post Bank

Other

VTB Bank + Bank of Moscow

2015 2016

34,482 32,060

19,392

13,966

7,30410,838

10,955

13,658

72,72175,577

5,624

Figure 10. Personnel age and gender structure, 2016

Under 30 (41%)

30-50 (50%)

Over 50 (9%)

Men (29%)

Women (71%)

In 2016, the Group recruited a total of 25 thousand people, with the highest number of new hires at VTB24 (9.3 thousand people), Post Bank (8 thousand people) and VTB Bank (4.2 thousand people). The employee turnover rate was 18.4%.

Group companies actively engage with leading local universities, as students and young professionals are regarded as key target groups for recruiting. In 2016, VTB Group took on 230 student interns and over 40 students were granted individual bursaries.

VTB is committed to creating equal opportunities and a comfortable working environment for vulnerable groups, including women on child-care leave and disabled people.

In 2016, Post Bank set up Client Service from Home, a project that allows female employees to work from home while on child-care leave in order to earn income and keep their skills up-to-date. Over

200 female employees in the South and Siberia macro-regions benefited from this initiative, which is planned to be rolled out across the entire bank in 2017. Client Service from Home was recognized as the year’s best HR project and won the audience choice award at the Group’s annual HR conference.

Over the reporting period, Group companies took up various initiatives aimed at the employment of the disabled, including the following:

Post Bank’s participation in the Business Advisory Board on Disability (38 disabled individuals work in the company)VTB Capital teamed up with the Office for Disabled Individuals under the Public Employment Center of the Moscow Central Administrative District and the Quality of Life Charitable Trust to take part in a career fair for the disabled, which was held via Skype (four disabled individuals work in the company)


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Table 16. VTB Group’s key executive training programs in 2016

Name of the program

VTB Group/ Company within the Group Purpose Level of managers

Number of participants

New Energy for Leadership VTB Group

Training VTB Group executives to address the strategic and operational challenges facing the organization

Middle managers of VTB Group

70 executives from 11 companies

Management Algorithms VTB Group

Shaping common understanding of key aspects of management, studying tools for effectivemanagement and implementation of tasks

Line managers of VTB Group

330 employees from 12 companies

Corporate MBA VTB24

Studying the aspects of financial management, strategic HR, marketing and leadership Line managers

49 participants were certified, of which 14 with honors

Academy of Management VTB Insurance

Studying and improving management skills (in-class format) Line managers 254 line managers

Leadership Development Training Program in collaboration with the Higher School of Economics Post Bank

Developing leadership skills and competencies among managers Line managers Over 300 employees

Project Mindset (VTB Bank)At the end of 2016, VTB Bank launched Project Mindset, a new modular training program designed to provide insight into a project-based approach, effective project and risk management techniques and teamwork communication skills. The program was elaborated according to a construction-based principle and consists of seven modules with total length of 117-hours that may be taken in any order. In December 205 employees underwent this training.

from a negotiations strategy to an agile methodology (a flexible methodology on software solutions), in which more than 1.3 thousand employees took part.

Improving employee performance in a changing environment has moved up on the agenda, considering the integration of Bank of Moscow and the creation of Post Bank. Training programs that deserve a mention in this context include Situational Change Leadership (VTB Bank), Improving Personal Efficiency amid Change (Post Bank), and Management in the Time of Change (VTB Leasing). In addition, members of the merged teams (VTB Bank and the former Bank of Moscow) benefited from integration training sessions designed to facilitate adaptation to the new environment. Over a thousand employees from nine divisions of the bank attended these sessions.

There were also training programs dedicated to building positive team spirit and developing requisite personal skills, of which the most notable are the following:

Constructive Communication, and Applying Personality Typology in Communication and Management, trainings aimed at improving business communication skills and mastering effective persuasion techniques (Post Bank); Tough Negotiation, a training session covering skills and techniques used in negotiations; Public Speaking: Preparing an Effective Speech (VTB Leasing);Babylon, a role-playing business game aimed at revealing negotiation skills and teaching players how to make effective business decisions (VTB Insurance);

3.1. Employee training and development

We all have studied at school and university, but sometimes in our life or work you come across a challenge you don’t have enough knowledge for. And you don’t have a teacher beside you who can prompt and guide you through it; now you have to learn on your own. You take on the challenge, plunge into it, start looking for answers wherever possible, but first you ask your colleagues or surf the Net. If the challenge is too big and requires a more systemic approach, additional training becomes a must. There’s nothing better than studying as an adult: you know exactly what knowledge you need and how you’re going to apply it today. Kirill Sedakov Head of PMO, Business Development, MultiCarta

Employee training and development is a priority area for VTB’s HR policies and is designed to maintain high professional standards of work. At the beginning of 2016, VTB committed an ambitious plan to improve corporate training, which was implemented through a number of initiatives aimed at:

improving the corporate culture; creating a self-learning organisation;promoting key themes of the year (situational change leadership, maintaining balanced motivation and managing performance through personal and organizational accountability).

The number of training hours per employee was 61.8, up 12% from the previous year. Post Bank provided the most hours of training (186 hours per employee), followed by VTB24 (76 hours per employee) and VTB Bank (18 hours per employee).

Distance learning is becoming increasingly popular across the Group, as this format is a good way to reduce costs, increase training coverage and promote self-learning. The total number

of distance learning hours in 2016 rose by 17% from a year ago to 37.57 hours per employee.

Figure 11. Training hours at the Group in 2015 and 2016 (including distance learning)

2015 2016

1,8

2,42

1,76

2,73

4,494,22

Total number of distance learning hours, mln hours

Total number of on-site learning hours, mln hours

VTB places a strong focus on providing continuous learning for its executive managers, as they are the ones who set the tone for the organization and form a positive attitude towards work. In 2016, the Group completed a number of training initiatives for executives, aimed primarily at developing leadership skills and increasing motivation. Some programs were improved to reflect lessons learned from experience, e.g., increasing active in-class and distance learning hours under the New Energy for Leadership program, adding inter-module activities to the distance learning format, and creating a mobile app for the Management Algorithms program.

VTB is also keen on providing its employees with training in theoretical aspects and practical skills that are required in their day-to-day work. Training activities in 2016 were centered around personal competencies, effective teamwork, negotiation skills, and change leadership.

To nurture and grow a self-learning organization, VTB put an emphasis on its Knowledge Academy, which serves as an open platform for exchanging experience, knowledge and conducting debates during the reporting period. In 2016, the Academy organized 15 training sessions covering a broad range of topics,


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received induction training, followed by a session on coaching skills (Coaching Skills for Managers and Leaders: Acting as a Coach). Mentoring is also promoted by other companies within the Group, e.g.:

VTB Bank (Kazakhstan) has a dedicated mentoring program that has been running for two years, with 40 students from six regions joining the program in 2016; Post Bank launched a pilot mentoring project, which brought together 33 mentors and 350 employees in 2016; VTB Factoring continues to expand its mentoring program, with 48 new participants joining in 2016.

3.2. Employee motivation and remuneration

Everybody wants their performance to be evaluated by management. If your work is evaluated and the evaluation is high enough, you can be proud of what you do. This is a very good motivating factor in driving employee performance.Gennady Galperin CEO and Chairman of the Management Board of VTB Insurance, Ltd.

Motivation system

Over 2016, VTB worked hard on increasing personnel loyalty and motivation and strengthening its employer brand in order to improve attraction and retention rates across the Group.

Compensation is a fundamental element of the motivation system. With that in mind, Group companies constantly monitor the levels of pay across peers to make sure the compensation package they offer is competitive. On top of their salary, employees receive bonus payments at the end of each relevant period (month/quarter/year) based on their performance against KPIs.

In addition to competitive salaries, Group companies provide voluntary health insurance, accident and sickness insurance, the reimbursement of relocation expenses and other benefits, which are designed to increase personnel loyalty and motivation. For example, VTB Bank provides the following social benefits:

voluntary health insurance (VHI), and international medical insurance (IMI) for policyholders with a first-time cancer diagnosis; accident and sickness insurance;one-off payments for family emergencies;financial aid in the event of exceptional circumstances;reimbursement of expenses on VHI insurance for children under 1 year of age; reimbursement of relocation expenses;additional paid leave;corporate pension program.

In 2016, VTB Bank continued to provide IMI insurance for employees with cancer. The coverage has been expanded so that policyholders can get help if cancer was diagnosed before the policy date, and receive treatment not only abroad, but also in Russia if they choose to do so. This insurance product is also available at a discount to the employee’s relatives.

Moreover, the VTB Privilege Club is actively developing within VTB Group. In it, employees and their relatives receive special conditions and discounts from partners of the program. Most often, the partners of the Club (now there are more than one hundred of them) are VTB customers. Some Group companies offer special benefits to their employees. For example, VTB24 partly compensates work-related higher education expenses, while Post Bank provides hardship allowance for employees working in the Far North and equivalent areas. The motivation system in the former Bank of Moscow (which merged into VTB Bank in 2016) has been changed significantly. Apart from adapting pay and other compensation benefits to match those of VTB Bank, bonus payouts to back office and control function staff were changed from quarterly to annual.

Owing to a competitive level of pay and extensive efforts to improve the employer

Team Management Rules, а training focused on learning the principles and instruments of effective teamwork (VTB Bank (Belarus)).

Taking into account that many Group companies work in retail banking, VTB places a strong focus on teaching front-office staff effective customer relations skills. Various training initiatives were held by Group companies in 2016 to drive a customer-centric approach among front-office staff and to share information about specialized product offerings, including the following:

a range of training sessions, business games, workshops and webinars at VTB24, aimed at enhancing customer relations skills and improving knowledge about banking products, e.g., “What? Where? When?”, an interactive game during which players analysed most common complaints about banking products; VTB Insurance’s training program aimed at providing knowledge about the key terms, parameters and advantages of the company’s products, and improving effective sales techniques; VTB Insurance also conducts regular checks to make sure employees understand products’ key features and terms and conditions;VTB Bank (Kazakhstan)’s two training programs, Positive Psychology: Managing Psychological Stress, a training session designed to help employees restore psychological balance and increase stress resistance, and Teamwork and Cooperation, a training session

23 For details, see Section 4.4. “Support for health care and education”.

for front-line staff designed to teach how to form and develop teamwork and management skills.

Attracting young talent and building a mentoring culture

Attracting young talents and creating the requisite conditions for their professional development are important elements of VTB’s HR management. In 2016, Group companies continued cooperation with 41 universities in the Russian Federation. The main outcomes of these efforts were:

five career fairs held at the Higher School of Economics, St. Petersburg State University and Moscow State University; 17 free master classes and presentations held at universities and VTB Bank offices with the involvement of business and HR leaders; launching new partnership programs, including the M&A Case Competition (in partnership with the Moscow State University IB Club), the Dream Bold Dreams fellowship program, the Russian National Contest for Finance and Economics Students and Graduates (in partnership with АССА).

VTB Bank also supported the launch of the Banking Automation and IT Department at the Financial University under the Government of the Russian Federation, which was opened in 201623.

VTB Junior and VTB Rost ( VTB Bank and VTB Capital) VTB Junior and VTB Rost are two programs for young professionals, which have been running in VTB Bank and VTB Capital since 2011. VTB Junior is targeted at bachelor and master’s students eager to do an internship in business or business support divisions, while VTB Rost is meant for graduates with a master’s degree who are well-prepared to work in VTB’s key business functions. Over 2.6 thousand applications were received in 2016, up 60% from a year ago, and 90 graduates of leading universities were taken on board. Since the inception of these programs five years ago, over 10 thousand young professionals have applied and over 350 have been admitted.

The Group’s active efforts to attract young talent are bolstered by a powerful blend of initiatives aimed at forming a counseling and mentoring culture. VTB

Bank put together a cross-functional mentoring program, which was introduced in 2016. The program is supported by a dedicated group of 13 mentors who


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informed of major corporate events, and publish interviews with the Group’s leaders. In 2016, Team Energy was named the best corporate magazine in the financial sector and received the Best Corporate Media award from Russia’s Association of Communication Directors and Corporate Media.

In the reporting period, Post Bank set up BankTube, a corporate analogue of YouTube that gained over 700 users in 2016.

25 For details on improving the financial literacy of the children of employees, see Section 4.1 Development of the business environment.

Corporate culture

Over 2016, VTB Bank continued to improve corporate culture and promote common values, including through team-building activities. The Code of Ethics, adopted in 2013, is a key document outlining the principles and rules of business conduct and ethics that are aimed at improving VTB’s market value, financial stability and operating performance.

Promulgating corporate values (VTB Factoring) In 2016, VTB Factoring continued progress toward embracing corporate values, which were developed with wide input from all employees. The activities included an employee survey and a discussion among company leaders and staff, with the following values emerging from the discussion:

collective accountability customer comes first civility, respect, and engagement efficient processes and technologies developing yourself to serve others

A significant effort was made to raise the awareness of corporate values through various visual means, such as thematic photos in the company’s main lobby, narratives and video clips available on the corporate portal, etc. VTB Factoring’s project was recognized at the Group-wide annual HR conference.

Corporate functions, sports festivals and family fun days at VTB are all aimed at building a close-knit and enthusiastic team. To promote healthy lifestyles among employees, VTB supports football, hockey and paintball teams, and holds regular sports events. In the reporting period, Group employees took part in the following sports events:

the 9th VTB Spartakiad (over 3 thousand spectators, more than 900 athletes from seven countries, 13 sports)mass ice-skating at the VTB Ice Stadium (over 2 thousand participants)the 10th Moscow International Velonotte (over 100 employees of VTB Bank)VTB24 Marathon of Sports (over 5 thousand employees of VTB24)

Rostec - Russian Corporate Games (the VTB Bank team took first place in the team competition).

VTB Bank pays special attention to the organization of family events. In 2016, the project “Children 360°” was launched, the goal of which is to contribute to balancing the professional and personal life of employees, as well as to increase financial and career literacy of the children of employees25. During the year, more than 30 events were carried out within the program; they involved about 6 thousand employees and their children. For the implementation of the project “Children 360°” VTB Bank received the first degree award of the prestigious award “HR-brand” in the nomination “Capital”.

brand, Group companies ranked highly in the following employer ratings in 2016:

Randstad Award: VTB Group was named the third most attractive employer in the sphere of financial services; In HeadHunter, the rating of Russia’s top employers: VTB24 was ranked as the sixth best employer; Universum Professional Survey (2016): VTB Capital was named the fourth most attractive employer in Russia and VTB24 took 20th place.

Talent pooling

Building a talent pool is a core element of VTB’s HR policies.

Since 2016, the Group has been using assessment centers to fill management and executive positions at its regional network of banks and subsidiary banks on a competitive basis. VTB Group employees were invited to participate in an internal competition for a managerial position at a corporate regional network of VTB Bank, by taking an online test designed to define and assess their individual strengths and communication skills. Out of 90 employees who took the online test, 22 were invited to in-person assessment centers.

As part of the talent pool initiative that has been running in the Bank for two years, 143 key positions were defined and 69 successors were identified (in the space of one to two years). In 2016, 14.5% successors received promotion. VTB Bank recommended its most promising employees as candidates for inclusion into the federal pool of high-potential managers24. The Government of the Russian Federation approved six Bank employees for inclusion in the federal pool. Post Bank also conducted employee assessment that led to 14 employees being included in the bank’s talent pool. All members of the talent pool undertook a training course in a cross-group program

24 Federal talent pool was established in accordance with the list of instructions given by the Russian President after the meeting dedicated to the forming of a management talent pool (No. PR-1573 dated 1 August 2008). At 26 December 2016, the federal talent pool comprises over 2,000 candidates (www.gossluzhba.gov.ru/rezerv).

Management Algorithms, and three employees were offered promotion to executive positions.

To add extra motivation to its teams, VTB Bank held an annual ceremony to recognize the 2016 top performers: 48 employees received VTB Honorary Badges of Distinction, 86 employees got letters of commendation signed by the President and Chairman of the Board and 38 employees of the companies of the Group were awarded with letters of commendation signed by the President and Chairman of the Board.

3.3. Internal communications and corporate culture

Corporate culture is a core intangible asset of any organization that helps it to build its business for the future. Corporate values are a vital code by which we live and work as one team. The rules give us a universal frame of reference in our day-to-day decision-making. They create a unique work environment that brings out the best in our people and leaders, makes them willing to go the extra mile, understand their value and be proud of what they do. This is what determines how our employees feel as they come to work and go home, what drives their motivation and how they respond to various challenges.Anton Musatov CEO of VTB Factoring, Ltd.

Internal communications

Effective internal communications constitute a vital element of the VTB’s corporate culture, especially considering the large number of people it employs and the multiple geographic locations in which it conducts business. The Team Energy corporate magazine is one of the main communication channels that inform employees about key results and achievements, keep them


https://gossluzhba.gov.ru/rezerv

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Blood donation is a long-standing initiative involving employees from all companies within the Group. In 2016, 255 employees from VTB Bank took part in the Donor Day, an event organized in collaboration with A.N. Bakoulev Scientific Center for Cardiovascular Surgery. The event helped to collect 115 liters of blood.

3.4. Occupational health and safety

As a socially responsible employer, VTB Group strives to create a safe and comfortable work environment for its employees. During 2016, VTB26 took a number of steps to reduce work-related injuries and occupational illnesses, including the following:

workplace conditions assessment (28,1 thousand workplaces assessed) occupational health and safety training (over 6 thousand managers and employees received training) preventive medical examinations aimed at dynamic monitoring of the health of employees, timely detection of the effect of diseases, the initial forms of occupational diseases, early signs of the impact of harmful and (or) hazardous production factors on the health of employees

26 VTB Group hereinafter refers to companies operating in Russia, except as specifically stated otherwise.27 The injury rate (the number of accidents for the total time worked by employees) is indicated for all VTB Group companies within the framework

of the Report.

In 2016 a total of 20 accidents were reported and investigated, including four serious injuries at VTB Group companies located in Russia. The number of sick-leave days due to work-related injuries was 591, down by 13.5% from the year before. In the Group’s subsidiaries abroad, one accident occurred. The accident frequency rate, i.e. the number of accidents per total man-hours worked, was 0.158 (√)27 in 2016.

In the next reporting period, VTB intends to further improve occupational health and safety. The activities scheduled for the coming year include the next phase of the workplace assessment program, improvements in distance occupational health and safety training, and continued initiation of preventive measures towards lower rates of work-related injuries.

In 2016, the Group organized the Epiphany Frosts in the Izmailovo Kremlin in Moscow, a corporate event that has now become regular and brought together more than 3 thousand guests who took part in various educational and training activities. The event was attended by employees and their family members, kids supported by the Children’s Palliative Care Fund, as well as children from the Vasilyevsky orphanage in Ivanovo Region, whose participation was sponsored with funds raised by VTB Capital employees.

In the run-up to the New Year, VTB24 launched two festive projects, the Miracles of Father Christmas (20 thousand participants) and the Christmas Tree of My Childhood (8.9 thousand participants), with employees receiving various gifts, such as books, sweets and souvenirs for their children.

VTB Capital organized Children’s Day, a third annual event when employees’ children

are invited to come and spend time at their parents’ workplace. Over 100 children participated in the event in 2016.

Volunteering

Active volunteering work is a good indicator of an organization’s corporate maturity and serves as an effective team-building tool.

VTB24 holds a regular monthly contest for the best volunteer project: employees come up with ideas to help children, veterans and elders, to run environmental campaigns, etc. Around 20-25 projects compete for the best volunteer project every month. A total of 125 projects were sponsored in 2016, with RUB 1 million raised by employees and RUB 3.5 million provided by the employer. VTB24 also won an award at an annual Group-wide HR conference for its efforts to promote corporate culture.

Table 17. VTB Group’s select volunteer projects in 2016

Project

VTB Group/Company of the Group Description Results

A Week of Kind Acts VTB Group

Charity fairs with gifts handmade by children from orphanages on New Year’s Eve;collecting bedclothing for the elderly; buying necessities for orphanages;preparing greeting cards for lonely elderly people;holding a training on charity literacy

• 2 thousand participants • 78 greeting cards were prepared • 300 bedding sets and 66 tickets for children’s New

Year’s Eve parties were bought • over RUB 483 thousand were raised for children

The New Year Charity Fair Acts of Kindness VTB24

Raising funds to pay for developmental lessons for children with Down syndrome

• over 300 participants • approximately RUB 83 thousand were raised

Support for the global initiative Giving Tuesday Post Bank

Raising humanitarian aid for students of three children’s institutions in Moscow

• over 300 participants• over 250 chocolates, gifts and toys were collected

Two charity book fairs VTB Capital Buying books for children’s institutions

• over 200 books were donated to the Children’s Hospital under I.M. Sechenov First Moscow State Medical University, and to the Vasilyevsky orphanage

Support for a home for elderly people VTB Capital

Collecting necessities for a nursing home in Podborki village

• 4 trips were made• sanitary supplies and medicines were bought

Support for an affiliated orphanage

VTB Insurance Raising funds for the orphanage

• over 100 participants• food, medicines, clothing, stationery, cleaning supplies

and New Year presents were collected • a visit to a local circus show was organized


Effective Businessfor a Balanced Society

The reputation of a reliable financial institution is inherent to the prosperityof the population and development of the regions of its presence

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VTB Social Report 2016 4. Social environment

4. Social environment

28 In 2016 the tournament was renamed the VTB Kremlin Cup.29 The Bank of Moscow’s charity expenditures in 2016 are combined with those of VTB Bank.

Private and corporate charity is a measure of society’s economic, moral and cultural level. In our organization, corporate social responsibility plays a central role. Among our priorities are children’s health, education and support for veterans’ organizations. We also work closely with long-term friends and partners to preserve our cultural heritage. Over the years we may have various partners – and charity recipients are partners for us – but our basic principles and approaches remain unchanged.For me personally, charity is a duty and an honor. I visit so many places – from orphanages and universities to hospitals and new exhibitions at the State Hermitage, and as a result I develop new contacts and a better understanding of life in all its aspects. Of course, I’m always aware that I only represent the true benefactor, VTB Bank.Yuri Levchenko Deputy Director, Northwest Regional Center,Senior Vice President, VTB Bank (PJSC)

Corporate social responsibility is an integral part of VTB Group’s policy along with financial performance and commercial success. As a socially responsible group, VTB believes that a financial institution’s economic results and reputation depend on the welfare of the society and regions in which it operates. VTB Group selects charity and sponsorship priorities based on its strategy and capabilities, national priorities and local needs. Our priorities include:

improving the financial literacy of the public and developing the business environmentsupport for health care, a healthy lifestyle and sportssupport for education and science

support for culture and the artsassistance for disadvantaged social groups

The Group’s charity and sponsorship efforts are based on principles of transparency, continuity and consistency and are in strict compliance with Russian law and internal regulations.

Total financing of charity projects in 2016 came to RUB 5.1 billion (√), 96% of which was contributed by VTB Bank. In 2016, the main focuses of charity and sponsorship in terms of the amount of financing were sports, culture and the arts, and education. VTB Bank also continued social projects initiated by the Bank of Moscow, which was fully integrated with VTB Group in May 2016. These projects included the intellectual TV game show “What? Where? When?” the Velobike bike rental system, the Bank of Moscow Kremlin Cup tennis tournament28 and the Moscow Urban Forum.

Figure 12. VTB Group’s charity expenditures by company in 2015–201629 (RUB billion)

VTB Bank

Bank of Moscow

VTB24

Other

VTB Bank + Bank of Moscow

2015 2016

2.26

0.96

0.31

0.1 0.12

0.073.6

5.1

4.89

Figure 13. VTB Bank’s charity expenditures in 2016

Culture and art (25%)

Sports (16%)

NGOs (13%)

Education and science (8%)

Bank and professional organizations (7%)

Veterans and people with disabilities (5%)

Health service (5%)

Other (21%)

4.1. Development of the business environment

Each year, VTB-supported business events bring together many distinguished experts, executives of global companies and investors to discuss key trends in the Russian economy. Such events serve to encourage large-scale investment initiatives and expand the investment potential of Russian and foreign companies. In the current geopolitical situation, we believe a constructive dialogue with the international financial community is essential. On our part, we are grateful to all of the participants for their interest and commitment.Alexey YakovitskyCEO, VTB Capital

30 The Russia & CIS Trade & Export Finance Conference.

Development of the Russian economy

VTB Bank, as a leader on the Russian market of investment banking services, works actively to develop Russia’s economy and supports major industry forums and conferences aimed at enhancing the business environment and attracting investments.

In order to improve the financial and banking system, VTB Bank supported a variety of business events in 2016, including:

The 11th International Russian Derivatives Market Conference: “Whether derivatives can insure the Russian economy?” The First Moscow Financial Forum: “The Financial strategy of Russia: Heading for growth” The Russia & CIS Trade & Export Finance Conference30: “The Russian global trade market and recent events in the light of international sanctions” The 26th Congress of the Association of Russian Banks: “Anti-crisis strategy and tactics: Cooperation between banks and regulators”

In 2016, VTB Bank also supported major events in the nuclear, railway, military technology and automobile sectors, among others.


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Strengthening international cooperation

As one of its main areas of sponsorship, the Group supports and organizes events aimed at improving international relations and bringing investments to Russia. Involvement in such international events allows VTB to reinforce its reputation as a reliable financial institution and to conclude

strategically important agreements with members of the Russian and foreign business community.

In 2016, VTB Bank supported major business forums such as the Eastern Economic Forum, the St. Petersburg International Economic Forum, the International Economic Forum and the International Financial and Banking Forum of CIS Member States.

The 20th St. Petersburg International Economic Forum (VTB Bank)In 2016, VTB Bank supported the 20th-anniversary session of the St. Petersburg International Economic Forum. Topics of discussion included plans for normalizing relations between Russia and the European Union and attracting investments. The numerous events held during the three days of the forum included: the plenary session “Capitalizing on the New Global Economic Reality,” attended by the presidents of Russia and Kazakhstan and the prime minister of Italy; the SCO Business Forum; the BRICS Business Forum; the B20 Regional Consultative Forum; and summits of energy companies and media. There were also business breakfasts, panel sessions, TV debates and other events. The forum was attended by over 12 thousand people from 133 countries, upwards of 200 experts, more than 600 speakers and moderators and 86 international television channels. As a result, 356 agreements worth RUB 1.46 trillion were signed.

Table 18. Key industry events held with the support of VTB Bank in 2016

Event Date and venue Main topics Number of participants and results

The 10th International AutoInvest® Conference 2016

24-26 February, St. Petersburg

Investment attraction to automotive component industry, development of exports, means of increasing the level of localisation and alternative forms of fuel

• over 200 experts• about 40 business meetings

The 8th International Atomexpo Forum 2016 30 May–1 June, Moscow

The role of nuclear energy in the low-carbon power balance of the future

• 5 thousand participants• 508 companies representing

55 countries

The 11th International Railway Business Forum: Strategic Partnership 1520 1-3 June, Sochi

Tariff setting, prospects for developing the market of transport services and international cooperation

• 1.5 thousand participants from 415 companies

• 130 speakers• 13 agreements and

memorandums signed

The Moscow Urban Forum 30 June–3 July, MoscowUrban planning, architecture, economic and strategic city planning

• 6 thousand participants from 42 countries

• 315 speakers• over 500 Russian and foreign

mass media• more than 75 events

The Army International Military-Technical Forum 2016 6-11 September, Kubinka

Prospects for creating modern weaponry, military and special technology

• 800 Russian and foreign companies

• delegations representing the defense establishments of 35 countries

• 500 thousand visitors• 140 thousand m2 of exhibition

pavilions


St. Petersburg, 16-18 JuneThe 20th St. Petersburg International Economic Forum (VTB Bank):• over 12 thousand participants from 133 countries• more than 200 experts• over 600 speakers and moderators• 356 agreements worth RUB 1.46 trillion were signed

Minsk, 27-28 OctoberThe Second International Financial and Banking Forum for CIS Member States: Minsk Business Meetings (VTB Bank):• 350 representatives of CIS and non-CIS countries

Moscow, 12-14 OctoberThe “RUSSIA CALLING” Investment Forum (VTB Capital):• over 2 thousand participants• 500 investors from 60 countries• around 1 thousand business meetings

Moscow, 18 MarchThe International Economic Forum of CIS Member States (VTB Bank):• 11 CIS countries and Georgia• 1.5 thousand participants• 155 journalists

Davos, 21 JanuaryBusiness breakfast with investors during the World Economic Forum (VTB Capital):• 70 Russian and foreign investors from 15 countries

Vladivostok, 2-3 SeptemberThe Eastern Economic Forum (VTB Bank):• over 3.5 thousand participants• 978 Russian and foreign companies• 1.1 thousand journalists• 214 agreements worth over RUB 1.85 trillion were signed


6160 Figure 14. Major business forums held in 2016 with the support of VTB Bank and VTB Capital


https://forumspb.com/en/2016

http://www.vtbcapital.com/events/2016/moscow/about/index.php

https://www.weforum.org/events/world-economic-forum-annual-meeting-2016

http://www.bc-cis.ru/forum

http://confer.fbc-cis.ru/minsk2016/

https://forumvostok.ru/en/arhiv-2/programme-main/

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Table 19. VTB’s channels of interaction with the public on matters of financial literacy

Channel of interaction YouTube Vkontakte Facebook Odnoklassniki Twitter

VTB Group (as a whole) Over 3 million views

203 thousand subscribers

VTB Bank 20.6 thousand

subscribers

VTB Bank Moscow25.6 thousand

subscribers30.8 thousand

subscribers 3.8 thousand8.2 thousand

subscribers

VTB24 Over 11 million views17 thousand



subscribers

VTB Insurance21.3 thousand


subscribers 7.3 thousand

31 A list of sports organizations that received assistance from VTB in the reporting period can be found on the website www.vtbrussia.ru.32 Until 2016, the tournament’s title sponsor had been the Bank of Moscow.

4.2. Support for sports

VTB Group is active in promoting high-performance sports and popularizing a healthy lifestyle. We’re involved in organizing major international sports events, and we provide support for sports federations and children’s sports. One of our most socially important efforts in this area is the construction of sports infrastructure. The reconstruction of Dynamo Stadium, for example – a project unique in the world – is being done with the support of VTB.Evgenia Mamsurova Head of retail and small enterprise business division of Advertising and Marketing department, VTB Bank (PJSC)

High-performance sports

VTB Group actively promotes the development of professional sports, providing support for international, Russian and other national sports federations as well as football, hockey and basketball clubs31. In 2016, VTB also supported the VTB United League Basketball Tournament as well as the Hoff Open and 27th VTB Kremlin Cup tennis tournaments.

In 2016, VTB Bank marked its tenth year of collaboration with the KAMAZ Master rally team. With

the Bank’s support, the team is a regular competitor in major races, including the Dakar and Silk Road rallies. In the 13 stages of the 2016 Dakar Rally, 55 trucks covered 9,5 thousand km of mountains, flatland and wilderness in Argentina and Bolivia. The KAMAZ Master team was the silver award winner. In the 2016 Silk Road Rally (Russia–Kazakhstan–China), KAMAZ Master teams took first, second and fourth places.

The 2016 VTB Kremlin Cup tennis tournament32 was held with VTB’s support. A special event was held ahead of the tournament that allowed clients of VTB Bank, the former Bank of Moscow and Post Bank, as well as students and Moscow residents with social cards to attend the first few days of the tournament free of charge. The tournament was attended by some 70 thousand spectators, 20% of whom took advantage of the special event.

Group subsidiaries abroad are also active in promoting professional sports in their own countries:

VTB Bank (Georgia) sponsored the Georgian national football team for the first time. It continued its collaboration with the Georgian Gymnastics Federation, the Georgian equestrian and water polo federations, the U18 junior national rowing team and children’s rugby, football and alpine skiing clubs. (In 2016 the Bank was named Business of the Year for its contribution to the development of sports.);

Improvement of financial literacy

Group companies have a tradition of working to improve the financial literacy of the public. In 2016, VTB Bank held its first conference on mortgage loans for clients and Moscow residents pricing mechanisms for apartments in new buildings and the future of mortgage lending. VTB24 held a series of free seminars on the stock markets for residents of Moscow.

In addition to the adult population, children are an important target in our efforts to improve financial literacy. In 2016, the “Children 360°” Program included initiatives in three main areas: financial literacy, communication skills and the ability to make informed decisions.

Among the program’s key initiatives in 2016 were:

the first career guidance forum “Bank of Your Abilities,” including a seminar to help children determine their type of personality and thinking,

learn the rules of teamwork and create a career profile, as well as a seminar for parents on career guidance for their children (attended by over 200 employees and their children)My Future Today, a simulation game on making informed decisions (attended by over 50 young adults) a master class on managing personal finances, time and a career for students of Rybnoye Boarding School (attended by 22 students)

Employees of VTB Bank (Belarus) led classes for over 700 children from ten schools in Belarus during International Financial Literacy Week.

In 2016, the VTB Capital Children’s Academy was launched – a project involving online lectures for children in orphanages by VTB Capital employees. As part of the initiative, the best students of the Vasilievsky orphanage visited the investment forum organized by VTB Capital “RUSSIA CALLING”, where they met with representatives of their chosen professions.

The 2nd Russia-Wide Financial Literacy Week for Children and Young Adults (Post Bank)In 2016, the 2nd Russia-Wide Financial Literacy Week for Children and Young Adults was held as part of the Russian finance ministry’s program “Promotion of financial literacy and financial education in the Russian Federation.” The chief topics of discussion were sustainable consumption, savings, protecting the rights of financial product consumers and information security. Over 30 Post Bank employees took part in the event. They held 46 lectures for 1.8 thousand schoolchildren and college students in 19 Russian cities. Post Bank was awarded for its contribution to the education of children and young adults in 2016 by the Ministry of Finance.Post Bank also supported the 3rd Russia-Wide Savings Week for the adult population, which included 460 master classes and lectures in 60 constituent entities of the Russian Federation. The event was attended by a total of 14 thousand people from 130 cities.

The Internet is another channel of communication that plays an important role in improving the financial literacy of the public. Group companies have their own YouTube channels and accounts in the most popular social networks, where they post

up-to-date information on bank products, interviews with VTB Group executives and information on VTB-supported projects, as well as advice and recommendations on financial management.


http://www.vtbrussia.ru

http://www.kamazmaster.ru/en

http://www.kremlincup.ru/index_en.html

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In 2016, VTB’s Northwest Regional Center sponsored Leningrad Region’s traditional “Paths of History” run and “Raising Olympians” races involving around a thousand children between 18 months and nine years of age.

For the second time, VTB Insurance was an official partner of the Moscow Marathon, held on 25 September 2016. The number of runners increases each year: in 2016, over 7.8 thousand people ran the 42.2 km distance, and nearly 11 thousand people ran the 10 km distance. The runners represented 86 countries.

VTB Arena Park supported the nonprofit Dynamo Foundation for Children’s Programs, which strives to popularize sports and a healthy lifestyle among children. In 2016, the company provided charitable assistance for the development of children’s recreation programs and children’s sports via a network of sports groups.

4.3. Support for culture and the arts

Preservation of our country’s cultural heritage is a key focus of the Group’s social efforts. We enthusiastically support major projects commensurate with the scale of our operations. In choosing recipients, we focus on well-known cultural institutions such as the Bolshoi and Mariinsky Theater and the Pyotr Fomenko Theater. We also have close, long-term relations with major museums such as the Tretyakov Gallery, the Hermitage and the Russian Museum.Alexander YerofeyevAdvertising and Marketing Leader, Department of Public Relations and Marketing, Vice President, VTB Bank (PJSC)

Art

VTB Bank sees art as a key element of its social efforts. To this end, the Bank collaborates with major world museums, such as the Tretyakov Gallery, the State Hermitage and the Russian Museum.

In 2016, VTB Bank and the Pushkin State Museum of Fine Arts, which have collaborated since 2005, signed a letter of intent to pursue a program of support for exhibition, restoration and publishing, as well as for the acquisition of artworks for the museum’s collection. In 2016, this cooperation included exhibition events devoted to the work of Lucas Cranach the Elder, Albert Marquet, Ilya Zilberstein and Giovanni Battista Piranesi.

In 2016, for the third year in a row, VTB Bank (Belarus) supported “The Artist and the City,” a unique outdoor exhibition in Minsk. Over 30 reproductions of paintings by the Belarus artist Valentin Gubarev were shown.

Dynamo Management Company, in cooperation with the Tretyakov Gallery, launched a project to create a copy of Joseph Chaikov’s Football Players. Based on the original sculpture in the Tretyakov collection, modern 3D scanning technologies will be used to produce a copy that will stand near the west terrace of VTB Arena Stadium.

VTB Bank (Armenia) continued its support for the Yerevan Sailing Club (20 recipients);VTB Bank (Germany) continued its collaboration with the Frankfurt Lions Hockey Team (1.7 million fans in the region);VTB Bank (Austria) provided assistance to a children’s football team training at the International Football Academy (30 children received uniforms).

Sports infrastructure

VTB Group supports projects to develop sports infrastructure in Russia and Kazakhstan, including the construction of football, hockey and volleyball arenas. When sports facilities are built, the surrounding area is also developed, thus improving the municipal infrastructure in general.

In 2016, VTB Bank charity donations were used for renovation work on the Tbilisi gymnastics center, which was damaged in a flood in 2015. Around a thousand gymnasts can train simultaneously in

the new building. Sports activities were offered to children from disadvantaged families free of charge.

Promoting a healthy lifestyle

VTB Group is an active supporter of mass sports and it strives to popularize a healthy lifestyle.

In 2016, VTB Bank continued its support for the Velobike project, which is aimed at enhancing Moscow’s infrastructure and transport system, promoting a healthy lifestyle and improving the environmental situation by cutting down on the use of personal vehicles. In 2016, the number of registered Velobike users grew by 198 thousand year-on-year to 435 thousand, and the number of subscriptions grew by 112 thousand to 255 thousand. The number of bike stations grew to 330 in 2016 (up from 300 at the end of 2015), and the number of rentals nearly doubled to 1.67 million.

Table 20. VTB Group’s key projects for the construction and reconstruction of sports infrastructure

Sports facility Group company Characteristics

Almaty Ice ArenaVTB Bank

(Kazakhstan)

• 3,463 seats (ice arena)• 16,942 m2 (area under development)• 327 seats (warm-up rink)

Reconstruction of the Central Dynamo Stadium and surrounding area

Dynamo Management Company

• 26,319 seats (Central Dynamo Stadium)• 11,488–14,000 seats (multi-purpose arena)• 62,800,000 m2 (Dynamo Sports Academy)• 8 ha (parking area, green space)• 13 residential buildings • Best Municipal Site with Sports Infrastructure (named by Sports Facilities magazine)

Match Point Volleyball Arena VTB Project

• 3,500 seats• 2 training facilities• sports and recreation center• 200 athletes can train and compete simultaneously

The 10th International Moscow Velonotte (VTB Bank)In 2016, VTB Bank was an official partner of the 10th Moscow International Velonotte, held on 16-17 June in Moscow. The tenth Velonotte was dedicated to the memory of Lev Yashin, Princess Diana and Varlam Shalamov. Over 3 thousand participants cycled the 28-km route between Red October and Dynamo stadiums – the first and last in the career of Lev Yashin, the greatest goalkeeper in football history.


http://velobike.ru/en/

http://www.velonotte.com/moskovskaya-velonoch-2016

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Theater

Support for the theater and music has long been an important focus of VTB’s social efforts. Group companies collaborate with major theaters in Russia and the CIS, including the Bolshoi and Mariinsky theaters, the Pyotr Fomenko Workshop Theater, the Griboyedov Russian Drama Theater in Tbilisi, Georgia, the Liepa Charitable Foundation for the Choreographic and Visual Arts, Kurazh Moscow Children’s Theater, etc.

VTB Bank sponsored a number of tours in 2016, including a gala concert of Bolshoi Ballet stars at the autumn meetings of the International Monetary Fund and the World Bank in Washington, D.C. (8 October), a London tour by St. Petersburg’s Eifman Ballet (6-10 December) and a Georgian tour by Moscow’s Pyotr Fomenko Workshop Theatre (1-2 October).

Group companies supported major theatrical events such as:

The Russia-Wide Professional Award “Facets of Mass Theater,” 28 March, Moscow (VTB Bank)The 26th Baltic House International Theater Festival, 30 September–13 October, St. Petersburg (VTB Northwest Regional Center)The 13th Baltic Seasons Arts Festival, 16 May–29 October, Kaliningrad (VTB Northwest Regional Center)The 13th International Baltic Star Award, 3 October, St. Petersburg (VTB Northwest Regional Center)The Yuri Lyubimov Theater Award, 30 September, Moscow (VTB24)

In addition to their support for the dramatic arts, Group companies make an important contribution to opera, ballet and classical and contemporary music. The Bank supported the 2016 Bolshoi Theater premiere of Puccini’s Manon Lescaut with Anna Netrebko and Yusif Eyvazov in the lead roles. As part of its collaboration with the Perm Opera and Ballet Theater, the Bank also supported a production of Shostakovich’s comic opera Orango at the New Opera and the ballet Hypothetically Murdered at the Teatrium on Serpukhovka.

Spasskaya Tower Festival (VTB Bank)VTB Group has supported the Spasskaya Tower International Military Music Festival since 2011: in 2016 the event drew over a thousand musicians from 12 European and Asian countries, including the Hellenic Air Force and Navy Massed Band, the Tiroler Kaiserjäger from Austria, the Honor Guard and Band of the Armed Forces of the Republic of Belarus, the Singapore Police Force Band and the Italian Carabinieri Band. The festival culminated in a gala concert of military bands on Red Square and a performance by French singer Mireille Mathieu. The festival had upwards of 75 thousand guests and over 200 million TV viewers around the world.

For three years, VTB24 has been a regional partner of the Usadba Jazz Festival. In 2016, the bank provided support for the festival’s cultural program in three Russian cities: St. Petersburg (Kirov Park of Culture and Recreation on Yelagin Island, over 8 thousand guests), Ekaterinburg (the Rastorguyev-Kharitonov Estate, over 4 thousand guests) and Voronezh (Oldenburg Palace, over 3 thousand guests).

On 27 April 2016, with the support of VTB Bank (Georgia), Vladimir Spivakov and the Moscow Virtuosi

Chamber Orchestra performed works by Shostakovich, Boccherini, Mozart, Piazzolla and Haydn at the Jansug Kakhidze Center of Music and Culture in Tbilisi.

Cinema and the mass media

Another focus of VTB’s sponsorship efforts is the promotion of cinema and television. 2016 was declared the year of cinema in Russia, and VTB made a point of providing special support for this industry.

Exhibition of the works of Ivan Aivazovsky (VTB Bank)In 2016, VTB Bank supported an exhibition at the Tretyakov Gallery on Krymsky Val to mark the 200th anniversary of the birth of the great Russian marine painter Ivan Aivazovsky. 150 paintings and 55 graphic works were exhibited as well as porcelain wares, ship models and nautical instruments from 16 museums. The exhibits included Aivazovsky’s four most famous paintings: The Rainbow, The Black Sea, The Ninth Wave and The Caucasian Coast. During its four-month run, the exhibition had over 600 thousand visitors. More than a thousand tours and some 20 special events were organized. Since 2015, VTB Bank33 has issued co-branded payment cards with the State Tretyakov Gallery. An amount equal to 1 percent of all money spent with these cards goes to the Tretyakov Gallery Support Fund. In August 2016, a second series of payment cards was issued to coincide with the Aivazovsky exhibition.

Table 21. Major exhibitions held with VTB’s support in 2016 33

Exhibition Date Museum Description and number of visitors

Lev Bakst, 1866-192424 February–

9 May 2016The State Russian Museum, St. Petersburg

• Some 100 paintings as well as graphic and decorative works from the collections of the Tretyakov Gallery, the Russian Museum and other museums

• 128 thousand visitors

The Cranachs: Between the Renaissance and Mannerism

4 March– 15 May 2016

The Pushkin State Museum of Fine Arts, Moscow

• 48 paintings and over 50 graphic works from the collections of major Russian and international museums and private collections


Ilya Zilberstein: For the 110th Anniversary of His Birth

30 March– 2 October 2016


• Paintings, graphic works and documents from the collection of the Pushkin Museum of Fine Arts and the Russian State Archive of Literature and Art


Sculpture, 1960-20008 June–

11 September 2016 The State Tretyakov Gallery, Moscow • Easel works created by a sculptor M. Dronov

Ivan Aivazovsky: For the 200th Anniversary of His Birth

29 July– 20 November 2016 The State Tretyakov Gallery, Moscow

• 150 paintings, 55 graphic works and other exhibits from 16 museums

• Over 600 thousand visitors

Piranesi: Before and After. Italy-Russia, 18th-21st Centuries

20 September– 13 November 2016


• Over 100 etchings, engravings and drawings of Piranesi’s contemporaries as well as books and other exhibits


Albert Marquet: The Open Window. Works from Museums and Private Collections in Russia and France

27 September– 8 January 2017


• 69 works (49 paintings by Marquet and works by his contemporaries); the pictures were grouped thematically: Marquet and Fauvism, Marquet’s Paris, the Artist’s Travels and Marquet in Russia


From the Dinner-Service Storerooms: Decorating the Russian Imperial Table in the Eighteenth to Early Twentieth Centuries

8 December 2016– 20 March 2017

The State Hermitage Museum, St. Petersburg

• Over 1.2 thousand items, including tableware, clothing, decorative elements, books and photographs

33 Until 2016, this had been a project of the Bank of Moscow.


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In 2016, VTB Bank took part in the repatriation of items from the personal collection of Vladimir Vysotsky and Marina Vladi acquired at the Drouot auction in Paris. On 25 January, Vysotsky’s birthday, the Bank donated two 19th-century icons and original works by Mikhail Zlatkovsky to the City of Moscow and the Vysotsky State Cultural Center and Museum.

VTB Bank also acquired 25 previously unpublished letters of Marina Tsvetayeva and her husband to the Bogengart family. The letters, which had been in France, were donated to the Moscow Department of Culture and will be kept in the Tsvetayeva Museum. This donation

completed the museum’s archive of letters, allowing a detailed study of the period in the poet’s life when she lived far from her homeland. It is planned to show these letters to the public in 2017 at an exhibition marking the 125th anniversary of Tsvetayeva’s birth.

In 2016, VTB Bank supported projects for the restoration of the New Jerusalem Monastery ensemble, for the reconstruction and reorganization of Valaam Monastery’s museum exhibits and for the construction of the church of the Icon of Our Lady of Iveron in Moscow.

Beringia 2016 (VTB24)In 2016, VTB24 acted as the official sponsor of the Beringia 2016 Dog Sled Races, whose goal is to preserve the cultural traditions of the indigenous peoples of the North. Sixteen mushers covered a route of some 1.3 thousand km from Petropavlovsk-Kamchatsky to the settlement of Tilichiki, and 47 children took part in the children’s race. With the support of VTB24, a special category was established, “For Fidelity to the Traditions of the North,” with prizes funded by the bank.

VTB Bank also provides support to the organizers of mass cultural events. In 2016, the Bank sponsored Moscow City Day, which included around a thousand concerts and performances. There were 212 performance venues and 32 fireworks points.

Another focus of VTB’s support for culture is the preservation of national traditions and the popularization of traditional arts and crafts. In 2016, VTB’s Northwest Regional Center supported the 2016 Kizhi Regatta festival of traditional boats as well as the Starina Folklore and Ethnography Forum on the Island of Kizhi, and VTB24 sponsored dog sled races in Kamchatka.

In 2016, VTB Bank (Austria) sponsored the Kulinarik & Kunst Festival, held from 19 August to 17 September in St. Anton am Arlberg. Over the course of a month, the festival had around 7 thousand visitors from 14 countries. Forty distinguished chefs, 17 wine makers and over 30 creative artists were featured in some 40 events devoted to the classical and culinary arts.

4.4. Support for health care and education

It is a very serious and socially important task to help those who truly need it. Especially children. It isn’t possible to help every sick child individually, but it is possible to create conditions in which a great many can be helped.Elena MelikhovaDeputy Head of Advertising and Marketing, Head of Sponsorship and Special Projects, VTB Bank (PJSC)

Health care

An important focus of VTB’s social efforts is support for health care institutions, participation in charitable initiatives and projects to raise funds for the treatment of those in need.

In 2016, VTB Bank continued its collaboration with the Culture TV channel and the intellectual game show “What? When? Where?” as well as supporting a number of film-related cultural events, including:

The 38th Moscow International Film Festival (326 films presented)The 24th annual “Window on Europe” Festival of Russian Film in Vyborg (10 films presented)The TEFI television awards (430 entries)

In 2016, VTB Bank provided assistance to the Vertical Film Studio for the film project An Anthology for Upper-Class Students. The film, to be directed by Stanislav Govorukhin, will consist of short love narratives based on works of classical Russian literature.

VTB Bank also provided financing to the “Beyond Time” Cultural and Ethnographic Foundation for the filming of In the Tracks of the Amur Tiger. This documentary focuses on the preservation of the Amur tiger as well as depicting the traditions, beliefs and way of life of the indigenous peoples of the Russian Far East, exemplified by the Udege people.

VTB’s Northwest Regional Center supported the makers of a documentary film on the musical group Kantele, founded in 1936. The film’s goal is to contribute to the preservation of Karelian cultural traditions and to popularize the group’s music.

VTB’s Northwest Regional Center is also the general sponsor of the Golden Pen, a professional journalism competition held for the 21st time in 2016. There were over 300 entries, and twelve journalists received Golden Pen awards.

Preservation of the country’s literary heritage

As part of its charity and sponsorship efforts, VTB gives special attention to preserving the country’s literary heritage and popularizing the work of Russian writers abroad.

In 2016, the Bank continued its sponsorship of a project to translate Russian literature into Vietnamese and to

translate the works of Vietnamese authors into Russian. In 2016, four books were published as part of this project: Dostoyevsky’s The Raw Youth, Griboyedov’s Woe from Wit, a collection of Soviet and Russian short stories and The Experience of Love, a collection of short stories by contemporary Russian writers.

Since 2013, VTB Bank has been the general sponsor of the publishing project “Classics of World Literature: Word and Image.” Over three years, this project has resulted in the publication of 15 classics of world literature. In 2016, five books were published with a print run of 900 copies each: Selected Russian Proverbs, The History of Moscow, The Three Musketeers by Alexandre Dumas, The Idiot by Fyodor Dostoyevsky and Gulliver’s Travels by Jonathan Swift. The project includes donating books to major Russian and foreign libraries.

In addition, the following books were published with the support of Group companies in the course of the year:

a three-volume edition in the “Lives of Remarkable People” series published by Molodaya Gvardiya (VTB Bank)a two-volume set: Two Capitals: St. Petersburg. An Illustrated History for Children, and Moscow. An Illustrated History for Children (VTB Bank)The Publications and Diaries of Vice Admiral Grigori Shchedrin (VTB24)Ragtime by Yuri Rost (VTB24)

Preservation of the cultural heritage

In 2016, VTB Group continued its efforts to preserve the cultural heritage and national traditions of the countries in which it operates and it continued to sponsor mass cultural events for the public.

A major two-year project to digitize and systematize the TASS news agency’s photo archive was completed during the reporting period. With the Bank’s support, over 860 thousand photographs were digitized and entered in TASS’s news photography database. A commemorative photo album, The Whole Country, was produced to mark the project’s completion.


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In the spring, the first group of 25 students began studying the department’s first subject: the Career Accelerator. As part of their study, the students visited a dealing center, treasury, technical floor and data-processing center at the Bank’s head office.

With VTB Bank as a partner, Lomonosov Moscow State University held the 2016 Growth Driver Championship. During this event, students made presentations, defended their calculations and

demonstrated their level of corporate finance knowledge to representatives of major companies.

VTB’s Northwest Regional Center provided financial assistance to Kaliningrad State Technical University for the 2016 Innovative Entrepreneurship Conference, which was held as part of the 4th International Baltic Sea Forum. The topic of discussion was the university’s role and tasks in implementing the National Technology Initiative.

Management of the Future 2016 (VTB Bank)The fifth conference of talented students and leading Russian companies was held in 2016 as part of the Bank’s longstanding collaboration with the Higher School of Management of St. Petersburg State University. Over 100 students represented 40 Russian institutions of higher education. The event was also attended by students from eight foreign institutions (including the Stockholm School of Economics, Yale University, Shanghai University, Bocconi University, and HEC Paris) and prominent representatives of Russian business. A novelty this year was the TED presentation format: accounts based on actual experience and success stories. Students also competed to solve the business case “New horizons of VTB Group’s retail business.” The conference included a job fair where students could learn about the programs of VTB Junior and VTB Growth. Over 30 applications were submitted for these programs.

4.5. Support for vulnerable social groups

VTB traditionally helps those who need it most, including children without parental support, veterans and the disabled.Elena MelikhovaDeputy Head of Advertising and Marketing, Head of Sponsorship and Special Projects, VTB Bank (PJSC)

VTB’s social policy is aimed, among other things, at supporting vulnerable segments of the population. Special attention is traditionally given to the disabled, veterans, children from disadvantaged families and orphans.

In 2016, VTB Bank supported a project of the Video Profile Charity Foundation to create a Russia-wide search system with information on orphaned

children and children without parental support. The main goal of the initiative is to increase the number of adoptions from orphanages. The project allows would-be adoptive parents to learn about children in orphanages and make an informed choice before meeting with a child. With the Bank’s support, 200 video profiles were created in 2016.

In 2016, VTB’s Northwest Regional Center supported a joint project of the “Point of Support” Charitable Fund and the State Hermitage: the In_Inbreathe Photo Exhibition. Well-known St. Petersburg photographers exhibited works telling the stories of 12 Paralympians. The bank also provided charitable funding for equipment needed for the exhibition.

To call attention to the needs of veterans living alone, Dynamo Management Company held the Dynamo Mile Charity Race on 22 May in Moscow. Over 100 runners took part in the event. The funds raised were used to equip several residential care homes for veterans and the disabled.

In 2016, VTB Bank took part in a comprehensive plan for the socioeconomic development of the Republic of Karelia, timed to coincide with the 100th anniversary of the republic’s formation, by providing charitable assistance to three medical institutions: the Gubkin Maternity Clinic, the Sortavala Central Regional Hospital and the Children’s Republican Hospital.

For 13 years, as part of the “World without Tears” program, VTB Bank has helped health care institutions acquire necessary medical equipment and pharmaceuticals. In 2016, VTB Bank provided RUB 43 million in charitable funds to hospitals in 22 cities throughout Russia. World without Tears was also supported by VTB Bank (Belarus), which helped three medical institutions in 2016.

For the tenth time in 2016, VTB’s Northwest Regional Center supported the charitable initiative From Heart to Heart, timed to coincide with the International Day for the Protection of Children. Artwork by students of Upper Secondary School No. 190 and the Shtiglits Academy was exhibited as part of an event held on 8 June in the St. Petersburg Legislative Assembly. A total of 109 pictures were exhibited and later donated to Municipal Hospital No. 31 and Raukhfus Municipal Children’s Hospital No. 19. During this initiative’s ten-year history, medical institutions in St. Petersburg have received over 900 pictures by young artists.

In 2016, VTB24 collaborated with the Konstantin Khabensky Charitable Foundation in launching the program “Small Business with a Big Heart.” The special service allows small businesses to use the Bank Client Online application to make quick and convenient cash transfers for charitable purposes. On 1 June, International Children’s Day, the first results of this collaboration were summed up, and over RUB 4.8 million in funds had been collected.

VTB Insurance also works with the Konstantin Khabensky Foundation, and in 2016 they jointly sponsored a charity initiative at a sports exhibition timed to coincide with the Moscow Marathon. A treadmill was set up at the exhibition, and any visitor could run a set distance, which

was automatically translated into an amount of money to be donated for the treatment of children with cancer. Over RUB 300 thousand in charitable assistance was collected.

Group companies support numerous health-related charity initiatives, including:

support for the Downside Up Foundation, which provides psychological and educational assistance to children with Down syndrome and their relatives (VTB24)funds to be used by the Armenian Mothers Foundation for the construction of a Dream House center for children with cerebral palsy and assistance for the “Gift of Life” Foundation for Children with Cancer (VTB Bank [Armenia])assistance for Tabletochki Charitable Foundation so that children with cancer can be treated abroad (VTB Bank [Ukraine])funds to be used by Asyp Bala Charitable Organization to help sick children (VTB Bank [Kazakhstan])

Education

Education is one of the Group’s social priorities. VTB sees its main task as improving the quality of financial and economic education and enhancing the education infrastructure.

In 2016, VTB Bank provided support to major institutions of higher education, including the Higher School of Management of St. Petersburg State University, the Financial University under the Government of the Russian Federation, Lomonosov Moscow State University, the Far Eastern Federal University, St. Petersburg State University, etc.

In early 2016, with VTB Bank’s support, a Bank Automation and Information Technologies Department was opened in the School of Applied Mathematics and Information Technologies of the Financial University under the Government of the Russian Federation. The Bank was motivated by the urgent need to prepare young professionals for practical work in the area of bank information technologies.


http://vtbrussia.ru/healthcare/mbs/

Caring about the Environment Todayto Make a Better Tomorrow

VTB pays great attention to enhancing its environmental consciousnessand supporting nature conservation initiatives

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VTB Social Report 2016 5. Natural environment

5. Natural environment

34 Green finance instruments, also known as green bonds, are debt instruments used for raising capital for environmental protection, climate change and resource sustainability projects.

Our bank is committed to socially responsible practices and prioritizes projects focusing on environmental and natural resource sustainability, which are critical to life on our planet and our own lives. Additionally, we take a responsible approach to the consumption of resources, striving to improve our performance each year.Aleksandr GogolevSenior Vice President of VTB Bank and Head of LLC VTB Ecology

Environmental protection is in the focus of the Group’s CSR activities. VTB pursues two major goals as part of its commitment to environmental sustainability: improving its energy efficiency and supporting environmental projects and initiatives. In 2016, VTB made an important step in promoting environmental values as it established a separate legal entity called VTB Ecology for the centralized management of environmental projects. VTB Ecology is also responsible for driving the development of new environmental instruments at the level of the Group, including instruments in green finance34.

5.1. Sustainable business practices

Better efficiency is a primary concern for VTB today. That is exactly why the Group’s top priorities include improving the efficiency of its property management. We have historically placed a strong focus on enhancing our resource and energy efficiency performance, with VTB actively promoting the implementation of innovative technologies in natural resource sustainability.Sergei Kovalev Head of Administration and Senior Vice President of PJSC VTB Bank

A responsible approach to property management is an essential element of the Group’s sustainable development policies. VTB pursues the following objectives in this area:

Better energy efficiencyRobust waste management and sortingReal estate portfolio efficiencyEnvironmentally sustainable transport fleetLower paper consumptionEnvironmental awareness campaigns

In 2016, VTB Bank implemented new initiatives under its Energy Saving and Efficiency Program launched in 2013, upgrading lighting systems in the elevator halls and stairways of the West Tower that houses its head office. To reduce energy consumption, the Bank installed energy saving equipment at its premises, as well as lighting controls to adjust lighting levels for day and night use.

VTB Group has also been steadily reducing fuel consumption by replacing old cars with more environmentally friendly vehicles and introducing changes to usual routes. Following the integration phase, the car fleet previously operated by Bank of Moscow (in the Moscow Region) was reduced by approximately 30%, with the combined car fleet totaling 300 vehicles at the end of 2016. In addition, average maintenance costs lowered by 17.2% per corporate car in 2016, brought down by the gradual installation of GPS tracker devices. Overall, fuel consumption at the Group reduced by 8% to 5 833.3 thousand liters (√) in the reporting period.

As part of green business practices, VTB is also committed to reducing paper consumption, which it strives to make headway by increasing the usage of electronic documents and encouraging employees to print on both sides of the paper. Paper consumption at the Group totaled 4,161 tons in 2016, a year-on-year increase of 10.9% that was mainly due to the expansion of Post Bank’s branch network.

Figure 15. Electricity consumption at Group companies, MWh/employee per year, in 2015-16

2015

2016

OtherVTB Bank + Bank of Moscow

VTB24

6.05

3.41 3.16 2.89 2.65

5.85

VTB Bank has put three containers for used batteries and 30 containers for the separate collection of plastic, glass and metal at its head office. In 2016, the Bank collected and handed over 300 kilograms of used batteries, 5 m3 of metal, 5.4 m3 of plastic, 4.7 m3 of glass and more than 100 tons of paper to waste management companies for treatment and

disposal. Cost savings from the use of compactors with a capacity of 20 m3 totaled more than 40% in monetary value. Other green business initiatives pursued by the Bank promote the collection of fluorescent and mercury-containing lamps and tubes, car tires, old office equipment and household appliances for treatment and disposal. The Bank collected 121 tires for recycling in 2016.

In the reporting year, VTB Group also focused on the optimization of its real estate portfolio prompted by the ongoing integration processes of the Bank of Moscow. VTB continued work to move the head offices of its entities to modern, more energy efficient business centers. In particular, it launched the process to relocate the offices of several companies to the Nevskaya Ratusha Business Center in St. Petersburg and the Eurasia Tower in Moscow, attempting to sell their previously occupied properties at the same time. Eight properties with a total area of around 8 thousand m2 were sold in 2016.

The use of taxis in place of company cars (VTB Bank)In 2016, the Bank’s head office and its regional offices in Yekaterinburg, Samara and Nizhny Novgorod ran a pilot project to reduce the use of the corporate car fleet by encouraging employers to travel by taxi. The pilot was a success, resulting in the development of a proposal for a three-stage reduction of the corporate car fleet across the Bank’s regional offices by 257 vehicles.

Figure 16. Gasoline consumption at Group companies, L/employee per year, in 2015-16

2015

2016


VTB24

138.3

58.3 56.366.7

56.8

139.9

Figure 17. Paper consumption at Group companies, kg/employee per year, in 2015-2016

2015

2016


VTB24

63.9

50.8

62.2

3843.6

58.1


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5.2. Financial support for environmental projects

The establishment of VTB Ecology within the Group, a separate legal entity combining environmental and business competencies for the centralized support of environmental projects, was a landmark event in 2016. Promoting the development of mechanisms to raise financing for environmental projects is also very much in the focus as the green bond market shows steady growth. VTB is an advocate of developing green finance practices in Russia.Elina ManilovaDirector, Special Programs Support Service, VTB Bank

In recent years, VTB has been placing an increased focus on environmental initiatives. In an effort to address new environmental challenges, the Group decided to extend the traditional boundaries of

the commercial banking business and establish a dedicated legal entity whose staff would have a sound understanding of environmental project requirements and green finance principles, as well as broad business competencies, especially in banking and investment activities. The establishment of VTB Ecology has allowed the Group to centralize the development, management and implementation of its environmental projects.

The main objective of the new entity is to contribute to the development and adaptation of financial mechanisms that could enable the private sector (e.g. financial institutions) to finance environmental projects, including through green bonds. In April 2016, VTB Ecology experts took part in a panel discussion “Green money for green products: should the new costs be considered a contribution to social well-being or a growth driver?” It was held at the Ecotech forum.

Conservation of Big Cats in Russian regions (VTB Bank and VTB Ecology)In 2016, VTB continued cooperation with WWF, supporting its effort to conserve the population of snow leopards, Siberian tigers, Amur and Persian leopards. The key objectives of the joint project are the following:

Designating new protected areas and preserving existing protected areas in the Far East, Altai-Sayan and Caucasian regionsEnhancing the legal framework on the conservation of big catsImproving living conditions for local communitiesStepping up the clampdown on poachers

VTB Bank has pledged to provide US$5 million during a five-year period, with the first installment in the amount of US$1 million disbursed in September 2016. Special equipment for research was delivered to the Ubsunurskaya Kotlovina Nature Reserve, the Altai and Katun Nature Reserves and the Saylyugemsky and Tunkinsky National Parks, as well as funding for regular patrols and anti-poaching raids.

Table 22. Resource consumption and greenhouse gas emissions at the Group in 2015-16

Resource 2015 2016

Total electricity consumption, thousand MWh 300.7 274.9 (√)

Total fuel consumption, thousand liters 6,343.9 5,833.3(√)

Paper consumption, tons 3,749.6 4,161 (√)

Direct greenhouse gas emissions, tons CO2-equivalent 15,091.91 16,067.22

Indirect greenhouse gas emissions, tons CO2-equivalent 217,894.1 192,472

As a socially responsible business, VTB aims to raise awareness on sustainable consumption among its employees and regularly conducts environmental training:

Employees of VTB Bank’s Administrative Department undertake annual training in environmental protection, safety and the sustainable use of resources to provide hands-on assistance with current issues to their coworkers in other departments;VTB24 employees undertook a training course in Environmental Requirements for Companies, Reporting and Charges for a Negative Environmental Impact.

VTB plans to take further action in 2017 to improve its business management practices from the environmental sustainability perspective. The plans focus on the following:

Upgrading the heat supply units by install temperature sensitive equipment at the Lesozavodsk Front Office and the Yaroslavl Regional Front OfficeInstallation of LED lamps Disposal of around 40 idle real estate properties with a total area of 90 thousand square meters Further movement of the offices of the Group companies to the Eurasia Tower in MoscowPromotion of electric vehiclesInstallation of extra containers for separate collection of waste, including used batteriesConducting of environmental awareness campaigns


http://wwf.ru/eng

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Plant a Tree as a Gift to a Friend (Post Bank)Post Bank provided further partnership support to the Maraquia online project aimed at encouraging tree planting in Russia. Under the project, bank customers can pay for the planting of trees in 12 national parks across the country. In June 2016, Post Bank signed an agreement with the Russian Ministry of Natural Resources and Environment to extend the project coverage to all protected areas in Russia. Post Bank earned the Best Media Manager in Russia prize at the 16th Media Business National Awards for this initiative.

In 2017, the Year of Ecology in Russia, the Group plans the following activities:

Further cooperation with the WWF under its wild cat conservation projectParticipation in new projects run by NEFCO and the Arctic CouncilImplementation of waste management initiatives

Driving the development of Russia’s nascent securities market is a key priority for VTB Ecology. At its meeting on 24 December 2016, the State Council of the Russian Federation adopted a resolution calling for the development of green finance instruments in Russia.

In 2016, VTB also continued activities as the Russian execution agency for the Arctic Council Project Support Instrument, with VTB Ecology

coordinating and implementing a series of Arctic contamination action projects.

In addition, the 2016 year saw the first results of a renewable energy project under which a wind-diesel hybrid power station was built to replace an old diesel-powered generator in the Murmansk Region. The cleaner source of energy helped reduce emissions tenfold, from 3.5 tons to 0.35 tons per year, while annual costs decreased by RUB 327.6 thousand. The project costs totaled RUB 4.1 million.

Reduction of black carbon emissions: Heat infrastructure reconstruction at the Valdai Cluster (VTB Bank and VTB Ecology)In 2016, new activities were undertaken under a black carbon reduction project launched at the Valdai Cluster in November 2014. The initiative’s key objective is to provide alternative energy sources for eight remote localities in order to decrease their dependence on fuel from external suppliers, reduce air pollution, and secure safe and quality energy supply. Project costs have already exceeded EUR 190 thousand.

In 2016, VTB also made charitable contributions to initiatives aimed at preserving biodiversity, which included:

Assistance to the Amur Tiger Research and Conservation Center with efforts to conserve and increase the population of Amur tigers

Assistance to the Klinskoye District Animal Protection Society with the construction of a shelter for abandoned animals


https://www.pochtabank.ru/posadiderevo

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VTB Social Report 2016 6. About the Report

6. About the Report

35 Including branches in Shanghai (China) and New Delhi (India).36 Including the subsidiaries CJSC VTB Capital and VTB Capital plc.

This 2016 VTB Group Social Report is the ninth non-financial report published by VTB Bank.

The main objective of the Report is to inform stakeholders about VTB Group’s CSR activities in the reporting period.

The reporting period of this Report is the calendar year beginning on 1 January 2016 and ending on 31 December 2016.

Non-financial reports are published by VTB Bank annually and are part of the Group’s annual reporting.

Scope of the Report

Companies are included in the scope of the Report on the following grounds:

Controlling interest (more than 50% of voting shares) held by VTB BankTheir economic, social, and environmental materiality

The scope of this Report includes the following companies:3536

Full name Type of activity

VTB Bank share ownership

as at 31 December 2015

Russia

VTB Bank (PJSC)35 Bank -

VTB24 (PJSC) Bank 99.97 %

CJSC Holding VTB Capital36 Finance 100 %

PJSC Post Bank (formerly, PJSC Leto Bank) Bank 50 %

HALS-Development PJSC Real estate 98.11 %

JSC VTB Leasing Leasing 100 %

VTB Insurance, Ltd. Insurance 100 %

VTB Factoring, Ltd. Factoring 100 %

JSC NPF VTB Pension Fund Pension fund 100 %

CJSC VTB Specialized Depository Non-bank custodial institution 100 %

MultiCarta LLC Processing center 100 %

LLC VTB DC Finance 100 %

CJSC MC Dynamo Real estate 75 %

LLC VTB Real Estate Real estate 100 %

CJSC VTB Registrar Registrar 100 %

Full name Type of activity

VTB Bank share ownership

as at 31 December 2015

CIS and Georgia

PJSC VTB Bank (Ukraine) Bank 100 %

Subsidiary Organization JSC VTB Bank (Kazakhstan) Bank 100 %

VTB Bank (Armenia) CJSC Bank 100 %

CJSC VTB Bank (Belarus) Bank 100 %

OJSC VTB Bank (Azerbaijan) Bank 51 %

VTB Bank (Georgia) Bank 97.14 %

Europe

VTB Bank (Austria) AG37 Bank 100 %

VTB Bank (France) SA Bank 96.3 %

VTB Bank (Deutschland) AG Bank 100 %

VTB Bank JSC Belgrade Bank 100 %

Asia and Africa

Banco VTB Africa, SA (Angola) Bank 50.1 %37

37 Including the subsidiaries VTB Bank (Deutschland) AG and VTB Bank (France).

The financial information on VTB Group in this Report is presented as stated in VTB Bank’s consolidated financial statements as of 31 December 2016, prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

Approach to determining the contents of the Report and material aspects

This Report presents information on the Group’s sustainable development and CSR activities. A number of quantitative indicators presented in this Report refer only to the Bank’s performance due to the specific nature of reporting systems and difficulties in collecting relevant information across the Group.

This Report complies with the G4 Sustainability Reporting Guidelines (core level). To comply with the Guidelines, VTB Group identified material aspects using a procedure that consisted of the following steps:

Interviews with leaders of relevant business unitsSurveys of the Group’s top managers and stakeholdersReview of non-financial reports issued by Russian and foreign peer companiesAnalysis of the Group’s internal communication channels and media coverageReview of internal regulationsExpert assessment of identified sustainability topics for completeness and balance


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VTB Social Report 2016 6. About the Report

VTB Group’s material indicators subject to independent assessment

Indicator Description

Charitable donations, RUB

These refer to charitable contributions made by Group companies (within the scope of the Report) in the reporting period. In cases where charitable donations were made in foreign currency, they were converted into rubles using the average exchange rate of the Bank of Russia for the year.

Sales offices The number of sales offices is determined by adding up the offices of Group banks, excluding retail desks and POS terminals.

Paper consumption, tons

This refers to paper consumption by all companies of the Group (within the scope of the Report) in the reporting period. The amount of paper consumed was determined by converting the number of paper packs used into metric tons. In cases where there was no information on the weight of an A4 or A3 sheet pack, average values were used (2.5 kg and 4.8 kg, respectively).

Fuel (gasoline and diesel fuel) consumption, 1000 LThis refers to fuel consumption by all companies of the Group (within the scope of the Report) in the reporting period, which was limited to the fuel consumed by vehicles on their books.

Electricity consumption

This refers to electricity consumption (kWh) by all companies of the Group (within the scope of the Report) in the reporting period. The amount of electricity consumed at some locations leased from VTB Bank has been included into VTB Bank’s total electricity consumption.

Average headcount

Average headcount is determined by adding up the number of employees of Group companies in each calendar day of the reporting period, including weekends and holidays, and dividing this sum by the number of calendar days in the month. Average headcount in the reporting period is determined by summing the average headcount in each month of the reporting period and dividing this sum by the number of months in the reporting period. Part-time employees as defined by their employment contracts are counted proportionally to the number of hours they worked. Average headcount in the reporting period excludes women who were on maternity leave or extended child-care leave and employees who were on unpaid leave to undertake a course of study at an educational institution or take entrance exams to be admitted to an educational institution.

Accident frequency rate

This refers to the accident frequency rate across all companies of the Group (within the scope of the Report) in the reporting period. Accident frequency rate indicates the number of accidents to total time worked.

Lost time injury rate

This refers to the lost time injury rate across all companies of the Group (within the scope of the Report) in the reporting period. Lost time injury rate indicates the total time lost due to work-related injuries.

Based on its analysis, the Group developed a matrix of relevant topics that reflects the most material aspects for sustainable reporting based on their influence on both internal and external stakeholders.

This Report covers the identified material aspects, disclosing approaches to management, results for the reporting period and performance assessment findings. Topics which are not considered relevant are not subject to disclosure in sustainability reports according to the Guidelines. However, this Report addresses some of them, since they may be important to stakeholders.

Information for this Report was collected and consolidated by the relevant functionaries of VTB Group companies.

Independent assurance of the Report

The Bank engages independent appraisers to review selected indicators presented in the Report. The assessment focused on material indicators of VTB Group’s CSR activities in the reporting period.

Significantly lower electricity consumption in 2016, which decreased by 16 million kWh year-on-year, was largely due to a different method used by VTB24 to calculate power consumption across its network in 2015. If VTB24 is excluded, the Group’s electricity consumption fell by 7% year-on-year in 2016, owing largely to optimized processes as a result of the merger of Bank of Moscow with VTB Bank.


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VTB Social Report 2016 7. Appendices

VTB Group company Business association VTB Pension Fund National Association of Non-Governmental Pension Funds

VTB Capital

British Bankers’ Association (BBA)American Chamber of Commerce in Russia (AmCham)Russian National Association of Securities Market Participants (NAUFOR)Corporate Counsel Association Russo-British Chamber of Commerce (RBCC)Emerging Markets Private Equity Association (EMPEA)International Capital Market Association (ICMA)Association of Foreign Banks (AFB) Russian National SWIFT Association (ROSSWIFT)

VTB RegistrarNational Securities Market Association (NSMA)National Settlement Depository

VTB Specialized DepositoryProfessional Association of Registrars, Transfer Agents and DepositoriesNational Association of Non-Governmental Pension Funds

MC Dynamo Russian Managers Association

VTB Bank (Ukraine)

Independent Association of Banks of UkraineProfessional Association of Registrars and DepositoriesUkrainian Interbank Payment Systems Members Association (EMA)Ukrainian Credit Banking Union

VTB Bank (Kazakhstan)

National Chamber of Entrepreneurs of the Republic of KazakhstanFinancial Institutions’ Association of KazakhstanKazakhstan Stock ExchangeKazakhstan Deposit Insurance FundSociety for Worldwide Interbank Financial Telecommunication (S.W.I.F.T. CSRL)Damu Entrepreneurship Development FundCouncil of Representatives of Banking OmbudsmanAssociation of Taxpayers in Kazakhstan

VTB Bank (Azerbaijan)

National Confederation of Entrepreneurs of Azerbaijan Republic Azerbaijan Banks Association Azerbaijani-Russian Chamber of Business Cooperation United States - Azerbaijan Chamber of Commerce

VTB Bank (Armenia) Union of Banks of Armenia (UBA)

VTB Bank (Belarus)

Association of Belаrussian Banks Association of Securities Market participants of the Republic of BelarusBelarusian Chamber of Commerce and Industry (BelCCI)

VTB Bank (Georgia) Association of Banks of Georgia

VTB Bank (Austria)

Austrian Federal Economic ChamberAustrian Bankers’ AssociationFederation of Austrian Industry

VTB Bank (Germany)

Auditing Association of German Banks (Prufungsverband deutscher Banken)Association of Foreign Banks in Germany (VAB)Association of Foreign Bank Representatives in Germany (VRAB)Hessen Bankers Association (Bankenverband Hessen)Federal Association of German Banks (BdB)Deposit Protection Fund (Einlagensicherungsfonds)

VTB Bank (France)

French Banking FederationFrench Bankers AssociationFranco-Russian Dialogue AssociationAssociation of Foreign Banks in ParisFinancial Professions Center

VTB Bank (Belgrade) Belgrade Chamber of Commerce

7. Appendices

7.1. Membership in business associations

VTB Group company Business association

VTB Bank

Agency for Loan GuaranteesAssociation of Russian Banks (ARB)Asia-Pacific Economic Cooperation Advisory CouncilInternational Chamber of Commerce (ICC)National Council on Corporate Governance (NCCG)National Financial Market Council (NFMC)Russian Union of Industrialists and Entrepreneurs (RSPP)CIS Financial and Banking Council (FBC)

VTB24

Association of Russian Banks (ARB)Russian Managers Association (RMA)National Securities Market Association (NSMA)Nonprofit Partnership for the Development of Financial Market RTS (NP RTS)

Bank of Moscow

Agency for Strategic InitiativesNational Payment Council AssociationAssociation of Bill Market ParticipantsFranco-Russian Dialogue AssociationAssociation of the Regional Banks of Russia (Association Russia)Association of Russian Banks (ARB)Business Council for Cooperation with Cyprus under the Chamber of Commerce and Industry of the Russian FederationInternational Capital Market AssociationMoscow International Business Association (MIBA)Moscow Chamber of Commerce and Industry (MCCI)Russian National Association of Securities Market ParticipantsNational Foreign Exchange AssociationNational Securities Market AssociationMoscow City Civic ChamberCivic Chamber of the Moscow Region Public Council under the Ministry of Finance of the Russian FederationSpecial Economic Zones OJSCProfessional Association of Registrars, Transfer Agents and DepositoriesRegional Association of Employers “Moscow Confederation of Industrialists and Entrepreneurs (Employers)” (MCIE(E))Russian Union of Industrialists and Entrepreneurs (RSPP)Trilateral Commission for Social and Labor Relations in the Central Federal District

Hals-Development First National Organization of Builders

VTB Insurance

Association of Life Insurance CompaniesAll-Russian Insurance AssociationInterregional Union of Medical InsurersNational Union of Liability InsurersRussian Association of Motor Insurers (RAMI)Russian Association of Aviation and Space Insurers (RAASI)Russian Antiterrorism Insurance Pool (RATIP)Russian Nuclear Insurance Pool (RNIP)

VTB FactoringAssociation of Factoring Companies (AFC)Factors Chain International (FCI)


8786


Indicator Definition Report section / notes Report pageExternal

assurance

G4-20Aspect boundary within the organization for each material aspect Section 6. About the Report 80-81

G4-21Aspect boundary outside the organization for each material aspect Section 1. About VTB Group 18

G4-22Restatements of information provided in previous reports, and the reasons for such restatements Section 6. About the Report 82

G4-23Significant changes from previous reporting periods in the scope and aspect boundaries Section 6. About the Report 80-81

Stakeholder engagement

G4-24List of stakeholder groups engaged by the organization Section 1. About VTB Group 18

G4-25Basis for identification and selection of stakeholders with whom to engage Section 1. About VTB Group 17-18

G4-26

Organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group Section 1. About VTB Group 18-23

G4-27Key topics and concerns that have been raised through stakeholder engagement Section 1. About VTB Group 18-23

Report profile

G4-28 Reporting period Section 6. About the Report 80

G4-29 Date of most recent previous report Section 6. About the Report 80

G4-30 Reporting cycle Section 6. About the Report 80

G4-31Contact point for questions regarding the report or its contents Contact information 92

G4-32“In accordance” option the organization has chosen and GRI content index Section 6. About the Report 81-82

G4-33 External assurance Section 6. About the Report 82-83

Governance

G4-34 Governance structureSection 1. About VTB Group www.vtb.ru 10-13

G4-51Remuneration policies for the highest governance body and senior executives

http://www.vtb.ru/group/documents/#regulation

Ethics and integrity

G4-56Organization’s values, principles, standards and norms of behavior

Section 1. About VTB Grouphttp://www.vtb.ru/group/mission/ 13-14

Specific standard disclosures

Economic category

Economic performance

G4-EC1 Direct economic value generated and distributed Section 1. About VTB Group 11

G4-EC3Coverage of the organization’s defined plan obligations Section 3. Internal environment 49

7.2 GRI content index


assurance

General standard disclosures

Strategy and analysis

G4-1

Statement from the most senior decision-maker of the organization about the relevance of sustainability to the organization and the organization’s strategy for addressing sustainability

Statement of the President and Chairman of the Management Board of VTB Bank 8-9

Organizational profile

G4-3 Name of the organization Contact information 92

G4-4 Primary brands, products, and services Section 2. Market environment 26, 34-39

G4-5 Location of the organization’s headquarters Contact information 92

G4-6Number of countries where the organization operates

Section 1. About VTB GroupSection 6. About the Report

1080-81

G4-7 Nature of ownership and legal form Section 6. About the Report 80-81

G4-8 Markets servedSection 1. About VTB GroupSection 6. About the Report

1076

G4-9 Scale of the organization

Section 1. About VTB GroupSection 2. Market environmentSection 6. About the Report

10-1124, 26-29, 35-36

80-81

+(number of sales

offices)

G4-10 Number of employees Section 3. Internal environment1044

+ (average headcount)

G4-12 Organization’s supply chain

The Group’s procurement policy is available at http://www.vtb.ru/group/purchases/The procurement record for local suppliers is not kept.

G4-13

Significant changes during the reporting period regarding the organization’s size, structure or ownership

Section 1. About VTB GroupSection 6. About the Report 80-81

G4-14 Precautionary approach or principleThe Group does not explicitly use the precautionary principle.

G4-15

Externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses

VTB Group joined the Banks Against Money Laundering Declaration.VTB Bank joined the Anti-Corruption Charter of Russian Business.

G4-16

Memberships of associations (such as industry associations) and national or international advocacy organizations Appendix 7.1 84-85

Identified material aspects and boundaries

G4-17Entities included in the organization’s consolidated financial statements Section 6. About the Report 80-81

G4-18 Process for defining the Report contentSection 1. About VTB Group Section 6. About the Report

14-1581-82

G4-19List of all the material aspects identified in the process of defining report content Section 1. About VTB Group 15


http://www.vtb.ru



http://www.vtb.ru/group/mission/

http://www.vtb.ru/group/purchases/

http://www.vtb.ru/financial/policy/#consensus

http://www.vtb.ru/financial/policy/#consensus

http://www.vtb.ru/financial/policy/

http://www.vtb.ru/financial/policy/

8988



assurance

Diversity and equal opportunity

G4-LA12

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership and other indicators of diversity

Section 3. Internal environmenthttp://www.vtb.ru/group/management/ 45

Society

Local communities

G4-SO1

Percentage of operations with implemented local community engagement, impact assessments, and development programs

Not applicable to Group financial companies. MC Dynamo organizes regular meetings with FC Dynamo Moscow supporters. Hals-Development participates in public hearings on its projects.

Anti-Corruption

G4-SO4Communication and training on anti-corruption policies and procedures Section 1. About VTB Group 16-17

Product responsibility

Product and service labeling

G4-PR5Results of surveys measuring customer satisfaction Section 2. Market environment 38

Financial services indicators

FS5

Interactions with clients, investors and business partners regarding environmental and social risks and opportunities Section 5. Natural environment 77-79

FS6Percentage of the portfolio for business lines by specific region, size and by sector Section 2. Market environment 26-27

FS7

Monetary value of products and services designed to deliver a specific social benefit for each business line broken down by purpose Section 2. Market environment 34-41

FS13Access points in low-populated or economically disadvantaged areas by type Section 2. Market environment 35-36

FS14Initiatives to improve access to financial services for disadvantaged people Section 2. Market environment 34-39

Insurance Section 2. Market environment 38-39

Charity and sponsor-ship Charity and sponsorship Section 4. Social environment 56-71


assurance

Indirect economic impacts

G4-EC7

Development and impact of infrastructure investments and services supported, with these investments and services being primarily commercial, in-kind or pro bono engagements Section 4. Social environment 56-71

G4-EC8Significant indirect economic impacts, including the extent of impacts Section 2. Market environment 26-29, 34-35

Environmental category

Materials

G4-EN1 Materials used by weight or volume Section 5. Natural environment 74-76+

(paper consumed)

Энергия

G4-EN3 Energy consumption within the organization Section 5. Natural environment 74-76

+ (electric energy and fuel

consumed)

G4-EN5 Energy intensity Section 5. Natural environment 74-76

G4-EN6 Reduction of energy consumption Section 5. Natural environment 74-76

Social category

Employment

G4-LA1

Total number and rates of new employee hires and employee turnover by age group, gender and region

Section 3. Internal environment(partially disclosed) 45

G4-LA2

Benefits provided to full-time employees that are not provided to temporary or part-time employees Section 3. Internal environment 49

Labor/management relations

G4-LA4

Minimum notice periods regarding operational changes, including whether these are specific in collective agreements

The minimum notice period is defined by the applicable laws of the countries of operation and is strictly observed by all Group companies

Occupational health and safety

G4-LA6

Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and gender Section 3. Internal environment 53

+(accident

frequency rate)

Training and education

G4-LA9Average hours of training per year per employee by gender, and by employee category

VTB Group in 2016Section 3. Internal environment

446


http://www.vtb.ru/group/management/

9190


Board for Accountants, which is based on the fundamental principles of honesty, objectivity, professional competence and due diligence, confidentiality and professional behavior.

Summary of the work performed

Our engagement was conducted in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information and, accordingly, included the following procedures:

analysis of the Bank’s internal regulatory documents related to sustainability policies, activities and relevant reporting;interviews with the managers and specialists responsible for sustainability policies, activities and reporting where relevant to the Indicators at the headquarters of the Bank, VTB24 PJSC;understanding the process of reporting on the Indicators by analyzing the process used for reporting on sustainability issues;review of sustainability reports of selected national and international financial institutions;review of a selection of corporate and external publications with respect to the Bank sustainability policies, activities and related events in 2016;identification of sustainability issues material for the Bank based on the procedures described above and analysis of their reflection in the Report;review of the data samples regarding Indicators at the Bank and its subsidiaries including a review on a sample basis of documentated evidence of the

Indicators value for the year ended 31 December 2016, in order to verify that the data was collected, prepared, collated and reported in a proper manner.

Our evidence gathering procedures are more limited than for a reasonable assurance engagement, and therefore less assurance is obtained than in a reasonable assurance engagement.

Conclusion

Based on the procedures performed and evidence obtained, nothing has come to our attention that causes us to believe that the Indicators do not represent fairly, in all material respects, in accordance with the criteria of our assurance engagement set out in the chapter “About the Report” on page 82 of the Report.

Translation of the original report issued in Russian; corresponds to, and should be read in conjunction with the 2016 VTB Group Social Report prepared by VTB Bank.

Signed: Petr Tsebernyak

Ernst & Young LLC

Moscow,

20 March 2017

7.3. Independent Assurance Report

Audit report38 on Selected Sustainability Indicators for the year ended 31 December 2016

Translation of the original report issued in Russian; corresponds to, and should be read in conjunction with the 2016 VTB Group Social Report prepared by VTB Bank

To the Supervisory Council of PJSC VTB Bank

Identification and description of the subject matter

At the request of PJSC VTB Bank (the “Bank”) we have obtained a limited level assurance on the following seven material sustainability performance indicators disclosed in the VTB Group Social Report 2016 (the “Report”) and identified in it by the symbol √ (the “Indicators”):

Average headcount (page 10 of the Report);Injury rate (page 53 of the Report);Number of sales offices including number of sales offices in underpopulated and economically underdeveloped regions of Russia (page 10 of the Report)Charitable donations made (page 56 of the Report);Electric energy consumed (page 76 of the Report);Fuel (petrol and diesel) consumed (page 76 of the Report);Paper consumed (page 76 of the Report).

The Indicators have been selected and prepared by Bank management based

38 Report on engagement which provides a limited level of assurance; Engagement is conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, issued by IFAC.

on the relevant sustainability reporting principles, scope and methods.

Identification of the criteria

The criteria of our engagement are disclosed in the chapter About the Report on page 82 of the Report. We believe that these criteria are appropriate given the purpose of our assurance engagement.

Management responsibilities

The management of the Bank is responsible for preparation of the Report and for fair disclosure of the Indicators for the year ended December 31, 2016 included in the Report in all material respects and in compliance with the sustainability reporting principles, scope and methods. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of Indicators that are free of material misstatements. The management of the Bank is also responsible for selecting and applying appropriate reporting principles and using relevant measurement and evaluation methods.

Our Responsibilities

Our responsibility is to independently express a conclusion that the Indicators have been fairly stated, in all material respects.

We apply the International Standard on Quality Control 1, and therefore, we support an exhaustive quality control system, also confirmed by documented policies and procedures for compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

We comply with the independence requirement and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Council on International Ethics Standards

Information about the subject of the independent assurance Name: VTB Bank Entered in the Unified state register of legal entities August 17, 2012 and assigned state registration number 1027739609391. Location: 29 Bolshaya Morskaya, Saint-Petersburg, 190000, Russia Information about the assurance provider Name: Ernst & Young Limited Liability Company Entered in the Unified state register of legal entities December 5, 2002 and assigned state registration number 1027739707203. Location: Russia, 115035 Moscow, Sadovnicheskaya emb., 77, bld. 1. Ernst and Young LLC is a member of non-profit partnership ‘Russian Audit Chamber’ (decision of the Council of NP RAC of 21.12.2009, protocol №55). Ernst and Young LLC is included in the master copy of the register of auditors and audit organizations with the primary registration number 11603050648.


92

VTB Social Report 2016

Contact Details

VTB Bank (PJSC)

Address: 29 Bolshaya Morskaya Str., St. Petersburg, 190000 Russia

Telephones: +7 (800) 200 77 99, +7 (495) 739 77 99

Fax: +7 (495) 258 47 81

Website: www.vtb.com, www.vtbrussia.ru

E-mail: [email protected]

Please send your comments and suggestions regarding this Report to Elena Melikhova, Deputy Head of Advertising and Marketing Division, Head of Sponsorship and Special Projects Unit, VTB Bank:

E-mail: [email protected]

Telephone: +7 (495) 775 54 54, ext. 1 46 48

http://www.vtbrussia.ru

mailto:info%40vtb.ru?subject=

mailto:melikhova%40vtb.ru?subject=