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ATON - Daily Dashboard, Financials - Oct 5, 2011.


VTB Hosts Investor Day

Yesterday (4 Oct) VTB held an Investor Day, hosted by top management including CEO Andrei Kostin.

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Key takeaways include:

- Management thinks that a macrorecession in Russia, if it happens, should be smoother than in 2008. A key reason is the Central Bank's greater readiness to support the banking system, they said. Nevertheless, should the recession be deep, the recovery would likely be slow, in VTB's view.

- The unprecedented RUB295bn Deposit Insurance Agency loan turned out well for VTB, since the newly issued government bonds that VTB bought with the money can be used in repo deals with the Central Bank of Russia. Thus, even though VTB cannot sell the bonds for a year they represent a major liquidity boost for the bank.

- Management has not yet seen any negative tendencies in the bank's core business, i.e. no deposit runs, no noticeable asset quality deterioration, etc. On the contrary, 3Q11 and September in particular were fruitful from a retail loan growth point of view, including mortgage activity and credit cards amongst other things.

- The FY11 earnings forecast of RUB100bn remains intact and is afundamentally attainablea, although after the turbulent 3Q management acknowledges there is downside risk to this estimate.

- Dividends are planned to reach 1020% of IFRS earnings for FY11.

Bottom line

The overall impression of the meeting was positive as management did their part to cheer investors and present the positives for the bank. However, little new information was communicated. That VTB can use the RUB295bn of new bonds in CBR repos boosts its liquidity and is a major positive for the bank. On the other hand, we believe VTB still faces a greater number of problems than management admits and we remain negative on the name.



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Publication:Russian Banks and Brokers Reports
Geographic Code:4EXRU
Date:Oct 5, 2011
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