VTB has developed a strategy with a 1.5-fold increase in profits

VTB plans to earn 650 billion rubles based on the results of its new three-year development strategy. The state bank plans to return to paying dividends based on the results of 2025, their size should be 80 billion rubles.

VTB President and Chairman of the Management Board Andrey Kostin presented financial targets as part of the group's new development strategy for 2024–2026. The bank's profit by 2026 should amount to 650 billion rubles.

The previous strategy was adopted for the period 2019–2022, but after the start of the Russian military operation in Ukraine and the introduction of sanctions against VTB, Kostin said that the group would develop a new one. Work on it continued throughout 2023, and the document was approved by VTB's supervisory board on December 19, 2023.

"It (the strategy. — ) was the result of our rethinking the situation that has developed in recent years, the new tasks facing the country, society, and the bank," Kostin said. Commenting on the results of the previous strategy, he emphasized that the tasks that the bank set "were accomplished, despite the fact that the recent events of February 2022 made significant adjustments to our activities." VTB also implemented a digital transformation program for the bank — Kostin estimated the effect of digitalization at 350 billion rubles.

The bank's net profit by the end of 2024 may amount to 435 billion rubles, by the end of 2025 - 520 billion rubles, while the return on capital will be at the level of about 19%, and in 2026 - about 20%, follows from the presentation given by the first deputy chairman of VTB Dmitry Pyanov. VTB also plans to return to paying dividends by the end of 2025. Their size should be 80 billion rubles.

The main shareholder of VTB is the Russian government - it owns 61.8% of the voting shares. Since 2022, VTB has been under blocking sanctions of the US , EU , UK , CANADA. This means that the bank's assets in these countries are frozen, and citizens and companies from these countries are prohibited from dealing with VTB and its structures.

Based on the results of the previous strategy, VTB planned to receive RUB 310 billion in net profit in 2022. Ultimately, this result was achieved back in 2021, when net profit amounted to RUB 327.4 billion. But in 2022, against the backdrop of the imposed sanctions, VTB received a record loss of RUB 756.8 billion under RAS and RUB 612.6 billion under IFRS. Before that, the group recorded a loss only in 2009 due to the global financial crisis, but then it was significantly less - RUB 59.6 billion under IFRS. As Pyanov explained, the loss when assessed using IFRS turned out to be less than under RAS, because the bank took into account a one-time income of RUB 165 billion from the merger of Otkritie, otherwise the group's "organic loss" would have amounted to about RUB 777 billion. However, the bank's business performance began to improve at the beginning of 2023, and by the end of 2023, VTB's net profit reached a record RUB 432.3 billion under IFRS.

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The bank expects the key rate to remain high even if inflation is "defeated," Pyanov said. By 2026, it should fall from the current 16% to 9% with inflation at 4%. In the long term, it will be at 8%, Pyanov predicts. "High real rates and strict regulation are reducing the market growth rate to a six-year low with a slower growth in lending compared to liabilities," the bank's presentation says. Thus, the average annual growth of assets in the banking sector will be 9%, business loans - 8%, loans to individuals - 9%, business funds - 15%, and funds of individuals - 11%.

In the case of VTB, the average annual growth rate of business loans is estimated at 8%, and the bank's share in this market in 2026 will be about 18%. The average annual growth rate of loans to individuals will be 9%, and the share in 2026 will be about 20%. According to Kostin, VTB's share in the market by assets should be at least 18%, and in foreign economic activity - at least 15%.

VTB intends to increase the share of ruble liabilities with high marginality. If in 2023 it was 66%, then in 2026 it should be 86%. The remaining share is liabilities with low marginality. As a result, the net interest margin in 2026 should grow to 3.6 from 2.5% in 2024.

The basic capital adequacy in 2024 is projected at 9.4%, and in 2026 — 10.6%, taking into account dividends. At the same time, according to the requirement of the Central Bank, these indicators should be at least 8.25% in 2024 and at least 9.5% in 2026.

Are these goals achievable?

The strategic plans, although quite ambitious, are quite achievable over a three-year horizon, believes Mikhail Doronkin, Managing DIRECTOR of the NKR rating agency: “Thus, on average, net profit growth is expected to be 15% per year, which is quite realistic, given the expected lending dynamics and the current level of rates.”

The strategy as a whole looks quite optimistic, while the prerequisites laid down in it are assessed as quite justified, agrees Irina Nosova, Senior Director of the Financial Institutions Ratings Group at ACRA. She notes that at the same time, the implementation of the strategy will directly depend on the state of the country's economy.

The target for net interest margin of 3.6% is not prohibitive for a large federal bank, says Vladimir Teterin, Senior Director of Bank Ratings at Expert RA. “Even at the height of the covid crisis in 2020–2021, VTB managed to maintain marginality at 3.5–4%, but fluctuations in the key rate subsequently led to a decrease in the indicator. If the key rate is systematically reduced, the bank will have more opportunities to increase the gap between lending and borrowing rates,” the analyst reflects. The trend towards cheaper liabilities in the banking sector is already quite established, Nosova summarizes.

The bank also spoke about development plans for individual business areas: retail business , technological transformation, servicing small and medium-sized businesses (SMEs), and a corporate investment block.

During the new strategy, VTB wants to increase the availability of its financial services to 100 million Russians; currently, the bank covers more than 50 million people in cities with a population of 100,000 people. To do this, it plans to increase the number of branches by 40%, to 1,800 points, and open offices in cities with a population of 20,000 people. The bank also plans to develop courier delivery of its products so that by 2026 it will operate in 23,000 cities and towns. The active client base should be expanded to 35 million people. Over three years, the bank plans to increase the volume of ruble savings of retail clients from 6.2 to more than 11 trillion rubles. Thus, VTB's share of the ruble savings market of individuals will exceed 21%. The bank expects that ruble funds on demand will be the growth drivers. VTB also intends to increase its share of the salary projects market: by 2026, the number of salary clients should grow by at least 40% and amount to 11 million people. VTB also plans to focus on developing the brokerage business. It wants to increase its market share to 25%. Currently, VTB broker clients include more than 3.2 million clients, and about 1.4 trillion rubles are under management. In the corporate investment business, the loan portfolio and deposits should grow by an average of 9% per year over the three years of the strategy. As a result, VTB's share of the large business loan market should amount to 21.1%, and of the deposit market — 22.6%. The number of SME clients should increase by one and a half times in three years, and the growth of the SME loan portfolio should amount to 40%. Currently, 1.3 million entrepreneurs and companies use the bank's services.