1.

The impact of the pandemic on the global economy and banks

2. The impact of the pandemic on the Russian economy and the banking sector

3. Competitive landscape changes

3
 EU Russia
Canada
UK
Real GDP, %
Japan
2019
USA Turkey
2020 forecast China
Mexico
India

Brazil
South Africa Australia
2019 2020 2021
Developed
1,6% -6,3% 4,3%
countries
Developing
4,4% -1,3% 6,6%
countries

World 2,6% -4,4% 5,2% − Initial expectations that the crisis will be short and will end in 2020 are not justified.
− During the year, international rating agencies repeatedly adjusted their economic forecasts for the worse.
− To date, the decline in global GDP by the end of the year is expected to be more than 4%

5
Source: Fitch, September 2020
 Operating income of European banks, bln € Return on capital of European banks, %
3/9/21 15
Opera.income
(before risk)
3/9/21

Crisis 2010 - 2012

Crisis 2007-2008

Crisis 2020 - 202?

10

Crisis 2020 - 202?

3/9/21 Opera.income
(after risk)
Crisis 2010 - 2012

3/9/21
5
Crisis 2007-2008

3/9/21

0
3/9/21

3/9/21
2005 2010 2015 2020 2025 -5

− Operating income and return on capital of Eurozone banks decreased to the level of the debt crisis of 2010-2012.
− As of November 2020, ROE of banks has decreased by more than 2 times (to 3.1%)
− Compared to the beginning of the year, experts estimate that the return on capital of European banks will not recover for at least 5 years.

6
Source: McKinsey “No going back: New imperatives for European banking”, 2020
 EXPECTED LOSSES, ADDITIONAL RESERVED,
gowth X times bln $
Data is presented worldwide • The energy sector is facing double pressure due to
L trajectory L trajectory volatile oil prices and falling demand, and healthcare
U and telecoms remain resilient.
U trajectory
trajectory • The growth of reserves for companies from these
Energy, oil and gas industries is likely to remain at pre-crisis level
15х+ 5-10х > 30 > 30
production
Industry 10-15х 5-10х > 30 15-30
Services sector 5-10х < 5% > 30 15-30 • The losses of banks will depend on:
Property 5-10х < 5% 5-15 <5 − the duration and depth of the crisis,
Transport and the aviation − the effect of the measures adopted by many
15х+ 5-10х 15-30 5-15
industry governments to support the economy,
Pharmaceuticals and − the current structure of corporate credit portfolios of
< 5% < 5% <5 <5
Healthcare banks,
Telecommunications < 5% < 5% <5 <5 − the ability of existing customer rating systems in
Tourism 15х+ 5-10х > 30 15-30 banks to adequately reflect the situation on industry
risks, especially for SME companies.

Source: Oliver Wyman & Morgan Stanley reseach “Steering Through the Next Cycle”, 2020 7
 Risk costs
320-550%
Optimistic case
• Corporate defaults and financial losses of companies in the real
Negative case 200-300%
sector of the economy worsen the quality of bank assets The cost
of risk in 2020 may increase by 3-5 times (depending on the
100% duration and depth of the crisis).
3/9/21 3/9/21 3/9/21
• The need to reduce non-operating costs will lead to a short-term
Efficiency outlay increase in the cost-effectiveness factor (CIR).
• Profits are expected to decline significantly, down to a negative
45-48% 48-49%
result.
51%
• In these circumstances, the decisive factor of success for
3/9/21 3/9/21 3/9/21 corporate banks is the growth of competences in risk
management and pricing taking into account risk factors.
Financial result

40-75%
100% 40%

3/9/21 3/9/21 -35% 3/9/21

Source: Zeb “Firmenkundenstudie 8.0: Das Firmenkundengeschäft im Zeichen der COVID-19-Krise“, 2020 8
 First level factors influencing the reduction of capital adequacy

Basic scenario Negative scenario

Level 1 capital adequacy

positive impact
negative impact

2019 P&L Dividends RWAs Other 2022 2019 P&L Dividends RWAs Other 2022

Source: European Central Bank data, https://www.ecb.europa.eu 9

 Maximum one-off fall The time it takes to restore Return on capital of banks at
in bank quarterly profits profits to pre-crisis levels the time of crisis
(as a percentage of pre-crisis level)

-150%
Рецессия (Covid... ~6 Q < 2% ​
COVID-19 (U - tajectory)
ve
COVID-19
-200%
Затяжная (L - trajectory)
рецессия (Covid... ~7 Q gati
ne

EUROPEAN
-100%
Европ. DEBT
долговой CRISIS
кризис (2010... 6Q ~ 8% ​

ve
-500% FINANCIALкризис
Финансовый CRISIS(2007... 6Q g ati
ne
-50%
Dot.com, Enron (2000... 8Q ~ 10% ​

-400%
Junk Bond (1989... 6Q ~ 7% ​

-500% Black Monday (1... 1Q ~ 9% ​

Source: Oliver Wyman & Morgan Stanley reseach “Steering Through the Next Cycle”, 2020
10
RUSSIA
As a result of the lockdown, the maximum GDP reduction was -9.5%. At the end of The average annual cost of Urals oil in 2020 will be about 40%
the year, THE drawdown of GDP is expected within - (3.4-5.5)%
70
CEP
GDP, % actually sick COVID-19 in Russia 60
IER 50 -40%

2% Central 40
Bank 30
0%
20
-2% 10
-4% 0
2020
2019 янв janфевр
feb mar apr апр
март may jun
май jul
июньaugиюль
sep oct
авг сент окт
-6%

-8% By the end of the year, inflation will approach the Bank of Russia's
-10%
target. The ruble exchange rate is expected at the level of 71-72
rubles/dollar.
2019 1 1 01.may
01.Apr 2 1 1 01.jun
2 3 1 01.jul
2 3 10 01.aug
20 30 901.sep
1 2 01.oct
8 1 2 01.nov
8 1 2 7 1 2 2020 80 5%

75 4%

70 3%
Uncertainty about this year's economic results remains. Prospects for further >10%
65 2%
economic recovery will depend on the duration of the "second wave" of the
pandemic, the timing and effectiveness of vaccination, as well as the 60 1%
effectiveness of government support measures taken. 55 0%
2019 янв февр март апр май июнь июль авг сент окт
jan feb mar apr may jun jul aug sep oct 2020
average annual RUB rate. (av. month)
инфляция, дек к дек, %
Inflation, dec to dec, %
12
 Economic activity in sectors of the economy, Financial result, Prospects for
2 sq. 2020 % to 2 sq 2019 7 months 2020 % to 7 months. recovery
2019
• During the period of quarantine restrictions, there
fast was a deep decline in business activity in almost
Agriculture 3/9/21 + 55% all sectors of the economy.
• This naturally affected the financial situation of
Food industry 3/9/21 fast
companies and a significant reduction in profits.

Chemical 3/9/21 fast • Restrictions on the OPEC deal and weak external
- 38% demand have also had a negative impact on the
Metallurgy 3/9/21 fast production complex's performance.
• The sectors producing basic necessities during
Mechanical the pandemic, as well as agriculture, have shown
3/9/21 -
Engineering
positive growth.
Oil and gas 3/9/21 - 23% slow
• In recovery, the greatest long-term risk is
associated with sectors that are strongly
Construction 3/9/21 + 5% - influenced by consumer demand.

Transportation 3/9/21 - 62% moderately

Retail 3/9/21 - 64% fast

13
Source: Russian Ministry of Economic Development, Rosstat (operational data), S'P Global Ratings
 Product profitability*,% Changing fin. result, % Growth credit • In a pandemic, the overwhelming majority of
(ten month 2020 to ten month portfolio**,% industries demonstrate a decline in product
2019) per 10 months 2020 profitability and/or profit. The exception is
3/9/21 10 months 2020 agriculture and food processing.
3/9/21
• Energetic and chemical sectors stfaced with
Agriculture +3/9/21 +3/9/21
3/9/21 reinforced pressing, including due to reduction
3/9/21 in world demand on their products:
Food industry +3/9/21 +3/9/21
3/9/21 - in oil- and gas production profitability
3/9/21 decreased from 32% to 18%,
Chemical 3/9/21
3/9/21 +3/9/21
- in the chemical sector, profits fell 80%.

Metallurgy 3/9/21
3/9/21 +3/9/21
• Taking into account more than 30% increase in
3/9/21 accounts payable by energy and chemical
Mechanical 3/9/21 companies, in the case of removal of all
Engineering 3/9/21 +3/9/21
3/9/21
concessions of the Bank In Russia, in these
Oil and gas
3/9/21
3/9/21 3/9/21 +3/9/21 industries there is a threat of deterioration in the
3/9/21
quality of loan portfolios, an increase in
3/9/21 overdue debt and new restructuring.
Transportation 3/9/21
3/9/21 +3/9/21

3/9/21
Retail 3/9/21 3/9/21
3/9/21

* the ratio between the value of fin. the result from the sale and the
cost of goods sold (Rosstat)
** data on 30 largest banks 14
 Guarantee on wages Deferred on all taxes Deferred insurance
(SME only) (6 months) premiums
(6 months)

3 trillion RUB
overall volume
Беспроцентный кредит
Interest-free salary Delaying Moratorium on debt
на зарплату rent payments collection and fines allocated funds
credit for employees
сотрудникам
(6 months) By the RF Government
(6 months)

Bankruptcy Reducing security

moratorium requirements for participation Concessional lending
(SME only) in state contracts programs

15
Source: Ministry of Economic Development of Russia
 EXTERNAL CALLS IMPACT FOR BANKS

 Asset volatility, portfolio impairment valuable papers

 Pereonconstruction siteand business processes and an increase in unforeseen
 Slowing Economy expenses (incl. as a result of reinOh yeah employees for remote operation)
 Devaluation ruble  Growth of operating risks
 Falling oil prices  Decline solvency, deterioration credit quality of corporate clients,
 Decline wages and incomes of the population, Rising predominantly MCB, and natiic persons
Unemployment  Growth overdue debt and credit risks
 Reduction of Investment Demand  The need to restructure credit portfolios
 Running measures state support economy  Growth in reserves
 Working capital deficits from companies of the real  Outflow corporate and retail deposits
sector of the economy
 Short-term liquidity shortage
 Reducing income and financial losses in a number of
 Keeping interest rates low
industries
  The fall income, withdecrease in capital adequacy
Sharp growth of demand for digital channels
 Reduced profitability capital

16
 Banking sector 2020
Economic recession Exchange rate volatility
Decrease in corporate margins and oil worsens the position of Russian borrowers
Problematic
and gas sector revenues leads to a
decrease in the amount of funds that 12-15% credits
with loans in foreign currency, and
indirectly affects individuals, whose
companies place with banks, which basket includes a high share of imported
affects funding profiles and banks' goods. Leads to higher prices for end
liquidity reserves. Restructuring users and will affect, inter alia, the ability
10-15%
aboutvolume of credit
issued of borrowers to repay loans.

portfolio
credits

Reducing consumption and Rexpenses for the

investment 2.5-3%
aboutvolume of credit
formation of Decreased creditworthiness
Decrease in consumer demand and weak additional reserves
portfolio The unsecured retail lending sector may
dynamics of growth in real wages have a
negative impact on many sectors of the enter a correction phase by mid-2020
economy (transport and commercial The financial result (these loans are concentrated in the
population with a relatively low
~0 RUB
sectors - about 37% of corporate loans).
of many income).
SMEs have traditionally been less able to banks
manage these risks than large companies.

State support is a decisive factor

for the stability of the banking sector

17
 In March of this year, the Bank of Russia introduced a number of regulatory concessions and macroprudential measures, directed to smooth out the
negative impact volatility in fin. markets for sufficiencybank capital, decline potential risks of deteriorating liquidity and risks of disruption standards,
decrease load on capital.

The most requested regulatory easing by banks in the period from March to Updated support measures
August 2020, % of numbers respondents * (August 2020)

Hf recognition of retail loans as restructured when forming reserves or  The right to an installment plan for the
not application of allowances on them / not increase reserveov at completion of reserves in full least:
3/9/21
worseningand fin... provisions borrower (extended before 31.12.2020)
- by retail loans and on loans SMEs (before
end I half year 2021 r...)
Right do not recognize losses from revaluation of investments in - on corporate loans restructured in
3/9/21 securities (acts until 01.01.2021). connection with pandemic (before end I
quarter of 2021 r...)
ANDusing exchange rates for 03/01/2020 (acted until
3/9/21 09/30/2020)  Possibility use the assessment of the value of
collateral (quality category I or II) as of
- withsoftening the conditions for the provision of irrevocable credit
01.01.2020 when completing the creation of
lines within the framework of compliance with the short-term liquidity
ratio (before 04/01/2021) reserves for corporate loans (before end 2020 of
3/9/21 - right not use allowances to the risk ratios for loans of citizens with the year)
confirmed COVID-19 (extended before 31.12.2020)
- withdowngrade premiums to risk ratios for mortgage credits, provided
with 04/01/2020

Source: ACRA data

18
 Slowdown in the dynamics of retail lending and intensification of the The growth of retail lending is provided mainly by mortgages, incl. through
issuance of corporate loans against the backdrop of anti-crisis measures concessional lending programs.
20%
18% 18%
16%
CB RF forecast CEP forecast
20%
18% 400 9%
8%
16%
300
14%
12% 200
10%
100
8%
6% 0
jan feb mar apr may jun jul aug sep
4% -100
2%
-200
0% jan feb 2020
2019 янв февр mar
мартapr апрmay май
jun июнь
jul aug sep
июль авг octсент окт Growth in a month, Car loans Consumer loans Mortgage
RUB bln
Assets Corporate loans Consumer loans

Zand March - November 2020 years aboutvolume of restructuring made up Against the background of regulatory easing and grace periods for restructured
more 6,five RUB trillion loans, the growth in reserves is still moderate
Increase in provisions for the loan
share in the corresponding loan onefiv
14% 4%
 e%     portfolio of banks,
portfolio
RUB bln
> 5 000 > 820 > 830 >6.6 RUB trillion 3/9/21

Corporate loans SME Retail

Source: Bank data Russia, in including... forecast from23.10.2020

3/9/21 1 sq ft 2020 2 sq ft 2020 3 sq ft 2020 4 sq ft 2020
(Oct)
3/9/21
19
Share problem loans in the retail portfolio increases through unsecured Decrease in interest rates on deposits accelerated in the second half of the
consumer loans, stable in the corporate portfolio year following the key rate

12% 11.2% 6.5% Key rate

11.0%
11% 10.7% The rate on deposits of individuals
6.0%
from over a year
10%
9.1% 5.5% The rate on deposits of legal entities
9% from over a year
8.2% 7.9% 5.0%
8%
7.7% analyst
6.8% 4.5% expectations
7%
6% 4.0%
jan feb mar apr may jun jul aug sep
3.5%
... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 1.1.21
corporative loans consumer loans в т.ч. потребительские 1/0 5/0 1/0 0/0 1/0 5/0 1/0 5/0 7/0 5/0 1/0 5/0 2/0 1/0 5/0 7/0 5/0 1/0 5/0 1/1
0 1 0 1 0 1 0 1 2 1 0 1 2 0 1 2 1 0 1 0

At the end of 8 months 2020 the banking sector is not getting ~ 15% of last year's
The share of overdue debt is relatively stable
profit. Profitability is gradually decreasing...
8% 7.4% 19.5% 18.3% 17.5% 16.8% 16.8% 16.7%
7.1% 20%
7% 7.1% 10%
0%
6% 1 sq. 19 apr may jun jul aug sep
-10%
4.8%
5%
4.4% -20%
4.7%
-30%
4%
-40%data is published with a -15% total
for January - August 2020
3%
jan feb mar apr may jun jul aug sep oct
-50% delay
-60%
-70%
consumer loans corporative loans
Return on equity, % Profit over the same period, % 20
 What new players could threaten the retail banking business?
2020 2025
Payment systems (PayPal, Ripple)

The Next Big Thing Tech Giants (GAFAM)

Perhaps the next disruptive technology
is already on the market. Experts are
currently paying a lot of attention to
digital currencies of central banks.

Robo-advising Alternative Credit Providers (e.g. p2p Lending)

Aggregators and plaftforms Partnerships between

(without thetech giants andoffintechs
participation banks)

Neobanks (Volt,Non-financial
Fidor, Monzo,companies
Varo Money,
(e.g. retailers
Starling)and telecoms)
Neobanks remain a threat to retail businesses.
But the results of their work in the first half of 2020 showed that in the context of
a pandemic, their real competitive advantages were not as significant as it was
believed earlier.

Source: poll Economist Intelligence Unit, which was attended by 405 heads of retail banks, 2019
22
Full launch of all products Sberbank and Yandex will allow them to share the client market in Russia and will leave little room for clients to other
financial institutions. Only point, individual solutions can become an alternative.

96 million active clients

• In the next 2-3 years plans increase profit from non-bank assets to
10% from the current 2-3%

Search Services Bank • Per 3 of the year invested over $ 1 billion in non-financial assets
from online trading to recruiting and healthcare services help
Yandex.Taxi Citymobil
• Sber does not clone the main business Yandex, although the share
Yandex.Food Delivery Club in services Mail.ru or Rambler it has.
Yandex...Market I take
Yandex...Shop Instamart...
"Yandex "can:
Yandex.Drive Youdrive • allow buy or create a bank for yourself (the company has a cash
Yandex.Alice Maroussia and the Capsule reserve of $ 3.2 billion)
• become a virtual bank based on the infrastructure of a real bank.
Yandex.Checkout own online checkout • to promote the main services of VTB Group under its own brand.
Yandex maps 2 GIS • to offer services related to e-commerce and "Yandex.Market»:
For example, leasing programs for suppliers and customer
Sber Telecom
loans...
Sber.insurance

82 million - monthly audience 23

 E-commerce volume, The volume of e-commerce in food products, Legal taxi market size,
trillion RUB bln RUB bln RUB

7.5 800 3.9%

3/9/21
7.0
2019-2024 CAGR: 3/9/21 750
2019-2024 CAGR: 2019-2024 CAGR:
6.5
+ 28.3% 3/9/21
700
> 300% 13%
6.0 650
3/9/21 3/9/21
5.5 600
3/9/21
550
5.0
3/9/21 500
4.5 3/9/21
450 800
4.0 3/9/21
3/9/21 400 3/9/21
3.5 1328
3/9/21 3/9/21 350 600
3.0 3/9/21 1142
3/9/21 3/9/21 300
2.5 3/9/21 983
3/9/21 250 845
3/9/21 400
2.0 4.1% 3/9/21 200 725
3/9/21 3/9/21 698
3.6% 3/9/21
1.5 3.2% 0.3 150
0.3 3/9/21 3/9/21
1.0 2.6% 100 3/9/21
200
1.7
1.1 1.3 0.2% 3/9/21
0.5 50
3/9/213/9/21 3/9/21
0.0 0 0
3/9/213/9/213/9/213/9/213/9/213/9/213/9/213/9/213/9/213/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21 3/9/21

Share of online sales in total sales, % Commodities (domestic market) Taxi

Goods (cross-border trade) Groceries 24
 Falling Changing
profitability of the consumer interests
banking business and preferences

Blurring the
boundaries of the
The emergence of
banking industry,
new technological
the emergence of
opportunities new competitors
(FinTech, BigTech)

Traditional bankhand have to adapt to rapidly changing market conditions, not only creating new products and services and
improving the quality of service, but also changing the business model.
25
26