Investor Day. Strategy 2020 - Sberbank Investor Day

SBERBANK STRATEGY 2020

H. Gref

M. Poletaev

L. Khasis

A. Vedyakhin

Y. Chupina

A. Morozov

Vision and key priorities of Strategy 2020

Retail and corporate clients

Ecosystem and technology

Data analytics and riskmanagement

Team and culture development

Financial targets

Disclaimer ThispresentationhasbeenpreparedbySberbank of Russia (the “Bank”) and has not been independently verified. This presentation does not constitute or form part or all of, and should not be construed as, any offer of, or any invitation to sell or issue, or any solicitation of any offer to purchase, subscribe for, underwrite or otherwise acquire, or a recommendation regarding, any shares or other securities representing shares in, or any other securities or financial instruments of the Bank, or any member of the Bank’s group, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or any commitment whatsoever or any investment decision. The information in this presentation is confidential and is being provided to you solely for your information and may

not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any purpose. This presentation is only being distributed to and is only directed at (A) persons in member states of the European Economic Area (other than the United Kingdom) who are “qualified investors” within the meaning of Article 2(1)(e) of Directive 2003/71/EC (as amended and together with any applicable implementing measures in that member state, the “Prospectus Directive”) (“Qualified Investors”); (B) in the United Kingdom, Qualified Investors who are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) and/or high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d)

of the Order; and (C) such other persons as to whom this presentation may be lawfully distributed and directed under applicable laws (all such persons in (A) to (C) above together being referred to as “relevant persons”). The shares, or other securities representing shares, are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this presentation or any of its contents. The information in this presentation or in oral statements of the management of the Bank may include forward-looking statements. Forward-looking statements include all matters that are not historical facts, statements regarding the Bank’s intentions, beliefs or current expectations concerning,

among other things, the Bank’s results of operations, financial condition, liquidity, prospects, growth, targets, strategies, and the industry in which the Bank operates. By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Bank cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Bank operates may differ materially from those made in or suggested by the forward looking statements contained in this presentation or in oral statements of the management of the Bank. In addition, even if the Bank’s results of operations, financial condition and liquidity and the development of

the industry in which the Bank operates are consistent with forward-looking statements contained in this presentation or made in oral statements, those results or developments may not be indicative of results or developments in future periods. Sberbank assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. The information and opinions contained in this presentation or in oral statements of the management of the Bank are provided as at the date ofthispresentationorasattheotherdateifindicated and are subject to change without notice. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or oral statements of themanagement of the Bank or on assumptions made as to its completeness.

No representation or warranty, express or implied, is given by the Bank, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. By attending or reviewing this presentation, you acknowledge and agree to be bound by the foregoing.

HERMAN GREF CEO

10 years of continuous transformation… 01

VISION AND KEY PRIORITIES OF STRATEGY 2020

02

RETAIL AND CORPORATE CLIENTS

03

ECOSYSTEM AND TECHNOLOGY

04

DATA ANALYTICS AND RISK-MANAGEMENT

05

PEOPLE DEVELOPMENT

06

FINANCIAL TARGETS

07

Technology for clients 2014 – 2017

Sberkassa before 2007 … – 2007

Client centricity 2008 – 2013

CONCLUSIONS


10 years of continuous transformation … 01

VISION AND KEY PRIORITIES OF STRATEGY 2020

02


03


04


05

PEOPLE DEVELOPMENT

06

FINANCIAL TARGETS

07

Client centricity

Technology for clients

… – 2007

2008 – 2013

2014 – 2017

37 60 65 NPS

1

Active retail clients

CSI

mln (+25 mln) CLIENTS

1

60 70 85 NPS

CSI

mln (+20 mln) CLIENTS1

Clients

ɘ,PSURYHGVHJPHQWDWLRQ ɘ&OLHQWIHHGEDFN

ɘ0DVVSHUVRQDOL]DWLRQ ɘm$FRPSODLQWLVDJLլ}

Products

ɘ1HZSURGXFWVFUHGLWFDUGVLQYHVWPHQWSURGXFWV 60(ORDQV500 external courses 

   

21 functional roles Unique learning plan for each role Data science community Data engineers community

Succession planning is a foundation for stable and continuous future growth

84% Y. Chupina Team and culture

Internal

TOP-management appointments, 2017

96%

Internal

mid-management+ appointments, 2017

100%

Succession pool candidates have an individual development plan and assigned mentor

Sberbank has a strong internal succession pool that is further fueled by:

4 people interview for recruiting and promotion

Promotions via Green Room

Mentoring and coaching

Personal development plan

Modern succession support tool (cloud-based IT platform)

Sberbank culture and self motivation are the guarantee of future victories Team member

Leader

Culture

I’m a leader:

Values:

Communication:

Expectations:

Emotional intelligence:

We are a team:

HR decision making:

Y. Chupina Team and culture

All for the customer:

Mentor:

Space and rituals: Social mission:

Careful use of data and the latest machine learning methods will bring interaction with the employees to a new level How can I be successful?

How do I find a suitable candidate?

Sberbank deeply understands the employees’ motivation and behavior Employee

360°

Advanced machine learning methods Neural networks Gradient boosting Random forest

100 How can I help the employees demonstrate their best abilities?

Y. Chupina Team and culture Where can I realize my potential?

1000 + 20 th FTE

Scope of analysis 2017 -> 2020

255 th FTE

Traditional analytics Decision tree Logistic regression

20 Gini coefficient

Data-driven HR will transform the Employee Journey and raise the team quality

x2

star employees

Recruitment 2020   

Candidates: prioritization Employees: success prediction Leaders: insights about future success

1

Onboarding 2020

2 Y. Chupina Team and culture

3

4

Churn 2020  

 

Early best employee-fit identification Maximum performance

HR process integration example Recruitment

Onboarding

PD

Churn

Servernoy S.S. Probationary Period Oracle Administrator Technology block Mark: СС

Technology block career Cross-block rotation

Other career opportunities

Successfulness profile Applicant Block

Employee

Successful profile

Success probability

Successful profile

Success probability

90%

Development 2020

Technology

Yes

70%

Yes

Retail

No

60%

Yes

80%

  

Corporate

No

55%

No

60%

Strategy

No

20%

No

45%

Timely and accurate rotation Individual training program (CorpUni) Personalized learning in Sberbank virtual school

Early mis-fit identification Churn prediction and prevention

Further development of our own analytical platform based on modern technologies People Development Platform

Single HR platform

Cloud-based, constantly updated IT system with open APIs Career development

Y. Chupina Team and culture



Success prediction



Improving employees’ performance



Retention of D-people



Promotion of employees from branches



Churn in call center

1 Database Candidate 360 Employee 360

2 Analytics development

Recruitment

Personnel records

Org. management

HR system Operational HR-analytics

Prescriptive

Analytics

Adaptive testing

Internal services Digital services

Digital mass recruitment hub

External Internet services

Robotics, chat-bots, voice recognition in the Contact Center

Payroll and bonus assessment

Compensation, motivation Video-cv

Implementation shared service center and mobile self-services

HR systems in subsidiaries

Performance management system Intranet portal

Descriptive Predictive

Salary calculation Org mgmt HR records

Development Onboarding

Automation, robotization, process redesign

Recruiting sites

100% electronic document flow Sberbank only Subsidiaries All Group companies

(х2-3 efficiency gains)

ALEXANDER MOROZOV Deputy CEO

Financial model 2020 01

VISION

02


03


04


05

TEAM AND CULTURE

06

FINANCIALS

07

CONCLUSIONS

ROE

Net income

~20% Equity

х1.4

х1.5

NII

х1.1

Loan portfolio growth

F&C

х1.5

NIM

х0.8

х0.8

Clients funds growth

х1.2

CoR

Costs SBERBANK STRATEGY 2020

х1

х1.3

Accelerating growth of margin accretive products to optimize our balance sheet efficiency 01 02 03 04 05 06 07

Loan portfolio (gross), RUB trln

Client funds

NSFR Ratio %

VISION

114%

113% RETAIL AND CORPORATE CLIENTS

х1.3

x1.2 ECOSYSTEM AND TECHNOLOGY

Retail deposits Corporate deposits

х1.2

100% CBR limit

x1.5

х1.1


19.8

TEAM AND CULTURE

FINANCIALS

CONCLUSIONS

Sberbank International Consumer loans (incl. credit cards) Mortgages SME Corporate business CIB

LCR Ratio %

26.1

x1.3

20.4

2020F

2017E

2017E

x1.2

24.6 2020F

133%

120%

100% CBR limit

80%

LDR (net) % 99%

x1.4

91% x3.0

x1.2


2017E

2020F

01

VISION

02


03


04


05

TEAM AND CULTURE

06 07

FINANCIALS

Optimizing balance sheet structure

Simulation based on millions of individual transactions Ongoing optimization using genetic algorithms and response surface modelling

Dynamic planning platform

In-memory computing Planning based on scenario analysis

Behavioral models

Machine learning predicting customer behavior

Holistic approach

Decisions based on comprehensive impact analysis of BS, PL and risks

Income

Dynamic AI Balance Sheet Management

Lim

ita

CONCLUSIONS


Forward-looking

Forecast, scenario analysis and early warning indicators as base for decision-making

tio

ns

o r G

h t w

290 3.5 14

behavioral models

mln

contracts forecasted

bln

transaction simulations

Dynamic AI – ALM management is mitigating margin compression Net interest margin optimization

01

VISION

02


03 04 05

TEAM AND CULTURE

06

FINANCIALS

07

Shift to margin accretive Ruble lending

CONCLUSIONS


41%

~6%

ECOSYSTEM AND TECHNOLOGY DATA ANALYTICS AND RISK-MANAGEMENT

Key factors

35%

5.7 %

59%

Slightly below 5%

40-50 bps Dynamic ALM management Inertial scenario 2016

2017E

2018

2019

2020F

65%

Transactional business to reduce cost of funding

Currency denomonated loans Ruble denominated Loans

Shift to margin accretive retail and SME lending

28%

31%

2%

4%

70%

65%

2017E

2020F

Increas share of Loans in Total Assets

64% 36%

61% 39%

Current and settlement accounts

Forecast accuracy improves asset structure Rub 200 bn

Retail Business SMEs Corporate loans

2020F

66%

Optimize balance sheet structure

Extra liquidity available for lending Liquidity buffer

2017E

71%

Loan to Assets Ratio

Term deposits

91%

2017E

Loan to Deposit Ratio

99%

2020F

Growing F&C income driven by core banking 01 02 03

Net F&C Income from Core Banking business, RUB bln

Growth of Cashless Transactions

VISION

1.5

X


~580

04 05

TEAM AND CULTURE

06

FINANCIALS

07

CONCLUSIONS

~390

Bank cards and acquiring

ECOSYSTEM AND TECHNOLOGY DATA ANALYTICS AND RISK-MANAGEMENT

2017E

~390

1.7

31%

1.5

2017E

X

Corporate payments and settlement transactions

X

Retail payments and settlement transactions

41%

2020F

Growth of SME clients

Other banking fees

Bank card operations Рayments and settlement transactions Other banking fees

2020F

~580

1.6 ml

1.4

X

2.2 ml


2017E

2020F

2017E

2020F

Income growth outside of core banking business 01

VISION

02


Non-banking financial business Operating income, RUB bln

03


04


05

TEAM AND CULTURE

06

FINANCIALS

07

Revenue from new business

CONCLUSIONS

Asset management and Pension fund management

Insurance

Brokerage

x2

x5 118

x4

x11

109

70

53

RUB bn 2020

25 2.0

7.8


2017Е

2020F

2017Е

2020F

2017Е

2020F

Revenue attributable to Sberbank

International business is adopting to the new reality 01

VISION

02


03


04


05

TEAM AND CULTURE

06

FINANCIALS

07

CONCLUSIONS


2020 FORECAST

SBERBANK KAZAKHSTAN

BPS-SBERBANK

DENIZBANK

SBERBANK EUROPE

ROE = 22% CIR = 30% LDR = 82% #4 on the market

ROE = 23% CIR = 31% LDR = 89% #3 on the market

ROE =15% CIR = 38% LDR = 102% #8 on the market

ROE =4% CIR ~ 68% LDR = 100% #7-15 on the market

Assets, Revenue and Capital allocation 01

VISION

02


03


04


05

TEAM AND CULTURE

06

FINANCIALS

07

CONCLUSIONS


Assets,% of the Group

Revenue, % of the Group

Capital, % of the Group

Target 2020 ROE

82.8

78.7

0.3

2020 FORECAST

1.0

0.9 13.4

7.7

83.5

7.4

9.0

7.0

8.6

CIR

Russia banking

20.0%

28.4%

Russia non-banking finanсial

21.6%

30.8%

Russia new businesses

15.3%

51.3%

International business

12.4%

41.3%

Gradual increase in risk appetite on better environment Cost of Risk, %

Shift to margin accretive retail and SME lending

01 02

VISION


03


04


05 06 07

Portfolio growth CAGR, 2017-2020

TEAM AND CULTURE

28% 2% 70%

2017E

40%

150-170 bps

SMEs

31% 4% 65%

2020F

35%

Retail Business SMEs Corporate loans

Size of the portfolio, 2020

~130 bps Corporate Total Retail

Mortgages

30%

CIB

25%

Large businesses

20%

2017E

2018

2019

2020F

Credit cards

15%

FINANCIALS 10%

CONCLUSIONS


IFRS 9

Estimated negative effect is below 40 bps on CET 1 CAR

COR estimates include IFRS 9 rolling effect

Consumer loans 5%

COR, 2020

0% 0%

2%

4%

6%

Frozen OPEX – positive operating leverage 01

OPEX, RUB bln VISION

02


03


04


05 06 07

CIR, % ~35%

1

X ~680

59%