24 May 2007
Moscow, 24 May 2007. Vozrozhdenie Bank (VZRZ) today reported three months 2007 IFRS financial results:
- Net income 275 million rubles ($10.6 million), up 66% compared to Q1 2006
- Return On Equity (ROE) at 19.5%, above 2006 average of 19.1%
- Equity grew by 68%, assets by 58%, compared to April 1, 2006
- New share issue closed at $59, will add $177 million to equity after registration
- Market capitalization has risen to 32 billion rubles ($1,25 billion) before issue
We are pleased to report strong business and financial results for the first quarter of 2007. Under International Financial Reporting Standards (IFRS) our profit after tax was 275 million rubles or $10.6 million, up 66% from the same quarter of last year. Our Return on Equity (ROE) was 19.5%, just short of our long term goal of
Business volumes continue to grow strongly with both small and medium sized businesses and individuals borrowing more. We see this as an excellent indication of increasing breadth and diversity in the Russian economy and we have found no deterioration in the good quality of our loan portfolio on either the commercial or retail side in spite of the rapid growth.
The first quarter of 2007 was an active period for Vozrozhdenie on the capital markets. The Bank has diversified its sources of funding to meet the demands for credit from a broad spectrum of clients. In the quarter Vozrozhdenie issued its first general obligation bond, a 3 year, 3 billion rubles domestic bond ($115 million) at par with a favorable coupon of 8.95%. A $50 million one year renewable syndicated loan was raised from a consortium of western banks led by Bank Austria Creditanstalt AG and Landesbank Berlin AG to support trade finance activities. Most importantly a new share issue was successfully sold to international and domestic professional investors at a price of $59. The new capital will be available to the bank after registration by the Central Bank of Russia.
“This activity in raising capital and diversifying funding supports the continued rapid rise in borrowing needs by both small and medium enterprises and individuals. While the Bank funds most of its lending activities from the deposits and funds of individual and business customers, this diversification of sources and longer term of funds is important to maintain the Bank’s stability and long term success,” said Dmitry Orlov, Chairman of the Management Board of Vozrozhdenie.
Pre-tax profit for the three months was a record 375 million rubles, an increase of 72% on the previous year. After taxes of 100 million rubles, net income was 275 million rubles ($10.6 million) which compares to 166 million rubles ($6.0 million) in the same period of 2006. Earnings per share rose to 12 rubles in the three months compared to 9 rubles for the first three months of 2006.
Net Interest Income grew 81% comparing to the first three months of 2006 exceeding the growth of average assets of 54%, due to the more profitable mix of assets this year. Although the level of problem loans in both the retail and commercial portfolios remained very low, 1.6% of total loans, we have been increasing provisions for possible losses on a regular basis. In the first three months we set aside 234 million rubles for provisions, or an annualized 1.2% of average loans. Total provisions were 2.2 billion rubles, or 3.5% of total loans, a cushion of more than twice the volume of past due loans.
Operating income grew 55% to 1,569 million rubles ($60.3 million) as transaction volume increases provided a 35% increase in fee and commission revenue from bank’s core business. Non-interest revenue provided 44% of total operating revenue in the first quarter 2007 and net fees and commissions constituted 87% of non-interest revenue.
Operating expenses grew 50% as volumes surged and the branch network expanded. This is still less than the growth in assets or loan volumes. It is also less than the rise in operating income. This year we have begun to amortize a greater portion of the expenses which have a seasonal factor and which previously caused an unusually high fourth quarter jump in expenses. The Bank’s measured efficiency has increased, with the cost to income ratio going down to 66.2% from 71.3% in the same quarter last year and an average of 72.3% for 2006
Assets grew 58% over the past year to reach 81,569 million rubles, or $3,135 million. Loans to individuals and families continue to grow rapidly, particularly mortgages. A recent report by RosBusinessConsult ranks Vozrozhdenie as 6th in terms of number of new mortgages issued in 2006. By total volume of mortgages we ranked 14th as most of our mortgage loans, distributed primarily in Moscow Oblast and other regions of Russia are for much more reasonable amounts than those required for high priced apartment purchases in Moscow. The volume of mortgages outstanding is four times what it was at the same time last year, reaching 4.9 billion rubles or $190 million. Mortgages make up almost 50% of our loans to individuals with very few past due or problem mortgages in the Bank’s portfolio. Our car and consumer loans also increased over 50% and credit card use has accelerated with balances now at 1,528 million rubles or 15% of our retail lending.
Equity rose by 2,345 million rubles or 68% compared to Q1, 2006, to 5,784 million rubles ($222 million) at the end of March 2007. This does not include the 4,560 million rubles ($177 million) which will come from our recent issue of 3 million new shares. The capital will be added to our financial statements once the Central Bank has approved the registration of the issue, which is expected before the end of the second quarter. This compares to the addition of 1,458 million rubles ($54 million) from the issue of 2 million shares completed on August 11, 2006.
Vozrozhdenie Bank provides personal banking and business services to clients throughout the Russian Federation. Vozrozhdenie Bank now has 152 branches and sales outlets and operates 490 ATMs. The bank serves more than 45,000 corporate clients, and over 1,000,000 individuals, with services ranging from savings accounts, payment handling and payroll management to mortgages, bank cards and business and consumer loans.
The bank’s full IFRS reports are available at: www.vbank.ru/en