3 June 2008
Vozrozhdenie Bank (VZRZ) reported Q1 2008 IFRS results today:
- Net Income of 681 million rubles ($29 million), up 148%
- Return on Equity (ROE) at 22.3% above 2007 average of 21%
- Earning per share increased to 27 rubles from 12 in same period in 2007
- Equity grew 117%, assets by 43% with strong liquidity position
- Loan from bank syndicate increased by $10 million to $60 million on rollover
“In difficult times for international banks we are pleased that our results continue to be strong and well protected against potentially adverse conditions. The continuing confidence of our customers is a great support especially the continued growth of our core funds from both retail and business clients,” said Tatiana Gavrilkina, Deputy Chairwoman of the Bank, about the first quarter results. “We see an increasing use of the banking system by our customers, both in number and types of transactions. We have issued one million one hundred thousand bank cards and now process payroll for over 6,000 corporate customers. Bank Vozrozhdenie is now the 8th most active bank in Russia in terms of individual deposits.”
On April 12, 2008, the Bank completed its 17th year as an independent bank. This has required careful attention to risks to protect depositors and all customer funds. During the recent period the bank has managed its liquidity carefully and built a strong base of core funding from clients. The only capital market debt maturing this year was a syndicated loan from primarily European banks which was issued in March 2007 for a one year plus one year term. While several banks declined to participate in the extension, new banks joined the syndicate and the total amount was increased by $9.75 million at the same spread over London Interbank Offered Rate: the interest cost for the next six months was set at 4.2%. Although the severity of the international difficulties seems to be easing, we expect uncertainty to continue for some time and are well-prepared with good funding and liquidity in place.
Assets increased by 43% to 116.9 billion rubles ($4.97 billion) during the year. The growth in the Bank’s assets was funded primarily by growth in customers’ funds on deposit and in their transaction accounts. The loan to deposit ratio at the end of the quarter was a very conservative 93% and the Bank retained a significant proportion of liquid assets mainly in cash and in Russian government securities. Liquidity balances increased by 82% from a year ago to equal more than 26% of the total balance sheet.
Equity more than doubled to 12.6 billion rubles ($535 million) by retained earnings and a successful placement of shares in May 2007. The Bank’s Tier 1 capital adequacy was 12.9% and combined Tier 1 and 2 was 15.8%.
Loans to customers increased by 33% to 79.7 billion rubles ($3.5 billion). Although loan growth in the last two quarters was slower as liquidity was emphasized. Retail lending programs make up 20% of the loan portfolio, with mortgages being 53% of the retail loan portfolio, with very good credit experience. The Bank’s support of commercial enterprises provides 80% of the total loan portfolio and is well distributed by sector and geography.
Loan portfolio quality continues to be very sound; the portion of past due loans has declined slightly to 2.47% from 2.55% at the end of the year. Overdue loans are tightly controlled and include all retail or commercial loans more than one day past due. The proportion of impaired loans, on which some loss of principal might be expected, is only 0.7%. The provision for possible losses compared to the total loan portfolio was maintained unchanged at a prudent 3.5%, 2.9 billion rubles.
Net Interest Income increased 49% to 1.7 billion rubles as spreads widened in spite of the higher cost of holding more liquidity assets in the last six months. Rates on both loans and deposits have increased in the last six months due to tighter liquidity in the banking system although there is a more rapid effect on loan yields as deposit costs change only as deposits are rolled over at maturity. About 70% of all retail time deposits are reinvested when they mature providing a solid funding base.
Non-interest income grew 38% to 1.0 billion rubles. Although fee revenue was down slightly from the previous quarter due to fewer working days, the trends of retail transactions in branches, bank card operations, payrolls services and corporate payment transactions are all strong. Non-interest income contributed 38% of operating income.
Operating expenses were up 33%, to 1.6 billion rubles, significantly slower than the growth in assets and less than the growth in revenues. We continued to make some rationalization in our branch network and opened 2 new sales outlets while closing uneconomic 3 units. The delivery network added 25 new ATMs in order to make services more accessible to SME and individual clients. Our technology implementation to support present and future expansion continues as planned. The Bank has 6.183 employees, a 13% increase from the previous year, with the largest effect being from the last year network expansion.
Pre-tax income in the first quarter increased 138% to 891 million rubles. Profits after tax increased 148% to 681 million from 275 million in the same period last year. In dollar terms the increase was 174% to $29.0 million.
The Bank’s full IFSR report is available at Bank web-site.
Vozrozhdenie Bank, a community bank for companies and individuals, was founded in 1991. (General License from the Central Bank of the Russian Federation # 1439, March 24, 2003.) Among the Top 30 Russian Banks in the Central Banks rating, its network includes 168 offices and 575 ATMs in 20 regions of Russia. The Bank provides more than 1,150,000 individual and 49,000 corporate clients with a range of services, from savings accounts, payment handling, payroll management, to mortgages, bank cards and business and consumer loans.