22 November 2011
Bank Vozrozhdenie (VZRZ) published today its 9M 2011 Financial Statements in accordance with International Financial Reporting Standards with the following key figures:
- Net Income for 9M 2011: Rub 1.1 billion (up 2.8 times YoY)
- Assets: Rub 177 billion (up 6.4% YoY)
- Operating income for 9M 2011: Rub 7.5 billion (up 38% YoY)
- Net interest margin grew by 35 bps QoQ to 4.6% in Q3 2011
- Return on Equity (ROE): 9.3% in Q3 2010
“Results of the third quarter reflect our efforts to improve earning power of the bank’s business. Increased share of interest-earning assets, awakened rebound of rates on corporate loans and expansion of high-yielding retail lending coupled with the lowest cost of funding over recent years resulted in 9% growth of net interest income for the quarter”, — commented Dmitry Orlov, Chairman of the bank’s Management board.
“The bank is well-positioned amid turbulent financial markets and tight liquidity in the system thanks to high share of its liquid assets and matched currency structure of the balance sheet with prevailing ruble instruments.
Operating efficiency is still in our focus. Moreover, in the current economic uncertainty we increased charges to provisions”, — added Mr. Orlov.
Assets grew by 6.4% since the beginning of the year to Rub 176.7 billion (USD 5.5 billion) mostly due to loan portfolio expansion. Despite squeeze of idle liquidity in the Russian banking system in Q3 2011, the bank maintained share of liquid assets at the stable level of 24%. Structure of liquid assets shifted to more profitable instruments — security portfolio inched up by 17.5%, while cash and equivalents were down by 12.3%. The bank is gradually building up share of interest earning assets that rose by 4.4% to Rub 141.1 billion in Q3 2011, comprising 80% of the bank’s balance sheet. Surpassed growth of loan portfolio throughout the year brought loan-to-deposit ratio to optimum level of 99%, up by 105 bps compared to December 31, 2010.
Client funds grew in nine months of 2011 by 6.1% to Rub 138 billion, representing 87% of the bank’s liabilities. The increase was mainly driven by inflow of corporate client funds that swelled by Rub 5.9 billion (+13.1%) in 2011. On the background of low deposit rates and boost of consumption retail client funds rose by only 2.3% to Rub 87 billion for 9M 2011, while share of long-term retail deposits surged to 36%. Share of current accounts, that are almost free source of funding for the bank, was up to 35% of all client funds due to growth of corporate customers funds by 12.7% (+ Rub 3.6 billion).
Shareholder’s equity rose by 6.5% during 2011 to Rub 17.9 billion ($563 million) as of September 30, 2011 largely due to capitalization of retained earnings. Tier-1 capital adequacy ratio was 11.6% while total CAR stood at 13.4% that exceeded regulatory requirements. Some decrease of indicators was due to 4.3% expansion of risk-weighted assets on the back of increased volume of loan and security portfolio.
Loan portfolio before provisions has delivered 19% growth in 2011 to Rub 136.7 billion that was generally in line with the plan. In enhanced uncertainty in Q3 2011 the bank was selective in granting new loans, giving preference to high-quality borrowers. Loan portfolio grew by 1.5% during the quarter to Rub 114.2 billion mostly on the back of large corporate borrowers (+8.6%) while SME portfolio increased by 0.4% to Rub 72.3 billion and loans to administrations decreased by Rub 1.6 billion. The bank maintained its positions in Moscow and Moscow region where 57% of loans were originated. Corporate loan portfolio is well-diversified across industries with the highest share of loans granted to companies of manufacturing and trade sectors that represent 30.3% and 29.0% of the portfolio, respectively.
Retail lending remains one of the key priorities for the bank, and its share in total loans reached 16.4% (+201 bps Ytd). In Q3 2011 retail portfolio climbed by 11.5% to Rub 22.5 billion mostly driven by mortgages, key element of the bank’s retail product line, that were up to Rub 13.6 billion (+12.4%), and consumer loans that expanded by 13.1% for the quarter.
Security portfolio added up to Rub 16.7 billion ($524 million) with 17.5% increase QoQ: the bank gained securities of the most reliable issuers amid financial markets decline in Q3 2011. Portfolio of trading securities contains mainly debt securities with investment grade and short maturity. Most of them are represented by fixed-income securities of federal and regional government bodies and Russian companies with quasi-sovereign risk. The breakdown of the security portfolio as of September 30, 2011 was as follows: 27.3% — Central Bank of Russia bonds, 18.4% — bonds and eurobonds of Russian Federal and Regional Governments and 54.3% — corporate bonds and eurobonds. Portfolio does not contain securities issued by euro zone countries.
NPL ratio was stable at the level of 8.4% (+9 bps for the quarter) with Rub 11.5 billion of non-performing loans as of September 30, 2011. In line with its conservative provisioning policy the bank charged Rub 720 million to provisions, 25% more than in the second quarter of 2011. This resulted in 1.7% cost of risk for 9 months of 2011, NPLs were fully covered by provisions. Thus total coverage ratio was 110%, while it was 142% for loans past due for more than 30 days and 144% — for more than 90 days past due.
Net interest income for the reporting period reached Rub 5.2 billion that is 28.3% higher compared to 9M 2010. In Q3 2011 cost of deposit was at record lows while interest rates on loans started to recover. As a result net interest income grew by 8.9% for the quarter on the back of 1.8% increase of interest income to Rub 3.6 billion and decline of interest expenses by 6.1% to Rub 1.6 billion. Cost of funding fell by another 28 bps in Q3 2011 supporting the expansion of net interest spread to 6.4%. Net interest margin for the quarter kept increasing and reached 4.6%.
Non-interest income was gradually growing throughout the year and added up to Rub 3.9 billion, up 21.6% compared to 9M 2010. In Q3 2011 fee income stood at Rub 1.3 billion, having increased by 5.4% QoQ despite traditional slowdown of economic activity in summer period. Growth was mostly attributable to cash collection services (+16.9%), currency transactions (+14.4%) and cash operations (+6.8%). Despite significant drop of financial markets in Q3 2011 losses on securities’ trading were limited to only Rub 28 million due to high quality of the portfolio. Moreover, the bank gained Rub 104 million from foreign currency trading, that is up 6.1% from the previous quarter. As a result operating income before provisions grew by 8.2% for the quarter to Rub 3.4 billion with non-interest income accounting for 41%.
Operating expenses declined by 1.5% to Rub 2.1 billion in Q3 2011 with administrative expenditures decreasing by 4.9%. On the back of stronger operating income cost-to-income before provisions ratio shrank to 60.1%, 597 bps down from the previous quarter.
Net profit for the reporting period surged by 2.8 times compared to 9 months of 2010 and reached Rub 1.1 billion. Bank Vozrozhdenie net profit was expanding throughout 6 consecutive quarters, and in Q3 2011 it rose by 4.1% to Rub 411 million despite significant charges to provisions. Effective tax rate remained at 20%.