29 March 2012
Today Bank Vozrozhdenie reported FY2011 consolidated IFRS results with the following highlights:
- Net income for 2011 amounted to Rub 1,594 million (USD 50 million), up 2.7 times compared to the previous year.
- Assets increased by 11% to Rub 184 billion (USD 5.2 billion) over the year.
- Operating income was Rub 10.6 billion (USD 329 million), up 32% compared to 2010.
- Return on average equity (ROE) was 9.1%, 5.5 pps more than in 2010.
“In 2011 we delivered strong results — profit growth was robust and even higher than projected. The focus was on high yielding retail lending, and in this segment we outpaced banking sector. In the second half of the year amid worsening macroeconomic environment and taking shape liquidity squeeze we were more cautious in lending, accumulated liquidity cushion and focused on asset quality,” — commented Dmitry Orlov, Chairman of the Management Board. “Now, the situation has stabilized — Russian economy demonstrates solid dynamics, loan demand remains healthy and competitive pressure has receded. In 2012 we will keep growing and enhancing revenues, currently we develop new products and work on improving operating efficiency,” — added Mr. Orlov.
The present release is prepared on the basis of the consolidated statements of Bank Vozrozhdenie and its special purpose vehicle “Mortgage agent Vozrozhdenie 1” — being the issuer of mortgage backed bonds of total nominal value of Rub 4,071 million, which were issued under the mortgage loans securitization deal.
Assets rose 10.7% to Rub 183.9 billion (USD 5.7 billion) in 2011 mostly owing to loan portfolio expansion by Rub 20.3 billion (+19.5%) over the year. Corporate portfolio grew predominantly in the first half of the year while retail loans demonstrated steady expansion throughout the year. Increase of cash and equivalents by Rub 12.8 billion rubles in Q4 2011, driven by seasonal inflow of current accounts, redemption of a significant part of securities portfolio and attraction of long-term funding under securitization deal, brought the share of liquid assets to solid 25%. Funding base was increasing mostly on the back of retail and corporate accounts growth of 11% to Rub 145.1 rubles. Major increase was demonstrated in Q4 2011 due to seasonal inflow of current accounts (+ Rub 5.1 billion) — as of the end of the year share of this almost free funding source reached 37% of total client funds, one of the highest levels in recent years. Increase of deposit rates in the end of 2011 following the trends across the whole banking system weighted on retail deposits’ inflow that grew to Rub 72.1 billion (+1.7% for the quarter) rubles as of December 31, 2011. However, on the back of surpassed loan portfolio growth throughout the year loan-to-deposit ratio added up 6.2 pps in 2011 to 94.6% implying room for further business expansion.
Shareholders’ equity kept rising throughout the year on the back of capitalizing profit earned and stood at Rub 18.5 billion (USD 573 million) as of December 31, 2011, up 9.5% compared to the previous year. In 2011 Tier 1 capital adequacy ratio and total CAR fell to 11.9% and 13.8% (from 12.8% and 15.2% in 2010) as a result of business expansion and growth of interest earning assets. The Tier 1 ratio and CAR increase in Q4 from 11.6% and 13.4% as of September 30, 2011 resulted from contraction of risk weighted assets due to a cut in securities portfolio.
Loan portfolio before provisions grew by 19.2% over the year to Rub 137.3 billion (USD 4.266 million) on the back of expansion of corporate loan book by 14.6% in full accordance with the plan and boost in retail lending. Throughout Q4 2011 loan portfolio remained almost flat: healthy growth of retail loan book by solid 8.5% to Rub 24.4 billion was almost fully offset by a number of repayments in December across the corporate portfolio that fell by 1.1% to Rub 113.0 billion. Corporate loan portfolio remained well diversified across industries with the highest shares falling on manufacturing (27%) and retail and wholesale trade (23%). 62% of corporate loans were granted to our key client segment — small- and medium enterprises. Retail loan portfolio rose by 46.7% in 2011 (vs sector growth of 35.9%) and reached Rub 24.4 billion. The main driving force behind loan portfolio expansion was mortgages that surged by 56.9% to Rub 15.4 billion. Mortgage loans remain the key product of the bank in retail segment, growth of which is supported by participation in various mortgage programs. Consumer lending also demonstrated solid dynamics and have expanded by 46.6% in 2011 to Rub 6.3 billion. Share of retail lending reached 17.7% in total loan portfolio.
Securities portfolio of the bank amounted to Rub 8.7 billion (USD 271 million) as of the end of 2011, down from Rub 14.2 billion at the beginning of the reported period. The bank’s trading portfolio mostly contains short-term debt securities with high investment grade and quasi-sovereign risk. A large portion of bonds in the bank’s portfolio, including all Bank of Russia bonds, was redeemed in Q4 2011 bringing the whole portfolio down by Rub 6.4 billion. As of the yearend breakdown of the portfolio was as follows: 91.2% — corporate bonds and Eurobonds and 8.7% — Federal and Regional Government’s bonds and Eurobonds.
NPL ratio dropped by 278 bps to 7.7% in 2011. In absolute terms the total amount of non-performing loans contracted to Rub 10.6 billion (-12.4%) from a peak of Rub 12.1 billion a year ago. Substantial progress was achieved in Q4 2011, when NPLs fell by 7.9% on the back of credit quality improvement on both corporate and retail side. However, in accordance with its conservative policy the bank maintained the current level of provisioning — cost of risk was at the level of 2010 — 1.8% of the average corporate loan portfolio for 2011. Since total provisions for loan losses amounted to Rub 13.0, NPLs overdue for more than 1 day were covered by 123%. Coverage ratio for 30+ days overdue NPLs was 140%, for 90+ days overdue — 151%.
Net interest income hiked by 35.8% in 2011 to Rub 7.5 billion on the back of substantial decline of interest expenses — trend observed throughout the whole 2011. Tailwinds of expiration of expensive deposits attracted in
Non-interest income demonstrated sustainable growth and reached Rub 5.4 billion in 2011, 23% higher than in the previous year — its share in operating income before provisions of 42% remained one of the highest among Russian banks. The bank recorded Rub 4.8 billion in net fee income, up 22.5% from the level of 2010. On the back of high business activity of the clients, typical for the end of the year, the bank earned Rub 1.4 billion of net fee income in Q4 2011, up 8.9% for the quarter with major contribution coming from settlements (+17.3%) and cash transactions (+8.7%).
Operating expenses stood at Rub 8.4 billion for 2011, 16.3% higher than in the previous year. The share of non-personnel costs in total expenses decreased to 41% in 2011 from 44% in the previous year. In Q4 2011 operating expenses grew by 16.8% to Rub 2.4 billion mostly due to a number of economic expenses that traditionally fall on the end of the year. We managed to cut cost-to-income ratio before provisions to 64.8% for 2011 versus 72.5% for 2010 due to income growth outpacing cost expansion.
Net profit for 2011 amounted to Rub 1.6 billion, 2.7 times higher than in 2010 on the back of healthy core revenues growth and optimized funding. From quarter to quarter net income continued to expand despite significant provision charges and reached Rub 471 million in Q4, 14.6% higher than in the previous quarter. Effective tax rate was 21% for 2011.