22 August 2012
Today Bank Vozrozhdenie reported H1 2012 IFRS Results with the following highlights:
- Net income for 6M 2012 rose 69% YoY to RUB 1.2 billion ($37 mln)
- Assets grew by 11% over the year to RUB 194 billion ($5.9 bln)
- Operating income was RUB 6.0 billion ($182 mln), up 25% compared to H1 2011
- Net interest margin for H1 2012 surged to 4.74%, up 101 bps compared to H1 2011
- Return on average equity (ROE) was 14% in Q2 2012 versus 11.2% in Q1 2012
“In the second quarter we efficiently capitalized on opportunities for balanced growth of assets, putting special emphasis on maintaining comfortable level of liquidity and adequate provisioning. After subdued activity in the beginning of the year, lending gained momentum, and we’ve managed to increase loan portfolio in the most attractive segment for us — small and medium enterprises. Strong consumption trends contributed to outpacing growth of retail portfolio in mortgages and consumer loans. Amid healthy loan demand funding was the key issue for Russian banks, heated by soaring interest rates. We did not feel the lack of resources and managed to attract almost Rub 9 billion of customer funds in Q2 2012 thanks to developed network and loyal client base, though we were very prudent in raising deposit rates”, — commented Tatiana Gavrilkina, Deputy Chairwoman of the Management Board.
“Higher rates on corporate loan portfolio and lending to more profitable segments offset surging cost of funding and supported NIM advancing to 4.8% for the quarter. Our adherence to efficiency improvement brings fruits: performance indicators keep recovering while ROE reached 14% in the second quarter”, — Tatiana Gavrilkina added.
Assets rose by 11.3% from the same period of 2011 to RUB 193.9 billion ($5.9 billion) mostly due to 14.7% growth of net loan portfolio. Amid continued liquidity shortage Russian banks applied to external funding sources, but it did not concern Vozrozhdenie with its share of liquid assets at the solid level of 22%. Balance sheet expansion was mostly provided by attracted client funds that added up 12.2% over the year to Rub 151.8 billion as of June 30, 2012. Major inflow fell on the second quarter of 2012 with Rub 8.9 billion increase on the back of corporate (+ Rub 2.8 billion) and retail funds (+ Rub 6.1 billion) growth. Individual funds amounted to Rub 95.7 billion as of the end of the reporting period, accounting for 55% of total liabilities. The bank managed to ensure optimal utilization of funds with loan to deposit ratio at comfortable level of 100%.
Shareholders’ equity grew 11.8% from June 30, 2011 to Rub 19.6 billion ($596 mln) mostly on the back of earned profit. Tier 1 Capital Adequacy ratio and total CAR were 13.2% and 11.6% respectively, exceeding regulatory requirements. Slight decrease from 13.6% and 11.8% in the same period of 2011 is attributed to outpacing risk-weighted assets growth by 13.4% for the year to Rub 168.4 billion due to higher share of loan portfolio in total assets.
Securities portfolio totaled RUB 11.6 billion ($354 million), down 15.4% on the background of turbulent financial markets. Trading portfolio of the bank remains conservative consisting of short-term debt securities with investment grade. Bonds of Russian corporations with quasi-sovereign risk as well as securities of Federal and regional government bodies represent the major share of the bank’s securities portfolio. As of June 30, 2012 corporate bonds and Eurobonds accounted for 85.9% of securities portfolio, whereas bonds of federal and regional state authorities represented 9.4%.
Loan portfolio before provisions was Rub 152.3 billion ($4.6 bln), up 10.9% compared to the beginning of 2012. For the second quarter in a row loan portfolio growth was mostly driven by loans to small and medium companies — in the 2nd quarter of 2012 SME portfolio added up Rub 4.4 billion (+6%), accounting for 63% of corporate loan portfolio. Loans to legal entities increased by 5.1% for the quarter to Rub 124 billion. The bank’s loan portfolio remains well-diversified across industries with largest shares in manufacturing (27%) and wholesale and retail trade (22%).
Retail loan portfolio keeps expanding and added up 9.1% for the quarter to Rub 28.3 billion on the back of mortgage and consumer lending growth. Mortgages represented 66% of retail portfolio and remained the key product in the retail line. As of June 30, 2012 mortgages reached Rub 18.5 billion, up 9.3% on a quarterly basis mainly due to active participation of the bank in various partnership programs. The bank also actively develops consumer lending that totaled Rub 7.2 billion as of the end of the 2nd quarter of 2012 (+13.1% for the quarter). Thus, share of more high-yielding retail portfolio in total loans reached 19% amid favourable market conditions.
NPL ratio declined to 8.1% from 8.7% in the first quarter of 2012 coupled with contraction of non-performing loans in absolute terms to Rub 12.3 billion. Despite credit quality improvements the bank’s provisioning policy remains conservative: in the second quarter of 2012 charges to provisions were Rub 830 million, bringing cost of risk for H1 2012 to 1.65%. Thus, total NPL coverage ratio increased to 113% for 1 day+ overdue, 135% — for 30 days + overdue and 153% — for 90 days + overdue. Total provisions for loan impairment stood at Rub 13.8 billion as of June 30, 2012.
Net interest income in H1 2012 rose by 36.9% compared to the same period of 2012 and amounted to Rub 4.4 billion supported by decent hike in interest income. On a quarterly basis the indicator increased by 5.3% in Q2 2012 and totaled Rub 2.3 billion due to expansion of interest income by 9.3%, partially offset by interest expenses growth of 14.6% to Rub 1.9 billion. Amid tighter competition for retail client funds and concurrent growth of deposit rates cost of funds rose to 4.3%, up 44 bps for the quarter. However, it was offset by loan portfolio expansion in more profitable segments and surge in corporate loan yields by 51 bps for the quarter that resulted into 12 bps increase in net interest margin to 4.8%.
Non-interest income grew by 14.7% in Q2 2012 and totaled Rub 1.4 billion due to enhanced business activity and higher fee income. All the components of fees and commissions demonstrated solid growth: fees on cash operations rose by 16%, settlement transactions added up 11% and cash collections and currency operations surged by 13%. Thus, share of non-interest revenues in total operating income before provisions remained one of the highest in the sector and was 39%. Conservative trading portfolio defended the bank from significant losses during the market turbulence in Q2 2012, while foreign currency operations contributed to 25% increase in trading income.
Operating expenses totaled Rub 2.1 billion, up 4.7% for the quarter. Moreover, in comparison with Q2 2011 operating expenses growth was just 2.2%. The bank successfully restrains operating expenses expansion, and the main element of total expenses structure — personnel costs remained at the level of Q1 2012 and were Rub 1.3 billion. Due to prudent approach to cost management the bank’s efficiency keeps improving — cost-to-income ratio continued to decline and stood at 56.7% for Q2 2012 compared to 60% for the last quarter.
Net profit amounted to RUB 678 million in Q2 2012, up 28.9% from the previous quarter, while in the first half of the year it reached Rub 1.2 billion, exceeding the level of the same period of last year by 69%. ROE also continued to recover reaching 14% in Q2 2012, up 280 bps for the quarter.