20 November 2012
Today Bank Vozrozhdenie reported 9M 2012 IFRS Results with the following highlights:
- Net income in 9M 2012 increased 59.1% YoY to RUB 1.8 billion ($57.63 mln)
- Assets of RUB 194.7 billion ($6.2 bln), up 5.9% over the year
- Operating income for 9M 2012 was RUB 8.8 billion ($281 mln), up 25% compared to 9M 2011
- Cost-to-Income ratio of 56.4% versus 65.2% for 9M 2011
- Net interest margin for 9M 2012 was 4.74%, up 101 bps YoY
- Return on average equity (ROE) for 9M 2012 was 12.3%
“In the third quarter we’ve managed to maintain our key competitive advantages on the back of effective policy of the bank, though loan portfolio dynamics showed different trends. General slowdown of economic growth resulted in worsening market conditions and deterioration of growth trends in corporate loan demand. At the same time, retail sector has continued to advance, providing opportunities for further growth. We’ve enhanced our capital position in July with a subordinated loan — Capital adequacy under Basel I exceeded 14% for the first time since 2011”, — Tatiana Gavrilkina, deputy chairwoman of the management board commented.
“This quarter we set aside higher provisions pursuing conservative policy in management of problem loans. As we continued to trim expenses Cost-to-Income ratio fell to 53% for the quarter. Operating profit before provisions continued to improve due to balanced structure of interest-earning assets and liabilities coupled with effective cost management. Despite challenging environment, strong financial position provides us with flexibility to support growth and reach our targets”, — added Mrs. Gavrilkina.
Assets grew by 5.9% from the beginning of the year to Rub 194.7 billion ($6.2 billion) primarily attributable to growth of net loan portfolio. Liquid instruments rose to 23% in total assets despite continuing resources strain in the system. The bank client funds, amounting to Rub 151 billion, or 87% of total liabilities have remained the main funding source. Loan-to-deposit ratio is kept at the optimal level of 100%. Retail deposits, the key element of customer funds, increased by Rub 6 billion (+8.4%) from the beginning of the year to Rub 78.2 billion. Deposits of corporate clients, remaining one of the most competitive markets in the Russian banking system, totaled Rub 23.6 billion (14% of total liabilities of the bank). Despite surging interest rates in the system, pressure on funding cost is mitigated by almost interest-free current accounts and balances on card accounts, representing 27.6% of total liabilities.
Equity of the bank was Rub 20.3 billion ($649 million), up 9.7% from the beginning of the year primarily as a result of net profit earned. Total capital and Tier — 1 capital adequacy ratios added up to 14.2% and 12.1% accordingly from 13.2% and 11.6% in the linked quarter. First tranche of subordinated deposit of Rub 1 billion was the key driver of Tier-2 capital growth. Risk-weighted assets declined by 1.4% during the quarter to Rub 166 billion mainly on the back of higher share of liquid assets in the balance sheet structure.
Securities portfolio grew by 3% for the quarter to Rub 12 billion ($384 million) amid volatile financial markets. Trading portfolio of the bank contains short-term bonds with investment grade, primarily securities of Russian companies as well as regional and federal administrations. As of the end of the reporting period corporate bonds and Eurobonds totaled 87.2% of total portfolio, bonds and Eurobonds of federal and regional authorities of Russia — 8.1%.
Loan portfolio before provisions amounted to Rub 151.5 billion ($4.9) as at September 30, 2012, up 10.3% from the start of 2012. Corporate loan portfolio declined to Rub 120.1 billion (-3.1%) in the third quarter due to weak business activity and repayment of a number of large debts and loans to municipal administrations. The share of small and medium loans, crucial for the bank, surged to 64% of corporate portfolio, and stood at Rub 77.2 billion. Sector diversification remains the same: highest shares fall on industrial production (27%) and trade (23%).
Retail portfolio of the bank outpaced the sector in Q3 2012, expanding by 11% to Rub 31.4 billion. In 9 months of the year it advanced by 28.8% or Rub 7 billion mainly on the back of mortgages, key retail product. Mortgages were Rub 20.8 billion as at September 30, 2012 (+12.2% for the quarter). In consumer and auto lending as well as in credit cards segment, where the bank pursues more conservative policy, loan portfolio increased to Rub 10.6 billion (+8.6% for the quarter).
Share of non-performing loans totaled 9.4% of total loans as of September 30, 2012. NPLs growth to Rub 14.3 billion resulted mostly from impairment of one large loan of Rub 2.1 billion in the corporate portfolio. In the key SME portfolio, problem loans demonstrate positive dynamics in both absolute and relative terms. Provisions amounted to Rub 14.4 billion, covering NPLs with 1 day+ overdue and impaired by 101.2%. Loans with 30 days+ overdue are covered by 104% and 90 days+ overdue — by 153%. In the 3rd quarter allocations to provisions stood at Rub 1.1 billion, while the cost of risk for 9M 2012 was 2.1%.
Net interest income in 9M 2012 reached Rub 6.7 billion, up 27% compared to the similar period of the last year on the back of outpacing interest income growth. On a quarterly basis net interest income remained flat and stood at Rub 2.3 billion. Interest income grew by 3.5% in the third quarter to Rub 4.3 billion due to higher interest rates on corporate loans and increasing share of retail lending, partially offset by repayment of large loans in the corporate portfolio. Growth of interest expenses by 8.3% for the quarter to Rub 2 billion and cost of funding surge by 24 bps for the quarter to 4.7% amid tightening competition for client funds, were mitigated by higher yields on interest-earning assets. Net interest margin in the third quarter was 4.6%, slightly down by 16 bps mainly due to higher level of average assets, while in 9M 2012 the indicator reached 4.7%, up 68 bps compared to the same period of 2011.
Non-interest income of the bank in 9M 2012 was Rub 4.4 billion, up 12.8% compared to the same period of 2011 mostly on the back of earned fees and commissions. Net fee income grew by 8.2% compared to the same period of the 2011 primarily as a result of improved fees and commissions from settlements (+11.5%) and banking card operations (+7.6%), that remained the key driver of the indicator on a quarterly basis. The bank recorded Rub 322 million in trading income mainly driven by FX revenues. Share of non-interest income in total revenues of the banks stood at the level of 40%, remaining one of the highest among Russian banks.
Operating expenses of the bank in 9M 2012 grew by just 4.8%, that is below inflationary level for the period. On a quarterly basis operating expenses decreased by 4% to Rub 2.1 billion due to lower level of administrative expenses and staff costs, that contracted by 1.9% to Rub 1.2 billion driven by a decrease in average headcount. Cost-to-Income ratio before provisions dropped to 52.9% in Q3 2012 compared to 56.7% in the previous quarter, marking meaningful efficiency improvement.
Net income in 9M 2012 increased by 59.1% to Rub 1.8 billion amid positive dynamics of interest and fee income. Some decline of net income in the 3rd quarter to Rub 583 million was mainly attributable to high provisioning. The bank recorded Rub 1.8 billion in operating profit before provisions and taxes, up 11.5% for the quarter. Effective tax rate for the period was 20%.
*Specified data as of November 21, 2012