Bank Vozrozhdenie earned RUB 521 million of net profit during H1 2013

27 August 2013

Today Bank Vozrozhdenie reported H1 2013 IFRS Results with the following highlights:

  • Net income for 6M 2013 equaled to RUB 521 million ($16 mln)
  • Assets grew by 11% over the last 12 months to RUB 216.2 billion ($6.6 bln)
  • Operating income before provisions stood at the level of H1 2012 of RUB 7.2 billion ($219 mln)
  • Cost-to-income ratio for H1 2013 was 59,0%

“During the first half of 2013 the bank was faced with the environment of fierce competition for creditworthy borrowers amid dawning trends of corporate lending stagnation, decelerating growth of personal income and declining rates on fee- and interest-generating products. Nevertheless we managed to increase both interest and non-interest income by 11% compared to the same prior-year period and keep operating income at H1 2012 level due to intensive work with existing clientele base as well as initiating cooperation with new customers from target segments. Adequate operating expenses management and right priorities set in the financial plan helped to secure cost-to-income ratio within the target range and improve Q-o-Q operating profit. However provisioning necessary for the business long-term stability continues to be the key factor for financial performance of the bank,” noted Tatiana Gavrilkina, Deputy Chairwoman of the Board.

“Small and medium-sized enterprises remain the bank’s key clients segment. We continue to be actively involved in financing such companies including participation in various state programs of SME support. We tend to offer the most favorable terms of lending to our customers supporting their business and thereby inducing growth of SME loan portfolio. In August, Bank Vozrozdenie granted an investment loan to a mid-sized company under the state guarantee. That guarantee was the very first one in the country issued as a part of the federal guarantees mechanism which initiation became the most expected event in the market of SME state support,” added Lyudmila Goncharova, Deputy Chairwoman of the Board.

“In the retail segment we strive to boost sales via remote channels. In the nearest future we plan to expand the range of solutions available for the user in our ‘Vbank with you’ service, ATMs and payment terminals — we’ll increase the number of companies that can get payments made by individuals, add new deposits with remote opening feature and option of making payments to any recipient”, commented Mark Nakhmanovich, Deputy Chairman of the Management Board.

Assets rose by 3.4% YTD to RUB 216.2 billion with the main growth of 2.8% coming in the second quarter. The share of liquid assets which include cash and cash equivalents, due from banks and trading portfolio of liquid securities widened from 21.7% to 22.5% over the quarter. Net interest earning assets accounted for 75.5% of the total assets as of June 30, 2013.

Loan portfolio before provisions advanced 6.8% YTD to RUB 166.9 billion on the back of new lending to corporate clients as well as retail loan book increase. In Q2 2013 the growth decelerated to 1.7%. Corporate loans didn’t change over the quarter but its structure experienced some realigning in favor of large loans (over RUB750 million) due to utilization of previously approved credit facilities and moving of several clients to the category of large corporates thanks to their business growth and respective widening of lending. The bank’s loan portfolio is well-diversified across industries with largest shares in manufacturing (29%) and wholesale and retail trade (22%). The bank also actively supports companies involved in construction, transport industry, agriculture etc.

Retail loan portfolio expanded by 11.9% over H1 2013 to RUB 36.8 billion as of June 30, 2013, adding during the last quarter RUB3.2 billion on the back of intensive mortgage and consumer lending. Reduction of rates on loans for apartments purchase made in March 2013 became the main driver of mortgages growth by 9% (+ RUB 2.1 billion) over the second quarter. Consumer lending rose 13.7% (+RUB 1.1 billion) in the course of the last three months to RUB 9.4 billion as at the end of the period.

Loan portfolio quality stabilized with NPL ratio remaining unchanged over the second quarter at 10.3%. Minor changes of impaired loans volume by 3.2% resulted from revaluation of its foreign-currency denominated part as well as from slight deterioration of middle-size companies’ loans quality. In retail lending the share of overdue and impaired loans stayed intact at 1.8% for mortgages and 5.4% for other loans to individuals. During the second quarter of 2013 the bank charged RUB1.3 billion to provisions for loan impairment, bringing NPL coverage ratio to 98% (+5p.p.). It’s worth mentioning that 82.3% of new provisioning went to cover two exposures to large corporates impaired during the previous periods. NPL coverage of loans 90 days + overdue improved to 123%.

Customers’ funds added up 3.3% YTD to Rub 169.3 billion as of June 30, 2013. Insignificant decline at the end of the first quarter was followed by 3.6% growth during the last three months, resulting first of all from the retail term deposits inflow of RUB 3.0 billion (+3.5%). In the course of the second quarter individual customers preferred to make savings for the term of 18 months. Total increase of retail clients’ funds by 4.5% during the period made them equal to RUB 107.5 billion as of the end of Q2 2013. Corporate customers’ funds grew by 1.7% over the last quarter to 60.1 billion.

Shareholders’ equity growth by 0.9% during the last three months was reasoned by retained earnings. Tier 1 Capital Adequacy ratio and total CAR were 11.7% and 14.6% respectively. Since May 2013 the bank started to report BASEL III capital adequacy norms. As of July 01, 2013 core capital adequacy (regulatory norm H1.1) equaled to 9.3% while Total Capital (Tier 1 Capital plus Tier 2 Capital) Adequacy (regulatory norm H1.0) totaled 11.49%.

During the recent three months yields on loans went upside driven by decent rebound of corporate loan book at the end of Q1 2013. It helped to offset increase of interest expenses by 6.1% to RUB 2.4 billion reasoned by raising new deposits under higher rates and enabled net interest income augmentation by 2.6% to RUB 2.2 billion for the period. Widening of yields on net interest earning assets to 11.46% (+22 b.p. over the quarter) outpaced growth of funding costs to 5.04% (+20b.p. over the quarter) leading to improvement of spread by 2 b.p. to 6.42% and NIM by 4 b.p. to 4.2%.

Net fees and commissions rose by 9.8% over the second quarter to RUB1.2 billion supported by expansion of settlement operations of both retail and corporate clients (+32% during the period).

Trading income elevated by 12.6% during the last quarter. The bank was successful in exploiting chances provided by FX rates volatility with total benefit from FX operations and FX revaluation amounting to RUB 172 million, up by 24.6% versus result of Q1 2013.

Operating income before provisions grew by 5.1% to RUB 3.7 billion in comparison with the first quarter while the share of non-interest revenues recovered to 39%.

Operating expenses added 2.1% versus Q1 2013 and totaled RUB 2.1 billion for the last three months. Moreover, in comparison with the first half of 2012 operating expenses for six months of 2013 went up by just 1.2%. Personnel costs in the amount of RUB 1.3 billion for Q2 2013 continued to be the main element of total expenses structure with over 75% represented by compensations to sales managers, specialists and service personnel of the bank. Furthermore the cost-to-income ratio kept improving and declined by 1.7 b.p. to 58.2% in Q2 2013.

Operating profit before provisions went up by 9.5% in Q2 2013 reflecting healthy results of the bank operations. Ratio of profit before provisions and taxes to equity improved during the quarter by 216 b.p. to 28.8% However significant charges to provisions required to increase coverage on earlier impaired loans weighted on quarterly net profit and pressed it down to RUB 188 million (-43.5% compared to the previous quarter). Net profit for H1 2013 totaled RUB 521 million resulting in ROE of 4.9% for the period.

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