6 August 2014
Bank Vozrozhdenie summarized 6M 2014 results under the Russian accounting standards.
“During the first half of 2014, we focused on optimization of the balance sheet structure and didn’t strive to actively expand the loan book, largely due to lack of reliable borrowers in the market. At the same time, continued uncertainty with funding in the sector haven’t affected the bank’s plans for developments, mainly owing to the trust of our depositors. Following the exchange rate stabilization, inflow of rouble retail deposits substantially exceeded the average level across the banking system that allowed to bring the Loan-to-Deposit ratio to a more comfortable level of 106%”, commented Andrey Shalimov, Deputy Chairman of the Management Board.
The bank’s net income for H1 2014 delivered almost five-fold growth to RUB1.9 bln versus the same period of the previous year, mainly due to recording of deferred tax asset as of July 1, 2014 in the amount of RUB1.4 bln. In accordance with the Bank of Russia Regulation №
Pre-tax income surged 11.9% comparing to H1 2013 and reached RUB832 mln. Operating income before provisions added 1.6% to RUB7.3 bln over the same period, building on positive dynamics of net interest income (+9.9% compared to the prior-year period) that offset a decrease of non-interest income to RUB2.5 bln.
Assets stayed nearly intact at the level of the year-start and equaled RUB207.2 bln. Loan portfolio before provisions* for the six months of 2014 edged down 1.8% to RUB170.3 bln. This was basically due to reduction of the corporate book by 3.4% to RUB126 bln on the back of loan repayments in the quarter-end and conservative credit policy of the bank.
Retail loan portfolio including securitized mortgages advanced by 3% to RUB44.3 bln from the beginning of the year. Mortgage and consumer loans rates increase in March 2014 resulted in some deceleration of the retail book expansion throughout the second quarter.
In the context of the rouble weakening and risks of economic stagnation in the year-start client funds moderated by 2.5% to RUB161.3 bln since January 1, 2014 primarily contributed by corporate deposits and current accounts. In the second quarter the growth rebounded on the back of the strengthened rouble, and the bank saw visible inflow of the rouble liquidity from the retail clients, the key client segment. Thus, individual deposits jumped by RUB4 bln (+4.5%) over the quarter to RUB92.7 bln.
In view of stabilising clients’ funding, the financing from the Bank of Russia slumped to RUB1.6 bln over the second quarter of 2014. Due to other credit institutions also dropped to RUB8.8 bln, which comprises long-term financing from SME Bank and international financing. As a result, share of funds raised on the interbank market in liabilities diminished from 8.6% as of April 1, 2014 to 5.6% as of the reporting date.
At the end of the first half of 2014 the bank’s capital totaled RUB26.0 bln as per Basel III standards, adding 11.7% YtD mainly supported by retained earnings — one of the core sources of the capital replenishment. As of July 1, 2014, total regulatory capital adequacy (N1.0 norm) was equal to 12.34%, up by 73 bps since the year-start while the minimum acceptable level is set at 10%. Common equity Tier 1 capital adequacy (N1.1 norm) reached 9.85%, up by 10 bps YtD significantly exceeding the minimum requirement of 5%.
In accordance with its conservative risk management policy and the Bank of Russia requirements as well as responding to the challenges of the current macro environment, the bank continues to add up provisions for possible loan losses. The bank charged RUB1.1 bln for asset impairment provisions, most part of which, 1 bln, fell to provisions for impairment of loans and other similar indebtedness. The total amount of provisions for possible losses comprised RUB21.1 bln including RUB19 bln for loan portfolio impairment.
Please notice that Bank Vozrozhdenie consolidated financial statements for 6M 2014 prepared in accordance with IFRS will be published on August 27, 2014.
* Hereinafter loan portfolio figures are provided in accordance with internal reporting forms of Bank Vozrozhdenie.