27 May 2009
Vozrozhdenie Bank (VZRZ) published its Q1 2009 IFRS results with key figures as follows:
- Net Income: 386 million rubles ($11 million)
- Cost to income before provisions: 38.4% down from 52.7% in 2008
- Assets: up 18% in the last 12 months
- Operating profit before provisions grew by 39% versus the f Q1 2008
- Return on Equity (ROE): 10.1% down from 2008 average of 23.3%
“In Q1 the bank confirmed its strong income generating capacity. However deteriorating environment eventually had negative influence on our clients that resulted in significant NPL growth. As we adhered to conservative approach in defining problem loans and relevant provisioning the final net profit was impacted substantially,” said Tatiana Gavrilkina, Deputy Chairwoman of the Bank Management Board. “Focusing on sound risk management and tight cost control we are eager to maintain partner relations with our customers and continue to provide them with daily services of high quality. We believe that the joint efforts of the bank and its clients are essential to overcome the current crises consequences”.
Assets grew by 18% to 137.9 billion rubles ($4.1 billion) in the past twelve months. During Q1 the bank decreased its dependence on state support facilities with their share in the balance dropping to 12.5% versus 14.3% as at the end of 2008. Client funds on deposit and demand accounts continue to be the core funding of the bank. Loan to deposit ratio has not changed since the beginning of the year and stayed at the level of 110%. The bank continued to keep significant liquidity cushion of 39.3 billion rubles ($1.2 billion) that accounted for 28% of the total assets.
Equity rose by 23% since March 31, 2008 to 15.4 billion rubles ($454 million). The Bank’s Tier 1 capital adequacy ratio was 13.7% and combined Tier 1 and 2 stood at 17.7%.
Gross loans to customers expanded by 18% in the last twelve months to 99.4 billion rubles ($2.9 billion). During Q1, 2009 the bank continued to issue new loans using the cash flow from redemption of existing loan book. The bank’s loans to corporate clients are well diversified in terms of sectors (the largest single sector exposure is 26%, which refers to wholesale and retail trade) and regions and represent 82% of the total loan portfolio. Retail lending accounts for 18% of total loans. The structure of the retail loan book has not experienced any material change. Mortgages still account for slightly less than half of the retail loan portfolio.
Loan portfolio quality began to deteriorate due to worsening macroeconomic situation. The share of non-performing loans grew to 5.9% of the total loan book including those ones with only principal over-due of 4.7%. According to IFRS the Bank records as non-performing loans the whole principal of all retail and commercial loans more than one day past due either on principal or interest. The impaired loans, on which some loss of principal is expected, accounted for 4.6% of the total loan portfolio. During the Q1 the Bank added over 1.6 billion rubles to provisions for loan impairment. As of March 31, 2009 total provisions amounted to 6.4 billion rubles or 6.4% of the total loan portfolio.
Net Interest Income increased by 41% comparing to the same period of 2008 to 2.3 billion rubles due to the rise in lending interest rates and increase in the average amount of interest-earning assets. Delayed deposit re-pricing comparing to loans, relatively expensive CBR funding and decrease of loan book share in total assets resulted in more rapid growth of interest expenses comparing to interest income growth (25% and 4% respectively). As usual significant share of customer funds (34%) held on current accounts with close to zero “on demand” interest rates supported low cost of funding which was 7.2% comparing to the yield on interest-earning assets of 17.3%.
Non-interest income grew by 35% to 1.3 billion rubles in the past 12 months. Net fees and commissions accounted for 69% of the net non-interest income or 0.9 billion rubles. Numerous holidays in Q1 historically cause some decline of fees and commissions comparing to the previous quarter. Completion of the active ruble devaluation determined the reduction of the income from FX operations. Positive result from trading portfolio mark-to-market revaluation contributed 131 million rubles to non-interest income. All in all we kept the share of non-interest revenue at a very strong level of 35% of operating income before provisions or almost 2/3 of after-provisioning operating revenue.
Operating expenses lowered by 13%, to 1.4 billion rubles versus 1.6 billion in Q1 2008. Tight control over the expenses allowed us to reduce cost-to-income ratio before provisions to 38.4% versus 61.0% a year ago. We continued rationalisation of our sales outlets network by adding 7 new ATMs. Till the end of the year we plan to focus on further network optimisation closing some least efficient offices.
Pre-tax income decreased by 28% comparing to 2008 to 581 million rubles due to continuing growth of provision charges. Profit after tax lowered during the quarter by 37% to 386 million rubles ($11 million).
The Bank’s full IFSR report is available at: http://www.vbank.ru/en/reports/statements_2/ifrs_interim_2/