19 May 2011
Bank Vozrozhdenie (VZRZ) published today its Q1 2011 Financial Statements in accordance with International Financial Reporting Standards with the following key figures:
- Net Income: Rub 317 million (up 227% YoY)
- Assets: Rub 174 billion (up 18% YoY)
- Operating profit before provisions: Rub 2 539 million (up 8% YoY)
- Return on Equity (ROE): 7.5% compared with 2.4% in Q1 2010
“In 2011 we celebrate 20th anniversary of Bank Vozrozhdenie. We are pleased that this jubilee year started with several positive trends. First of all managed to almost twofold outpace banking sector growth, having raised our loan book by 34% as compared with the previous year. Meanwhile despite the usual slow down of business activity we managed to increase our loan book by 10% per quarter” — commented Dmitry Orlov, Chairman of the bank. “Over the crisis period we managed to maintain our fee-generating business — fees and commissions grew by strong 22% as compared with the previous year. Furthermore our efforts on cost of funding reduction bore the fruits — cost of funding stood at 4.69%, down more than by 2% as compared with the previous year. As a result net profit has been growing five quarters in a row and 3.2 times exceeded last year result. We managed to retain our key advantages — strong capital position and liquid balance sheet and keep developing our core businesses particularly focusing on cost optimization”.
Total assets increased by 18% compared with the first quarter of 2010 and amounted to Rub 174 billion (USD $6.1 billion) primarily due to growth of the loan book, which rose by 29 billion rubles (up 34% YoY). Over the first three months of 2011 loan portfolio growth reached impressive 10%, despite the traditional slowdown in business activity at the beginning of the year. Relatively expensive deposits attracted by the bank over the crisis period, were consistently replaced by new customer funds raised on term deposits and current accounts, which grew by 17.6 billion rubles YoY (up 14.7%). Thus the bank maintained a stable funding base and loans before provisions to deposits ratio increased from 80% in Q1 2010 to 92.1% in the first quarter of 2011. The share of liquid assets represented by cash and cash equivalents as well as securities remained at solid 29%, reflecting sound liquidity position of the bank’s balance sheet. Meanwhile cash and cash equivalents contracted by 7.8% as compared with the first quarter of 2010 to Rub 32.9 billion on the back of growth of trade and investment securities portfolio which expanded by 51,4% and amounted to Rub 16.8 billion.Shareholder’s equity as of 31 March 2011 rose by 4.8% to Rub 17.1 billion ($ 604 million) compared with Rub16.4 billion ($ 558 million) in Q1 2010 due to capitalization of retained earnings of the bank. Tier 1 capital adequacy ratio remained at a comfortable level of 12.0% and totalcapital adequacy ratio reached 14.1%. Reduction of Tier 1 and Total capital adequacy ratio as compared with Q1 2010 (total CAR by 3.8%, Tier 1 CAR by 2.7%) mainly resulted from risk-weighted asset growth due to expansion of loan and securities portfolio.
Loan portfolio before provisions grew by 32% to Rub 126 billion as compared to Q1 2010, almost twice outperformed banking sector growth rate of 16.3% in accordance with CBR data. For the first months of the year loan portfolio before provisions grew by 9.4% versus 2.3% of the banking sector average. Loan book expansion in the first quarter was driven by corporate and SME lending program. In Q1 2011 corporate loan book increased by 10.1% or Rub 9.9 billion, of which Rub 6 billion were issued to our key client segment — small and medium enterprises. Thus corporate loan book accounted for 86.1% of total loans with loans issued to SME representing the largest part of the loan portfolio and accounting for 52%. The greatest part of the loans is traditionally represented by the loans to enterprises of manufacturing and wholesale and retail trading sectors (26% and 23% respectively). Retail loan book grew by 5.2% to Rub 17.5 billion. Mortgage loans were highly sought banking product over the reporting period, mortgages grew by 7.5% as compared with 1.7% of consumer, car and credit cards lending growth. Thus mortgages accounted for 60% of total retail loans by the end of the first quarter.
Securities portfolio (trade and investment securities) amounted to Rub 16.9 billion ($594 million) as of March 31, 2011, up by 18.6% QoQ. By the end of the quarter trade securities portfolio mainly consisted of investment-grade securities with short duration. Most of them were represented by fixed — income securities of Russian federal and regional government bodies and companies with quasi-sovereign risk. The breakdown of the securities portfolio as of March 31, 2011 was as follows: 52% — Federal and Regional Government’s bonds and Eurobonds, 28% — corporate bonds and Eurobonds and 9% — Central Bank of Russia bonds.
NPL ratio declined from 11.1% a year ago to 8.78% by the end of the first quarter. In absolute terms non-performing loans contracted from Rub 12.1 billion in the beginning of the year to Rub 11.9 billion as of March 31, 2011. Under IFRS the bank applies very conservative approach to the definition of NPLs recording as non-performing loan the whole principal of the loan more than one day past due either on principal or interest. Impaired loans, on which some potential losses are possible, contracted to 9.0% of the total loan portfolio. Total NPLs are completely covered by provisions for loan losses, which amounted to Rub 11.5 billion by the end of the first quarter. Total coverage ratio was 104%, while for loans past due for more than 30 days it was 130% and 132% for more than 90 days past due. Total charges to provisions in Q1 2011 (annualized cost of risk) accounted for 1.2% of average loan book or Rub 350 million.
Net interest income totaled Rub 1.36 billion in Q1 2011 compared to Rub 1.4 billion in the previous quarter due to ongoing reduction of lending rates over 2011. Meanwhileremaining part of expensive term deposits raised by the bank during the crisis period expired over Q1 2011 and the bank’s cost of funding continued to decline. It fell from 6.75% in Q1 2010 to 4.69% by the end of the reporting quarter. However, due to significant growth of total assets net effect on NIM was −28 basis points and net interest margin declined from 3.5% in Q4 2010 to 3.2% in the first quarter of 2011. Interest spread stood at 5.14% by the end of the first quarter.
Total non-interest income in the first quarter of 2011 increased by 33% compared with the first quarter 2010 to 1,175 million rubles as a result of growth in both fees and commission income (+22%) and income from trading operations and operations with foreign currency (+252%). Among fee-generating products fees for settlement transactions (up 32% YoY) and fees for banking cards settlement transactions (up +26% YoY) showed the greatest dynamics. Non-interest income for the quarter accounted for 46% of total operating income before provisions compared with 38% for the same period last year.
Operating expenses contracted by 20.1% to Rub 1.8 billion compared with the previous quarter primarily thanks to reduction of personnel expenses as bonuses for the bank employees have been paid in Q4 2010.
As compared with the first quarter of the previous year operating expenses rose by 17.4% while personnel expenses increased by 22% and amounted to Rub 1.1 billion. Personnel expenses increase was driven by tax payments growth to off-budget funds due to changes in tax legislations which came into effect since January 1, 2011. Social tax payments grew by 45.6% compared to the Q1 2010 while salary budget merely exceeded inflation level and amounted to 10.2%. Thereby wide application of the system of electronic purchases allowed the bank to reduce administrative expenses by 11% YoY. Thus cost to income before provisions came to 70.8% compared with 86.2% last quarter.
Profit before taxation amounted to 396 million rubles (up 111% YoY). Net profit has been steadily growing for 5 quarters in a row and amounted to Rub 317 million in the first three months of 2011. Effective tax rate in Q1 2011 was equal to the nominal one of 20%.