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VTB Group announces audited IFRS results for 2012

 
24 April 2013

VTB Group today publishes its Consolidated Financial Statements with the Independent Auditors’ Report for the year ended 31 December 2012.

 
 
 
 
«These full year results demonstrate the strength of our core businesses, and in the fourth quarter we delivered record high net profit in VTB’s history. In 2012, we made considerable progress in strengthening capital and optimising risk in our asset base, thus positioning us well for further profitable growth. We also continue focusing on expanding our retail business, including developing the new Leto Bank mass market banking project.» 
Andrey Kostin,
VTB President and Chairman of the Management Board

FINANCIAL AND OPERATING HIGHLIGHTS

Income statement

RUB billion

FY2012

FY2011

Change, % or pps

4Q2012

4Q2011

Change, % or pps

Net interest income

246.0

227.0

8.4%

71.7

77.9

(8.0%)

Net fee and commission income

48.3

39.2

23.2%

14.1

12.1

16.5%

Operating income before provisions

369.5

286.6

28.9%

110.4

76.7

43.9%

Provision charge for impairment of debt financial assets

(59.4)

(31.6)

88.0%

(14.4)

(6.3)

128.6%

Profit for the period

90.6

90.5

0.1%

30.4

17.9

69.8%

ROE, %

13.7%

15.0%

(1.3 pp)

16.8%

11.5%

5.3 pp

  • VTB Group’s 2012 net profit was RUB 90.6 billion, corresponding to earnings per share of 0.817 Russian kopecks and an ROE of 13.7%. In 4Q 2012, the Group posted a record quarterly net profit of RUB 30.4 billion, corresponding to an annualised quarterly ROE of 16.8%.
  • The Group’s core business segments, Retail Banking and Corporate and Investment Banking (CIB), posted a profit before tax of RUB 66.0 billion and RUB 52.4 billion in 2012, contributing 57.8% and 45.9% respectively to the Group total pre-tax profit before intersegment eliminations.
  • The expansion of the Group’s loan book, stronger yields on loans in 4Q 2012 and releases of provisions booked on the balance sheet of Bank of Moscow (BoM) prior to its consolidation into the Group contributed to year-on-year and quarter-on-quarter net interest income growth. Net interest margin (NIM) was 4.6% in 4Q 2012 (vs. 4.1% in 3Q 2012 and 2Q 2012 and 3.8% in 1Q 2012) resulting in a NIM of 4.2 % for 2012. The 4Q 2012 NIM adjusted for the BoM provision releases amounted to 4.3%.
  • Retail Banking and Transaction Banking continued to drive solid growth in fee and commission income, contributing RUB 32.2 billion and RUB 15.6 billion or 58.3% and 28.3%, respectively, to the Group’s total net fee and commission income before intersegment eliminations.
  • The provision charge for impairment of loans and advances to customers reached 1.2% of the average loan portfolio in 2012, up from 1.0% in 2011. In 4Q 2012, the provision charge for impairment of loans and advances to customers remained stable on a quarter-on-quarter basis at 1.1%. For 2012, the provision charge for impairment of debt financial assets was RUB 59.4 billion (versus RUB 31.6 billion in 2011), approximately 34% of which was booked counter-cyclically in 1Q 2012.
  • The Group’s net result from financial instruments was RUB 15.0 billion in 2012. In 2011, the Group recorded net loss from financial instruments of RUB 26.7 billion. The net result from foreign currencies was RUB 6.8 billion in 2012 versus a net loss of RUB 0.4 billion in 2011.
  • Staff costs and administrative expenses amounted to RUB 191.6 billion in 2012, up 35.4% from RUB 141.5 billion in 2011, largely due to the consolidation of Bank of Moscow and continued expansion of the Group’s key businesses.

Statement of financial position

RUB billion or %

31 Dec 2012

31 Dec 2011

Change, % or bps

Total assets

7,415.7

6,789.6

9.2%

Total gross loans

5,084.8

4,590.1

10.8%

Corporate gross loans

3,964.6

3,766.0

5.3%

Retail gross loans

1,120.2

824.1

35.9%

Customer deposits

3,672.8

3,596.7

2.1%

Corporate deposits

2,238.7

2,435.3

(8.1%)

Retail deposits

1,434.1

1,161.4

23.5%

NPL ratio

5.4%

5.4%

0 bps

Tier 1 ratio

10.3%

9.0%

130 bps

Total CAR

14.6%

13.0%

160 bps

  • In 4Q 2012, the Group continued the expansion of its corporate loan book that started in 3Q 2012. Corporate gross loans excluding federal loan bonds purchased by Bank of Moscow in September 2011 and accounted for as customer loans, amounted to RUB 3,929.9 billion as of 31 December 2012, up 7.7% from RUB 3,650.6 billion at 31 December 2011 and up 4.8% in 4Q 2012 from RUB 3,748.2 billion at 30 September 2012. Retail gross loans increased by 35.9%, from RUB 824.1 billion to RUB 1,120.2 billion during 2012, reaching 22.0% of the Group’s total gross loans.
  • Loan quality was stable, with the NPL ratio unchanged for 2012 at 5.4% of total gross loans (including financial assets classified as loans and advances to customers pledged under repurchase agreements) as of 31 December 2012. The Group’s NPL coverage ratio at 31 December 2012 was 112.4%, versus 111.3% as of 31 December 2011.
  • Changes in customer deposits during 2012 were primarily driven by the Group’s focus on optimising the cost of funding and improving net interest margin.
  • The Group substantially reduced its equity securities portfolio, which contracted by RUB 167.8 billion, or 61.7%, during 2012 (4Q 2012 decline of RUB 97.3 billion or 48.3%) to RUB 104.0 billion.
  • Throughout 2012 and into 2013, the Group reaffirmed its ability to effectively diversify funding sources across instruments, geographies, currencies and investor bases, issuing debt in US dollars, Singapore dollars, Swiss francs, Chinese yuan renminbi, and Australian dollars. In December 2012 VTB successfully issued an AUD 500 million 7.5% Eurobond due in 2017, the first ever Australian dollar offering from a Central and Eastern European issuer. In March 2013, VTB raised a US$ 2.0 billion, 3-year syndicated loan facility with a margin of 150 bps p.a. over LIBOR, the largest syndicated facility by a financial institution in Russia since 2011.
  • The Group continued to prioritise strengthening its capital base in 2H 2012. In August 2012, VTB successfully issued a US$ 1 billion Tier 1 perpetual bond, which provided the Group with a cost effective, non-dilutive means of raising capital. The bond was designed to achieve capital treatment under Basel I and II, as well as to accommodate anticipated changes to the Russian regulatory system in light of the transition to Basel III. In November 2012, VTB increased the total issue size by US$ 1.25 billion to US$ 2.25 billion. In October 2012, the Group also issued a US$ 1.5 billion Subordinated Lower Tier 2 6.95% Eurobond, due in 2022.
  • The Group’s total and Tier 1 capital adequacy ratios (CAR) as of 31 December 2012 were 14.6% and 10.3%, respectively, versus 13.0% and 9.0% as of 31 December 2011. The Group will continue to seek to strengthen its capital ratios in order to support further growth.

KEY BUSINESS SEGMENT HIGHLIGHTS

RUB billion

Corporate and Investment Banking

Retail Banking

Loans and deposits

Investment banking

Transaction banking

Total CIB*

Net interest income

93.3

15.0

22.3

130.6

133.7

Net fee and commission income

1.9

4.6

15.6

22.1

32.2

Operating income

72.0

34.6

38.7

145.4

143.1

Profit before taxation

26.2

10.5

15.6

52.4

66.0

*Including Inter-CIB Eliminations

Corporate and Investment Banking

 
 
 
 
«We continue to focus on perfecting our unique product offering and further improving efficiency in the Group’s CIB business. Our Transaction Banking team is successfully expanding its client coverage, while VTB Capital is transforming itself into a strong regional investment banking player, having secured the #1 position in Russia and the CIS.» 
Yuri Soloviev,
First Deputy President and Chairman of the VTB Management Board

  • In 2012, the Group’s Global Transaction Banking Business (GTB) sold complex and customised cash management solutions to 165 large corporate groups (comprising over 1,300 legal entities). Throughout the year the GTB team was focusing on improving client service and establishing dedicated sales teams in the Russian regions for small and medium-sized clients.
  • The CIB team has successfully delivered on its strategic project aimed at transforming VTB’s corporate branch network in the Russian regions to further enhance its performance and efficiency. During 2012 and 1Q 2013, more than 40 VTB Bank branches were converted into operational offices, which will allow further cost optimisation and unlock new growth opportunities in the regional corporate banking business.
  • In 2012, VTB Capital started operations in a number of new geographies, with its clients gaining access to South African, Turkish, Polish, Czech, Hungarian, Israeli and other Middle Eastern markets. VTB Capital also began offering direct market access (DMA) services for institutional clients in 2012 via VTB Capital Broker.
  • VTB Capital is the #1 investment banking franchise in Russia. In November 2012, it became the first Russian bank to place sovereign Eurobonds in CEE (Serbia’s US$ 750 million Eurobond), and in March 2013 it was the first Russian bank to participate in a domestic bond offering in the United States (Bank of America Corporation's US$ 4 billion offering). For 2012, VTB Capital’s DCM team took the top spot in the Dealogic ranking for Central and Eastern Europe, with 103 local and international debt placements worth a total of US$ 18.7 billion. VTB Capital also holds top positions in the 2012 Russia and CIS Eurobond Bookrunner ranking, with 35 transactions worth US$ 10.7 billion (market share: 18.2%) and in the Russia domestic bonds bookrunners ranking, with 63 placements worth US$ 7.4 billion (market share: 21.4%).
  • Key highlights of VTB Capital’s capital markets operations in 2012 included: joint bookrunner for the US$ 1.8 billion IPO of Megafon, Russia’s largest equity market transaction of 2012, and a sole advisor and co-investor in exchangeable bonds issue by Uralkali, one of the world's largest potash producers.
  • VTB Capital placed second in Dealogic’s M&A financial advisor league tables focusing on Russia and CIS. In 2012, VTB Capital has advised on 21 deals worth a total of US$ 68.3 billion, which is a 50.8% market share in Russia and a 46.1% share in the CIS.

Retail Banking

Mikhail Zadornov, VTB24 President and Chairman of the Management Board, said: “Our retail business saw strong growth both through the expansion of our client base and by successfully selling new products to existing clients. We further enhanced our retail franchise by launching the mass segment project, Leto Bank, which is growing rapidly and starting to outperform all relevant peers. We also continue to integrate the retail operations of banks we have acquired. In 2013 TransCreditBank’s clients will be offered the full product range of VTB24, our core retail bank with the most advanced product offering.”

VTB Group Retail Loan Book

RUB billion

31 Dec 2012

31 Dec 2011

Change, %

Gross retail loans

1,120.2

824.1

35.9%

Consumer loans

624.3

436.2

43.1%

Car loans

102.0

75.5

35.1%

Mortgage loans

390.7

309.0

26.4%

  • The Retail Banking segment’s performance was supported by a favourable macro environment combined with healthy real wages growth and strong household consumption expenditures in 2012.
  • In April 2013, TransCreditBank (TCB) offices started offering VTB24’s products as part of the ongoing integration of the banks’ retail operations. VTB24 is the Group’s core retail bank with the most advanced product range, and efficient exploration of TCB’s client base is expected to further increase the value of the Group’s retail business going forward.
  • In 2H 2012 the Group launched Leto Bank, a new strategic project aimed at the mass retail client segment. The bank focuses on highly profitable cash loans and point-of-sale loans. In 1Q 2013 Leto Bank’s loan portfolio expanded 4.5x times to RUB 3.2 billion. At 31 March 2013, Leto Bank had already established 106 client centres and was present in over 1,600 shopping centres.
  • In retail lending, the Group maintained its focus on higher-margin products, which resulted in the share of consumer and car loans in the Group’s retail loan portfolio increasing to 64.8% at 31 December 2012 from 62.1% at the start of the year. The share of mortgage loans in the same period decreased to 34.9% from 37.5%.
  • The changes in the portfolio mix contributed to an annualised yield on the Group’s retail loans amounting to 17.6% in 4Q 2012, versus 16.6% in 3Q 2012, 15.7% in 2Q 2012 and 15.9% in 1Q 2012.
  • VTB24’s private banking deposits continued to be an important contributor to the retail deposit base, as the Group continued to successfully expand its business among affluent and high-net-worth customers. Funds from VTB24’s private banking clients increased to RUB 214.1 billion, representing 16.1% of the Group’s retail deposits.
  • The total number of VTB24, BoM and TCB retail offices in Russia was 1,257 as of 31 December 2012, versus 1,242 as of 31 December 2011. The combined number of VTB24, TCB and BoM ATMs exceeded 12,300 as of 31 December 2012.

Contacts:

Investor Relations:

Tel.: +7 495 775 71 39

Email: investorrelations@vtb.ru

About VTB:

JSC VTB Bank and its subsidiaries (“VTB Group” or the “Group”) is a leading Russian financial group, offering a wide range of banking services and products in Russia, CIS, in the selected countries of Europe, Asia, Middle East, and Africa, and in the USA. The Group conducts its banking business in Russia through VTB Bank as a parent and five subsidiary banks. The Group’s largest subsidiary banks in Russia are VTB24, Bank of Moscow, and TransCreditBank.

The Group operates outside Russia through 15 bank subsidiaries, located in the Commonwealth of Independent States (Armenia, Ukraine (2 banks), Belarus (2 banks), Kazakhstan and Azerbaijan), Europe (Austria, Cyprus, Germany, France, Great Britain and Serbia), Georgia and Africa (Angola); through 2 representative offices located in Italy and China; through 2 VTB branches in China and India and 2 branches of VTB Capital, Plc in Singapore and Dubai. The Group investment banking division also performs broker/dealer operations in the United States of America, securities dealing and financial advisory in Hong Kong and investment banking operations in Bulgaria.

The Group’s business franchise spans Corporate and Investment banking (CIB) and Retail Banking. In CIB, the Group provides a broad range of services and products including corporate lending, foreign trade transactions, syndicated loans, deposit and settlement services, equity and debt capital markets underwriting, project financing, merger and acquisition financing, advisory services, custody services, asset management and venture funds. In Retail Banking, VTB offers deposit accounts, lending, debit and credit cards and transaction services to individuals and small-sized corporations.

The number of employees of the Group as of 31 December 2012 was 80,860.

In February 2011, the Russian Federation state reduced its share from 85.5% to 75.5% of VTB Bank’s shares as a result of an offering in the form of shares and global depositary receipts. 


VTB Bank
Consolidated Statements of Financial Position as at 31 December

(in billions of Russian Roubles)

2012

2011

Assets

Cash and short-term funds

569.0

407.0

Mandatory cash balances with central banks

63.8

71.9

Financial assets at fair value through profit or loss

528.8

571.5

Financial assets pledged under repurchase agreements and loaned financial assets

302.9

198.6

Due from other banks

358.6

424.6

Loans and advances to customers

4,761.5

4,301.6

Assets of disposal group held for sale

15.3

10.3

Financial assets available-for-sale

97.4

167.7

Investments in associates and joint ventures

48.3

32.5

Investment securities held-to-maturity

0.9

32.4

Land, premises and equipment

142.5

116.8

Investment property

148.0

122.5

Intangible assets and goodwill

137.3

141.2

Deferred tax asset

42.9

42.7

Other assets

198.5

148.3

Total assets

7,415.7

6,789.6

Liabilities

Due to other banks

759.9

699.7

Customer deposits

3,672.8

3,596.7

Liabilities of disposal group held for sale

6.1

8.5

Other borrowed funds

806.2

734.6

Debt securities issued

894.5

664.5

Deferred tax liability

12.3

10.0

Other liabilities

212.0

209.4

Total liabilities before subordinated debt

6,363.8

5,923.4

Subordinated debt

285.8

241.1

Total liabilities

6,649.6

6,164.5

Equity

Share capital

113.1

113.1

Share premium

358.5

358.5

Perpetual loan participation notes

68.3

Treasury shares

(13.7)

(0.6)

Unrealized gain on financial assets available-for-sale and cash flow hedge

4.3

7.9

Land and premises revaluation reserve

20.8

11.4

Currency translation difference

8.8

11.0

Retained earnings

193.7

102.2

Equity attributable to shareholders of the parent

753.8

603.5

Non-controlling interests

12.3

21.6

Total equity

766.1

625.1

Total liabilities and equity

7,415.7

6,789.6


VTB Bank
Consolidated Income Statements for the Years Ended 31 December

(in billions of Russian Roubles)

2012

2011

Interest income

555.7

416.7

Interest expense

(309.7)

(189.7)

Net interest income

246.0

227.0

Provision charge for impairment of debt financial assets

(59.4)

(31.6)

Net interest income after provision for impairment

186.6

195.4

Gains less losses / (losses net of gains) arising from financial instruments at fair value through profit or loss

10.1

(30.8)

Gains less losses from available-for-sale financial assets

4.9

4.1

Losses net of gains arising from extinguishment of liability

(1.8)

(0.7)

Net recovery of losses on initial recognition of financial instruments, restructuring and other gains on loans and advances to customers

17.2

20.2

Gains less losses arising from dealing in foreign currencies

14.5

6.1

Foreign exchange translation losses net of gains

(7.7)

(6.5)

Fee and commission income

61.2

47.4

Fee and commission expense

(12.9)

(8.2)

Share in income of associates and joint ventures

1.2

7.5

Provision charge for impairment of other assets, contingencies and credit related commitments

(2.7)

(1.4)

Income arising from non-banking activities

57.9

20.4

Expenses arising from non-banking activities

(29.2)

(9.1)

Other operating income

8.1

9.2

Net non-interest income

120.8

58.2

Operating income

307.4

253.6

Staff costs and administrative expenses

(191.6)

(141.5)

Impairment of goodwill

(1.5)

Profit from disposal of subsidiaries and associates

1.1

3.4

Profit before taxation

115.4

115.5

Income tax expense

(24.8)

(25.0)

Net profit

90.6

90.5

Net profit attributable to:

Shareholders of the parent

85.8

89.4

Non-controlling interests

4.8

1.1

Basic and diluted earnings per share
(expressed in Russian Roubles per share)

0.00817

0.00855


Tags:
VTB Group, IFRS

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