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VTB Group announces its IFRS Results for 1Q 2013

 
2 July 2013

VTB Group today publishes its Interim Condensed Consolidated Financial Statements as at 31 March 2013 with the Independent Auditors’ Report on Review of these Statements.

Andrey Kostin, VTB President and Chairman of the Management Board, said: “VTB Group first quarter results were driven by robust loan book dynamics, as well as by healthy year-on-year growth in key core income items. Our strong revenue generation capacity allowed us to respond to a challenging economic environment by increasing loan loss provisions. In May 2013, we completed our local share placement which allowed VTB to strengthen significantly its capital base and to meet its capital adequacy targets. This landmark transaction has positioned VTB Group very well for further profitable growth, with a particular focus on the retail segment.”

FINANCIAL AND OPERATING HIGHLIGHTS

Income statement

RUB billion

1Q 2013

1Q 2012

Change, % or pps

Net interest income

73.8

54.0

36.7%

Net fee and commission income

11.5

10.3

11.7%

Operating income before provisions

92.9

95.4

(2.6%)

Provision charge for impairment of debt financial assets

(22.0)

(20.4)

7.8%

Net profit

15.7

23.3

(32.6%)

ROE, %

8.1%

14.9%

(6.8 pps)

  • VTB Group’s 1Q 2013 performance was in line with plans, with net interest income and fee and commission income demonstrating strong year-on-year growth. The Group’s net profit amounted to RUB 15.7 billion in 1Q 2013, corresponding to earnings per share of RUB 0.0015, and an annualised quarterly ROE of 8.1%.
  • The Group’s core businesses, Retail Banking and Corporate and Investment Banking (CIB), posted a profit before tax of RUB 15.8 billion and RUB 10.2 billion in 1Q 2013 versus RUB 13.3 billion and RUB 20.6 billion in 1Q 2012.
  • The expansion of the Group’s loan book, 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 4.5% in 1Q 2013 (vs. 4.6% in 4Q 2012). The 1Q 2013 NIM adjusted for the BoM provision releases amounted to 4.2%, versus 4.3% in 4Q 2012 on the same basis.
  • Retail Banking and Transaction Banking continued to be key drivers of the Group’s fee and commission income growth, contributing RUB 8.2 billion and RUB 4.2 billion or 58.6% and 30.0%, respectively, to the Group’s total net fee and commission income before inter-segment eliminations in 1Q 2013.
  • On the back of an overall macroeconomic slowdown, the provision charge for impairment of debt financial assets was RUB 22.0 billion in 1Q 2013 versus RUB 20.4 billion in 1Q 2012. The provision charge for impairment of loans and advances to customers reached 1.6% of the average loan portfolio in 1Q 2013 compared to 1.1% in 4Q 2012 and 1.7% in 1Q 2012. In line with overall market trends, the increase in cost of risk was mainly driven by the creation of loan loss reserves in the rapidly growing retail segment.
  • Staff costs and administrative expenses amounted to RUB 49.2 billion in 1Q 2013, up 15.8% from RUB 42.5 billion in 1Q 2012, largely due to the expansion of the Group’s key businesses. The Group’s cost-to-income ratio was 53.0% in 1Q 2013 versus 44.5% in 1Q 2012.

Statement of financial position

RUB billion or %

31 March 2013

31 Dec 2012

Change, % or bps

Total assets

7,602.8

7,415.7

2.5%

Total gross loans

5,292.7

5,084.8

4.1%

Corporate gross loans

4,100.1

3,964.6

3.4%

Retail gross loans

1,192.6

1,120.2

6.5%

Customer deposits

3,727.9

3,672.8

1.5%

Corporate deposits

2,198.6

2,238.7

(1.8%)

Retail deposits

1,529.3

1,434.1

6.6%

NPL ratio

5.4%

5.4%

-

Tier 1 ratio

10.2%

10.3%

(10 bps)

Total CAR

14.5%

14.6%

(10 bps)

  • In 1Q 2013, the Group continued to expand its loan book. The Group’s total gross loans amounted to RUB 5,292.7 billion as of 31 March 2013, up 4.1% from 5,084.8 billion as of 31 December 2012.
  • Loan quality remained largely stable, with the NPL ratio at 5.4% of total gross loans (including financial assets classified as loans and advances to customers pledged under repurchase agreements) as of 31 March 2013. The Group’s NPL coverage ratio at 31 March 2013 was 115.4%, versus 112.4% as of 31 December 2012.
  • Changes in customer deposits during 1Q 2013 were primarily impacted by seasonality in customer behaviour, as well as by the Group’s focus on optimising the cost of funding and protecting net interest margin.
  • The Group’s total and Tier 1 capital adequacy ratios (CAR) as of 31 March 2013 were 14.5% and 10.2%, respectively, versus 14.6% and 10.3% as of 31 December 2012. In May 2013 the Group successfully completed its RUB 102.5 billion share issue, which was conducted within the Russian regulatory framework among both Russian and international investors, solely in the form of ordinary shares traded on the Moscow Exchange. A group of investors comprising existing and new shareholders, including Norges Bank Investment Management, Qatar Holding LLC, the State Oil Fund of Azerbaijan and China Construction Bank, subscribed for and were allocated an aggregate of 55% of the total issue volume. This transaction enabled VTB Group to significantly strengthen its capital adequacy targets, while also providing funding for the continued growth of the Group’s key businesses.

KEY BUSINESS SEGMENT HIGHLIGHTS

Corporate and Investment Banking

  • During 1Q 2013, VTB Group managed to grow its corporate loan book efficiently without compromising on risk management, which reflected the strength of VTB’s CIB franchise and the quality of its product offering to a top tier corporate customer base. Corporate gross loans excluding federal loan bonds purchased by Bank of Moscow in September 2011 and accounted for as customer loans, amounted to RUB 4,094.8 billion as of 31 March 2013, up 4.2% from RUB 3,929.9 billion at 31 December 2012.
  • VTB Bank has successfully completed the reform of its regional network launched in 2012. In the course of the reform, the majority of the bank’s branches were converted into operating offices, which will allow CIB to further improve its efficiency and the quality of its customer service. VTB’s reformed corporate branch network is now represented by seven basic branches, 44 regional back offices and three operational support centres.
  • VTB Capital continues to be the #1 investment banking franchise in Russia. For 1Q 2013, VTB Capital’s DCM team took the top spot in the Dealogic ranking for Russia & CIS, with 34 debt placements worth a total of US$ 5.8 billion. In March 2013, VTB Capital 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).
  • VTB Capital was first in Dealogic’s M&A financial advisor league tables focusing on Russia & CIS. In 1Q 2013, VTB Capital advised on eight deals worth a total of US$ 63.4 billion, representing an 80.6% market share.
  • Equity markets activity remained subdued throughout 1Q 2013. VTB Capital, however, remained one of the top players in Russian ECM, having acted as Joint Global Coordinator, Joint Bookrunner and Stabilization Manager on the RUB 15 billion IPO of Moscow Exchange, the largest Russian IPO in 1Q 2013.

Retail Banking

  • The Retail Banking segment’s profit before tax amounted to RUB 15.8 billion in 1Q 2013, up 18.8% from RUB 13.3 billion in the same period last year.
  • The segment’s performance was supported by continued strong growth in its loan portfolio led by the Group’s core retail bank VTB24. Retail gross loans increased by 6.5%, from RUB 1,120.2 billion to RUB 1,192.6 billion during the first three months of 2013, reaching 23% of the Group’s total gross loans. In line with its strategy of above-the-market growth in the retail business, the Group increased its market share in retail lending from 13.3% as of 31 December 2012 to 13.6% as of 31 March 2013.

VTB Group Retail Loan Book

RUB billion

31 March 2013

31 Dec 2012

Change, %

Gross retail loans

1,192.6

1,120.2

6.5%

Cash and credit card loans

665.7

624.3

6.6%

Car loans

108.4

102.0

6.3%

Mortgage loans

415.2

390.7

6.3%

  • In 1Q 2013, the Group’s retail loan book growth was driven mainly by cash and credit card loans and mortgage lending. The composition of the retail loan book remained broadly unchanged with the share of cash, credit card and car loans staying at 64.9% at 31 March 2013 (64.8% at 31 December 2012). The share of mortgage loans in the retail portfolio at 31 March 2013 was 34.8% (34.9% at 31 December 2012).
  • The Group is proceeding with the successful integration of TransCreditBank’s (TCB) retail operations. In April 2013, TCB offices began offering VTB24’s products including cash, credit card, mortgages and deposits. In June 2013, VTB24 products were available at more than 166 of TCB’s 264 offices. The Group plans to sell those products throughout the entire TCB branch network starting from August 2013.
  • 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. During 1Q 2013, funds from VTB24’s private banking clients increased by 34% to RUB 287 billion, representing 19% of the Group’s total retail deposits.
  • The total number of the Group’s retail offices in Russia (operating under the brands of VTB24, Bank of Moscow, TCB, and Leto Bank) was 1,362 as of 31 March 2013. The combined number of VTB24, TCB, BoM and Leto Bank ATMs exceeded 10,800 at the end of 1Q 2013.

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 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 March 2013 was 84,764.

VTB’s majority shareholder is the Russian Federation state, acting through the Federal Agency for State Property Management, which holds 60.93% of VTB’s shares.


VTB Bank

Interim Consolidated Statement of Financial Position as at 31 March 2013

(in billions of Russian Roubles)

31 March
2013

(unaudited)

31 December
2012

Assets

Cash and short-term funds

582.7

569.0

Mandatory cash balances with central banks

67.7

63.8

Financial assets at fair value through profit or loss

467.8

528.8

Financial assets pledged under repurchase agreements and loaned financial assets

424.2

302.9

Due from other banks

263.8

358.6

Loans and advances to customers

4,948.2

4,761.5

Assets of disposal group held for sale

14.8

15.3

Financial assets available-for-sale

113.2

97.4

Investments in associates and joint ventures

48.0

48.3

Investment securities held-to-maturity

0.6

0.9

Land, premises and equipment

141.6

142.5

Investment property

151.8

148.0

Intangible assets and goodwill

136.0

137.3

Deferred tax asset

43.3

42.9

Other assets

199.1

198.5

Total assets

7,602.8

7,415.7

Liabilities

Due to other banks

760.9

759.9

Customer deposits

3,727.9

3,672.8

Liabilities of disposal group held for sale

5.1

6.1

Other borrowed funds

883.6

806.2

Debt securities issued

932.8

894.5

Deferred tax liability

12.9

12.3

Other liabilities

208.2

212.0

Total liabilities before subordinated debt

6,531.4

6,363.8

Subordinated debt

288.1

285.8

Total liabilities

6,819.5

6,649.6

Equity

Share capital

113.1

113.1

Share premium

358.5

358.5

Perpetual loan participation notes

69.8

68.3

Treasury shares

(13.8)

(13.7)

Other reserves

34.7

33.9

Retained earnings

208.3

193.7

Equity attributable to shareholders of the parent

770.6

753.8

Non-controlling interests

12.7

12.3

Total equity

783.3

766.1

Total liabilities and equity

7,602.8

7,415.7


VTB Bank

Interim Consolidated Income Statement for the Three Months Ended 31 March 2013 (unaudited)

(in billions of Russian Roubles)

For the three-month period
ended 31 March

2013

2012

Interest income

157.2

127.0

Interest expense

(83.4)

(73.0)

Net interest income

73.8

54.0

Provision charge for impairment of debt financial assets

(22.0)

(20.4)

Net interest income after provision for impairment

51.8

33.6

Net fee and commission income

11.5

10.3

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

(0.9)

1.0

Gains less losses from available-for-sale financial assets

0.7

3.7

Losses net of gains arising from extinguishment of liability

(1.0)

(0.7)

Losses on initial recognition of financial instruments, restructuring and other gains / (losses) on loans and advances to customers

2.6

0.1

Gains less losses arising from dealing in foreign currencies

5.9

25.4

Foreign exchange translation losses net of gains

(8.8)

(6.6)

Share in income of associates and joint ventures

0.1

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

(1.3)

(0.2)

Net income from non-banking activities

7.9

4.7

Other operating income

1.2

3.4

Net non-interest income

17.8

41.2

Operating income

69.6

74.8

Staff costs and administrative expenses

(49.2)

(42.5)

Profit / (loss) from disposal of subsidiaries and associates

1.1

(0.4)

Profit before taxation

21.5

31.9

Income tax expense

(5.8)

(8.6)

Net profit

15.7

23.3

Net profit attributable to:

Shareholders of the parent

15.3

22.7

Non-controlling interests

0.4

0.6

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

0.0015

0.0022


Tags:
IFRS, VTB Group

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