Unaudited financial results for the three months ended March 31, 2008
Moscow July 16, 2008 VTB Group today announces its unaudited financial results according to IFRS for the three months to March 31, 2008.
Operating and financial review
VTB Group today reports that its core income, defined as net interest income before provisions and net fee and commission income, is up 114.4% year-on-year to US$ 1.2 billion reflecting strong underlying momentum in the business. Net interest margin rose to 5.1% in the first quarter of 2008 from 4.4% in 2007.
Customer loans continued to show strong growth in the first three months of 2008. The total volume of loans issued to customers increased by 15.7% from the year end 2007 to US$ 69.4 billion with both corporate and retail loans growth outperforming the market. There was a particularly strong increase in individual loans, the growth of which was running at twice the rate of the market. As a result, the Group became the second biggest retail lender in Russia, taking 6.7% of the market compared with 5.9% at the end of 2007. The Group also continued to consolidate its position as the second biggest lender in the corporate market with 11.0% of the market, up from 10.7% at 2007 year end.
The retail branch network expanded by a further 50 VTB24 branches in the first quarter of 2008 to a total of 378. The Group is well on track to reach its target of 500 retail branches in Russia by the end of 2008.
VTB is also well advanced in its plans to set up a new investment banking business with a management structure now in place under the leadership of Yuri Soloviev.
Expansion internationally has continued further with branches opened in China and India during the quarter and a representative office set up in Kazakhstan.
Net profit for the three months of 2008 was US$ 121 million. As stated in the trading update on June 6, 2008, the net profit figure includes a charge for realized securities losses and mark-to-market adjustments to the securities portfolio of US$ 453 million. Reported net profits for the same quarter of 2007 were US$232 million. Comparison with the prior year is also impacted by the change in functional currency from US dollars to roubles in line with IFRS. This change reflects the fact that VTB`s business is predominantly rouble denominated. The change will mean that the translation effects will impact on equity, but it will eliminate a major cause of volatility from earnings in the future.
As a result of the issues which arose relating to the securities portfolio in the first quarter, a number of measures have been taken to reduce overall proprietary exposures and derisk the portfolio. As indicated earlier in the June trading update, the losses that were taken were a result of an ongoing strategy to reduce overall earnings volatility. Since the end of 2007, total securities exposure has been reduced to US$ 11.4 billion from US$ 13.5 billion, or to 11.4% of total assets compared with 14.6% at year end 2007.
Management of the legacy portfolio has been transferred to a recently constituted team under the responsibility of VTB`s newly formed investment banking business. The team has adopted an active approach to managing risk in the portfolio. Overall proprietary trading exposure is being reduced while a thorough review of risk control and risk metrics in this area has been undertaken with a view to putting in place a more rigorous risk control structure in the near future.
In the first quarter of 2008, customer deposits increased by 17.5% to US$ 43.6 billion from US$ 37.1 billion at the end of 2007. As a result, the share of customer deposits in total funding increased to 53.2%, up from 48.7% last year. There was especially strong growth in corporate deposits, which increased by US$ 5.6 billion within the quarter to US$ 32.1 billion from US$ 26.4 billion at the end of 2007. The bank has also made progress in increasing retail deposits in a highly competitive environment. Retail deposits went up by 8.1% to US$ 11.5 billion.
VTB Chief Financial Officer and Member of the Management Board Nikolai Tsekhomsky said: "During the first quarter our core business continued to strengthen across the group. We are strongly positioned to meet our goals for the full year and we are confident that we are on track to achieve our strategic goals for 2010."
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About VTB Bank:
JSC VTB Bank and its subsidiaries (the VTB Group or the Group) is a leading Russian banking group, offering a wide range of banking services and products across Russia, certain CIS countries and in selected countries of Western Europe, Asia and Africa.
As of March 31, 2008 the Group had a network of 980 branches located across Russia, CIS. Europe and Asia, of which VTB24 retail branches amounted to 378. Outside of Russia, the Group operates through four subsidiary banks located in the CIS (Armenia, Georgia, Ukraine and Belarus), six subsidiary banks located in Europe (UK, France, Germany, Austria, Switzerland and Cyprus), one subsidiary bank and one financial company in Africa (Angola, Namibia), and an associated bank in Vietnam. VTB also has a presence in Singapore through a branch of its UK subsidiary. VTB has operated under a full banking license в"- 1000 from the Central Bank of the Russian Federation since 1990.
The Group`s business franchise is in the areas of corporate, retail and investment banking. In corporate banking, the Group provides a broad range of commercial banking services and products including corporate lending, foreign trade transactions, syndicated loans, deposit and settlement services, as well as custody services, leasing and treasury services to large- and medium-sized corporations and financial institutions. In retail banking, VTB offers financial services, including deposit accounts, lending and certain ancillary services, to individuals and small-sized corporations. In investment banking it provides debt capital markets underwriting, project financing, merger and acquisition financing, advisory services, asset management and venture funds.
The Group had 38,151 employees as of March 31, 2008. The Government of the Russian Federation is VTB`s main shareholder and owns, through the Federal Property Management Agency, 77.5 % of its registered share capital. For more information please visit www.vtb.com
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of VTB. You can identify forward-looking statements by terms such as "expect","believe","anticipate","estimate","intend","will","could","may" or "might", or the negative of such terms or other similar expressions. These statements are only predictions and actual events or results may differ materially. VTB does not intend to or undertake any obligation to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in VTB`s projections or forward-looking statements, including, among others, general economic and market conditions, VTB`s competitive environment, risks associated with operating in Russia, rapid technological and market change, and other factors specifically related to VTB and its operations.
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of VTB or any of its subsidiaries, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of VTB or any of its subsidiaries.
Information contained in this document is not an offer, or an invitation to make offers, sell, purchase, exchange or transfer any securities in Russia or to or for the benefit of any Russian person or any person in Russia, and does not constitute an advertisement of any securities in Russia.
Consolidated Balance Sheet
|31 March 2008||31 December 2007|
|Cash and short-term funds||5,028||5,160|
|Mandatory cash balances with central banks||1,318||825|
|Financial assets at fair value through profit or loss||8,431||10,436|
|Financial assets pledged
under repurchase agreements and loaned financial assets
|Due from other banks||8,537||9,733|
|Loans and advances to customers||67,693||58,549|
|Financial assets available-for-sale||1,346||858|
|Investments in associates||190||167|
|Investment securities held-to-maturity||39||5|
|Premises and equipment||2,075||1,997|
|Deferred tax asset||288||215|
Consolidated Balance Sheet
|31 March 2008||31 December 2007|
|Due to other banks||11,689||14,794|
|Other borrowed funds||5,437||5,176|
|Debt securities issued||18,644||16,489|
|Deferred tax liability||143||149|
|Total liabilities before subordinated debt||80,865||74,937|
|Unrealized gain on financial assets
available-for-sale and cash flow hedge
|Currency translation difference||1,340||663|
|Premises revaluation reserve||583||587|
|Equity attributable to shareholders of the parent||16,979||16,207|
|Total liabilities and equity||99,293||92,609|
Consolidated Profit and Loss Statement
|31 March 2008||31 December 2007|
|Net interest income||1,079||479|
|Provision charge for impairment||(194)||(62)|
|Net interest income after provision for impairment||885||417|
|Net (losses) / gains less losses
arising from financial instruments at fair value through profit or loss
|Gains less losses arising from dealing in foreign currencies||612||78|
|Foreign exchange translation (losses) / gains less losses||(502)||13|
|Fee and commission income||168||111|
|Fee and commission expense||(23)||(19)|
|Share in income of associates||3||(1)|
|Income arising from non-banking activities||33||22|
|Other operating income||34||11|
|Net non-interest (loss) / income||(128)||257|
|Staff costs and administrative expenses||(542)||(365)|
|Expenses arising from non-banking activities||(23)||(14)|
|Profit from disposal of subsidiaries and associates||-||18|
|Profit before taxation||192||313|
|Income tax expense||(71)||(81)|
|Profit after taxation from continuing operations||121||232|
|Net profit attributable to:|
|Shareholders of the parent||113||218|