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VTB Group announces IFRS results for the first nine months of 2013

 
5 December 2013

VTB Group today publishes its Interim Condensed Consolidated Financial Statements as at 30 September 2013 with the Independent Auditor’s Report on Review of these Statements.

Andrey Kostin, VTB President and Chairman of the Management Board, said: "While macroeconomic factors continue to challenge financial institutions in our home market, VTB Group has achieved further healthy balance sheet growth and strong year-on-year performance on core income lines. At the same time, the Group has continued to build loan provisions, which affected the bottom line. We are encouraged by the progress we have made in executing on our non-core asset disposal strategy and de-risking plan around our principal positions, which is expected to further improve the stability of the Group’s earnings going forward.”

FINANCIAL AND OPERATING HIGHLIGHTS

Income statement

RUB billion

9M 2013

9M 2012

Change, % or pps

Net interest income

233.2

174.3

33.8%

Net fee and commission income

38.9

34.2

13.7%

Operating income before provisions

281.3

253.4

11.0%

Provision charge for impairment of debt financial assets

(72.8)

(45.0)

61.8%

Staff costs and administrative expenses

(149.2)

(128.2)

16.4%

Net profit

46.0

60.2

(23.6%)

ROE, %

7.4%

12.6%

(5.2 pps)

– VTB Group’s core income lines saw solid growth in 9M 2013, with net interest income and fee and commission income up 33.8% and 13.7% year-on-year, respectively.

– Net interest income growth during 9M 2013 was driven primarily by strong expansion of the Group's loan book (in particular a 26.5% year-to-date increase in retail gross loans as of 30 September 2013), as well as by stable interest margins.

– Net interest margin (NIM) was 4.4% in 9M 2013 vs. 4.0% during 9M 2012. In 3Q 2013, the Group’s NIM was 4.5%, up 10 bps vs. 4.4% in 2Q 2013.

– Retail Banking and Transaction Banking continued to be key drivers of the Group's fee and commission income growth, contributing RUB 19.8 billion and RUB 12.7 billion or 50.5% and 32.4%, respectively, to the Group's total net fee and commission income before inter-segment eliminations in 9M 2013.

– On the back of an overall macroeconomic slowdown, the Group’s cost of risk was 1.7% for 9M 2013 vs. 1.3% for 9M 2012. The provision charge for impairment of debt financial assets increased year-on-year and was RUB 72.8 billion in 9M 2013 vs. RUB 45.0 billion in 9M 2012. In 3Q 2013, the provision charge for impairment of debt financial assets was RUB 22.1 billion, down 23.0% from RUB 28.7 billion in 2Q 2013.

– Staff costs and administrative expenses amounted to RUB 149.2 billion in 9M 2013, up 16.4% from RUB 128.2 billion in 9M 2012, largely due to the expansion of the Group's retail banking business.

Statement of financial position

RUB billion or %

30 Sept 2013

30 June 2013

31 Dec 2012

Change in 3Q 2013, % or bps

Change in 9M 2013, % or bps

Total assets

8,486.5

8,355.8

7,415.7

1.6%

14.4%

Total gross loans

6,019.3

5,637.3

5,084.8

6.8%

18.4%

Corporate gross loans

4,602.6

4,326.3

3,964.6

6.4%

16.1%

Retail gross loans

1,416.7

1,311.0

1,120.2

8.1%

26.5%

Customer deposits

4,323.5

4,312.8

3,813.4

0.2%

13.4%

Corporate deposits

2,657.6

2,683.1

2,379.3

(1.0%)

11.7%

Retail deposits

1,665.9

1,629.7

1,434.1

2.2%

16.2%

NPL ratio

5.4%

5.5%

5.4%

(10 bps)

-

Tier 1 ratio

10.3%

10.8%

10.1%

(50 bps)

20 bps

Total CAR

14.1%

14.9%

14.4%

(80 bps)

(30 bps)

– Expansion of the Group’s assets during 9M 2013 was driven mainly by robust loan book growth. As a result, the Group’s asset structure has improved further, with the share of net loans and advances to customers in total assets reaching 66.3% as of 30 September 2013, up from 63.0% as of 30 June 2013 and 64.2% as of 31 December 2012. The share of interest earning assets in the Group’s total assets increased to 83.4% as of 30 September 2013, up from 82.8% as of 30 June 2013 and 82.1% as of 31 December 2012.

– Customer deposits totalled RUB 4,323.5 billion as of 30 September 2013, up 13.4% from RUB 3,813.4 billion as of 31 December 2012.– Loan book quality was affected by macroeconomic factors and was in line with Russian banking sector trends in 9M 2013. The Group’s non-performing loans (NPLs) ratio was stable at 5.4% of total gross loans (including financial assets classified as loans and advances to customers pledged under repurchase agreements) as of 30 September 2013. The allowance for loan impairment as of 30 September 2013 amounted to 6.2% of the Group's total gross loans (including financial assets classified as loans and advances to customers pledged under repurchase agreements), up from 6.1% at the beginning of the year. The Group's NPL coverage ratio at 30 September 2013 was 115.2%, vs. 112.4% as of 31 December 2012.

– In line with its strategy of de-risking the balance sheet, VTB Group continued to successfully divest its major non-interest earning assets. In October 2013, VTB signed a framework agreement with Societe Generale to sell the Group's 10% stake in Rosbank. In the same month, the Group announced the sale of a 50% stake in Tele2 Russia, a leading domestic telecom operator acquired by the Group as a private equity investment in March 2013.

– The Group's total and Tier 1 capital adequacy ratios (CAR) as of 30 September 2013 were 14.1% and 10.3%, respectively, vs. 14.4% and 10.1% as of 31 December 2012.

KEY BUSINESS SEGMENT HIGHLIGHTS

Corporate and Investment Banking

– During 9M 2013 the Group managed to effectively grow its corporate loan book, increasing its market share in corporate loans to 16.0% as of 30 September 2013 from 14.7% as of 31 December 2012.

– Global Transaction Banking (GTB) continued streamlining its sales process and increasing coverage of the mid-sized client segment, with a particular focus on the Russian regions. In 3Q 2013, the GTB team sold customised cash management solutions to 75 large groups of companies (over 600 legal entities). On 1 November 2013, as part of the integration of TransCreditBank (TCB) into the Group, the transaction banking team successfully completed migration of more than 800 of TCB’s large and mid-sized clients to VTB Bank.

– VTB Capital continues to be the #1 investment banking franchise in Russia. For 9M 2013, VTB Capital's debt capital markets (DCM) team took the top spot in the Dealogic ranking for Central and Eastern Europe, with 85 transactions worth US$ 14.1 billion and a 10.6% market share. VTB Capital is also ranked #1 in Dealogic's Russia domestic DCM bookrunner ranking with 61 transactions worth US$ 9.2 billion (market share: 29.1%).

– VTB Capital held the top place in the equity capital markets in Russia and CIS, having arranged five transactions for a total of US$ 1.9 billion and taking 29.9% market share during 9M 2013. VTB Capital is also ranked first place in Dealogic's rankings of M&A consultants in Central and Eastern Europe (CEE), Russia and CIS. In 9M 2013, VTB Capital had 13 transactions in CEE with a volume of US$ 16.8 billion. In Russia, VTB Capital advised on 11 transactions worth US$ 14.5 billion with a market share of 26.7%.

– In 4Q 2013, VTB Capital’s private equity business completed several successful exits, including the sale of White Gardens, a Class A office center in Moscow, to Millhouse LLC, as well as the sale of VTB Capital’s stake in Luxoft, a leading provider of software development services, in a secondary public offering on the NYSE.

Retail Banking

– In line with its retail strategy VTB Group continued to grow its retail loan portfolio, and increased its market share in retail lending to 13.7% as of 30 September 2013 from 13.3% as of 31 December 2012.

VTB Group Retail Loan Book

RUB billion

30 Sept 2013

30 June 2013

31 Dec 2012

Change in 3Q 2013, %

Change in 9M 2013, %

Gross retail loans

1,416.7

1,311.0

1,120.2

8.1%

26.5%

Cash and credit card loans

804.6

738.8

624.3

8.9%

28.9%

Car loans

126.9

119.1

102.0

6.5%

24.4%

Mortgage loans

482.8

450.4

390.7

7.2%

23.6%

Reverse sale and repurchase loans

2.4

2.7

3.2

(11.1%)

(25.0%)

– During 3Q 2013 the Group saw strong growth both in secured lending products including mortgages, as well as in unsecured cash and credit card loans. The composition of the Group’s retail book remained largely unchanged during the quarter, with the share of mortgage loans standing at 34.1% of total retail loans as of 30 September 2013 (vs. 34.4% at 30 June 2013 and 34.9% at 31 December 2012) and the share of cash and credit card loans at 56.8% of total retail loans (vs. 56.4% at 30 June 2013 and 55.7% at 31 December 2012).

– In response to Russia’s slowing economic growth and trends in the domestic consumer lending market, VTB24, the Group’s core retail bank, tightened its lending policies and focused on its cross-sale and payroll client base, while decreasing the share of walk-in customers in its cash and credit card loan books. At the same time, the Group has further enhanced its debt collection function, which is expected to help protect asset quality going forward.

– The growth of the Group's retail deposits was helped by the continued strong inflow of funds from VTB24 private banking customers. Deposits from VTB24's VIP clients increased by 51.9% in 9M 2013 to RUB 325.3 billion, representing 19.5% of the Group's retail deposits as of 30 September 2013.

– On 1 November 2013, the Group successfully completed the merger of TransCreditBank ("TCB") with VTB24, bringing around 1.8 million new retail clients to VTB24 and adding 259 new branches to VTB24’s retail network.

– 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 1,535 as of 30 September 2013. The combined number of the Group's ATMs was around 11,500 at the end of 9M 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 the Group’s subsidiary banks. The Group's largest subsidiary banks in Russia are VTB24 and Bank of Moscow.

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.

VTB's majority shareholder is the Russian Federation, acting through the Federal Agency for State Property Management, which holds 60.9% of VTB's shares.


VTB Bank

Interim Consolidated Statement of Financial Position as at 30 September 2013

(in billions of Russian Roubles)

30 September
2013

(unaudited)

31 December
2012

(restated)

Assets

Cash and short-term funds

339.7

569.0

Mandatory cash balances with central banks

76.9

63.8

Financial assets at fair value through profit or loss

371.7

528.8

Financial assets pledged under repurchase agreements and loaned financial assets

499.4

302.9

Due from other banks

454.8

358.6

Loans and advances to customers

5,630.7

4,761.5

Assets of disposal groups held for sale

158.8

15.3

Financial assets available-for-sale

170.7

97.4

Investments in associates and joint ventures

33.8

32.8

Investment securities held-to-maturity

0.7

0.9

Land, premises and equipment

166.5

142.5

Investment property

159.6

148.0

Intangible assets and goodwill

152.9

152.8

Deferred tax asset

44.3

42.9

Other assets

226.0

198.5

Total assets

8,486.5

7,415.7

Liabilities

Due to other banks

770.6

759.9

Customer deposits

4,323.5

3,813.4

Liabilities of disposal groups held for sale

56.9

6.1

Other borrowed funds

1,129.4

806.2

Debt securities issued

742.5

753.9

Deferred tax liability

13.4

12.3

Other liabilities

263.4

212.0

Total liabilities before subordinated debt

7,299.7

6,363.8

Subordinated debt

291.8

285.8

Total liabilities

7,591.5

6,649.6

Equity

Share capital

138.1

113.1

Share premium

433.8

358.5

Perpetual loan participation notes

72.7

68.3

Treasury shares

(4.2)

(13.7)

Other reserves

38.1

33.9

Retained earnings

206.5

193.7

Equity attributable to shareholders of the parent

885.0

753.8

Non-controlling interests

10.0

12.3

Total equity

895.0

766.1

Total liabilities and equity

8,486.5

7,415.7


VTB Bank

Interim Consolidated Income Statement for the Three Months and the Nine Months Ended
30 September 2013 (unaudited)

(in billions of Russian Roubles)

For the three-month 
period ended

For the nine-month
period ended

30 September

30 September

2013

2012

2013

2012

Interest income

176.1

141.5

500.7

400.5

Interest expense

(93.2)

(79.6)

(267.5)

(226.2)

Net interest income

82.9

61.9

233.2

174.3

Provision charge for impairment of debt financial assets

(22.1)

(12.7)

(72.8)

(45.0)

Net interest income after provision for impairment

60.8

49.2

160.4

129.3

Net fee and commission income

13.3

12.4

38.9

34.2

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

4.2

0.6

(3.6)

(3.4)

Gains less losses from available-for-sale financial assets

0.2

1.2

4.0

(Losses net of gains) / gains less losses arising from foreign currencies

(8.9)

7.8

(9.2)

14.9

Gains on initial recognition of financial instruments, restructuring and other gains on loans and advances to customers

0.3

2.9

9.7

Share in profit of associates and joint ventures

0.8

0.9

1.3

Gain from disposal of subsidiaries and associates

1.1

1.9

1.0

Net operating income from insurance activities

3.8

2.0

9.6

5.6

Net income /(loss) from non-banking activities

(1.6)

7.1

1.7

7.3

Losses net of gains arising from extinguishment of liability

(0.4)

(1.0)

(2.6)

(1.9)

(Provision charge) / reversal of provision for impairment of other assets, credit related commitments and legal claims

0.1

(0.9)

(1.9)

(1.0)

Excess of fair value of acquired net asset over cost

1.5

Other operating income

2.7

1.5

6.1

6.4

Net non-interest income

14.5

31.8

46.2

78.1

Operating income

75.3

81.0

206.6

207.4

Staff costs and administrative expenses

(51.9)

(45.6)

(149.2)

(128.2)

Profit before taxation

23.4

35.4

57.4

79.2

Income tax expense

(6.5)

(8.8)

(15.9)

(19.0)

Net profit after tax

16.9

26.6

41.5

60.2

Profit after tax from subsidiaries acquired exclusively with a view to resale

1.5

4.5

Net profit

18.4

26.6

46.0

60.2

Net profit attributable to:

Shareholders of the parent

17.9

23.4

45.8

56.2

Non-controlling interests

0.5

3.2

0.2

4.0

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

0.0016

0.0022

0.0037

0.0053


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