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VTB Group announces IFRS results for 2013

 
2 April 2014

VTB Group today publishes its Consolidated Financial Statements with the Independent Auditor’s Report for the year ended 31 December 2013.

Andrey Kostin, VTB President and Chairman of the Management Board, said: "Against a challenging economic backdrop we have delivered strong results supported by healthy year-on-year earnings growth in the Group’s key business lines. The issue of new shares in May 2013 helped us to strengthen our capital base and to expand further the Group’s core businesses while continuing to de-risk our asset base. While the external environment remains uncertain, we are increasingly focused on optimising costs and extracting additional synergies from integration. The Group is also finalising its new three-year strategy, which we will announce in first half of April 2014. The strategy will place particular emphasis on efficiency and cost controls.”

FINANCIAL AND OPERATING HIGHLIGHTS

Income statement

RUB billion

FY2013

FY2012

Change, % or pps

4Q2013

4Q2012

Change, % or pps

Net interest income

323.0

246.0

31.3%

89.8

71.7

25.2%

Net fee and commission income

55.4

48.3

14.7%

16.5

14.1

17.0%

Operating income before provisions

429.3

358.7

19.7%

148.0

105.3

40.6%

Provision charge for impairment of debt financial assets

(96.9)

(59.4)

63.1%

(24.1)

(14.4)

67.4%

Net profit

100.5

90.6

10.9%

54.5

30.4

79.3%

ROE, %

11.8%

13.7%

(1.9 pps)

23.7%

16.8%

6.9 pps

  • In 4Q 2013 and FY 2013 the Group posted record quarterly and annual net profit, supported by solid balance sheet growth and strong performance in core income lines.
  • Net interest income growth in 2013 was driven primarily by robust loan book expansion combined with a stronger net interest margin (“NIM”). For 2013 the Group’s NIM was 4.5% vs. 4.2% for 2012. In 4Q 2013, NIM was 4.7%, up 20 bps from 4.5% in 3Q 2013.
  • Retail Business and Transaction Banking business continued to be key drivers of the Group's fee and commission income growth, contributing RUB 27.0 billion and RUB 17.9 billion, or 48.4% and 32.1%, respectively, to the Group's total 2013 net fee and commission income before inter-segment eliminations.
  • Against the backdrop of Russia’s macroeconomic slowdown, the Group’s cost of risk increased to 1.6% in 2013, up from 1.2% in 2012. In 2H 2013, VTB Group further tightened its risk management policies in retail lending and focused on high-quality borrowers in large and medium-sized corporate lending, which resulted in a cost of risk of 1.5% in 4Q 2013 and 2H 2013 (vs. 1.8% in 1H 2013).
  • The net result from financial instruments at fair value through profit or loss and available-for-sale financial assets was RUB 20.5 billion in 2013, primarily driven by the Group’s profitable private equity projects, including a number of successful divestments, and de-risking of the Group’s balance sheet.
  • Staff costs and administrative expenses amounted to RUB 210.9 billion in 2013, up 16.4% from RUB 181.2 billion in 2012, driven by the expansion of the Group's retail business.

Statement of financial position

RUB billion or %

31 Dec 2013

30 Sept 2013

31 Dec 2012

Change in FY 2013, % or bps

Change in 4Q 2013, % or bps

Total assets

8,768.5

8,486.5

7,415.7

18.2%

3.3%

Loans and advances to customers (gross)

6,330.1

6,019.3

5,084.8

24.5%

5.2%

Corporate gross loans

4,809.3

4,602.6

3,964.6

21.3%

4.5%

Retail gross loans

1,520.8

1,416.7

1,120.2

35.8%

7.3%

Customer deposits

4,341.4

4,323.5

3,813.4

13.8%

0.4%

Corporate deposits

2,548.0

2,657.6

2,379.3

7.1%

(4.1%)

Retail deposits

1,793.4

1,665.9

1,434.1

25.1%

7.7%

NPL ratio

4.7%

5.4%

5.4%

(70 bps)

(70 bps)

Tier 1 ratio

10.9%

10.3%

10.1%

80 bps

60 bps

Total CAR

14.7%

14.1%

14.4%

30 bps

60 bps

  • Robust loan-book expansion was the main factor behind the growth in VTB Group’s assets. The share of loans and advances to customers in total assets reached 68.1% as of 31 December 2013, up from 64.2% as of 31 December 2012. The share of interest bearing assets in the Group’s assets increased to 84.3% as of 31 December 2013, up from 82.1% as of 31 December 2012.
  • In line with management’s strategy to grow consistently the share of the higher-margin retail business in the Group’s asset base and revenues, gross retail loans amounted to 24.0% of the total loan book at 31 December 2013, up from 22.0% at the beginning of the year.
  • Loan-book quality continued to improve as the Group tightened its credit origination and risk-management policies and increased write-offs of non-performing loans (NPLs) in 2H 2013. The Group’s NPL ratio improved to 4.7% of gross customer loans, including financial assets classified as loans and advances to customers pledged under repurchase agreements, (hereinafter the “total loan book”) as of 31 December 2013 vs. 5.4% as of 30 September 2013 and 31 December 2012. The allowance for loan impairment as of 31 December 2013 amounted to 5.5% of the Group's total loan book vs. 6.1% at the start of the year. The Group's NPL coverage ratio at 31 December 2013 was 115.5%, vs. 112.4% as of 31 December 2012.
  • In line with its strategy of de-risking the balance sheet, VTB Group continued divestments including VTB Capital’s profitable exits from large private-equity projects, in particular in the real estate and IT sectors. The Group’s investments in equities declined 37.4% during the year, reaching RUB 65.1 billion as of 31 December 2013.
  • In May 2013, the Group completed a RUB 102.5 billion new share issue, which was placed solely in the form of ordinary shares listed on the Moscow Exchange. This transaction, combined with strong income generation in subsequent quarters, enabled VTB Group to strengthen its capital base. The Group's total and Tier 1 capital adequacy ratios (CAR) as of 31 December 2013 were 14.7% and 10.9%, respectively, vs. 14.4% and 10.1% as of 31 December 2012.

KEY BUSINESS SEGMENT HIGHLIGHTS

Retail Business

  • In 4Q 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.
  • In 4Q 2013 mortgage lending replaced unsecured consumer loans as the fastest-growing part of VTB Group’s retail loan book. Mortgage loans reached 35.5% of total retail loans as of 31 December 2013 (vs. 34.1% at 30 September 2013 and 34.9% at 31 December 2012).

VTB Group retail loan book

RUB billion

31 Dec 2013

30 Sept 2013

31 Dec 2012

Change in FY 2013, %

Change in 4Q 2013, %

Retail gross loans

1,520.8

1,416.7

1,120.2

35.8%

7.3%

Mortgage loans

539.9

482.8

390.7

38.2%

11.8%

Cash, credit card and other loans

844.8

804.6

624.3

35.3%

5.0%

Car loans

133.2

126.9

102.0

30.6%

5.0%

Reverse sale and repurchase loans

2.9

2.4

3.2

(9.4%)

20.8%

  • Strong growth in retail lending was accompanied by successful steps by VTB24, the Group’s core retail bank, to change the product mix in its loan book, tighten lending policies and focus on cross-sales and its payroll client base, while reducing the share of walk-in customers in its cash and credit-card loan book. This contributed to a significant improvement in asset quality in 4Q 2013, with the cost of risk in the retail loan book down to 1.9%, compared to 3.2% in 3Q 2013 and an average of 3.1% for the full year.
  • The Group saw a strong inflow of retail deposits in 4Q 2013, which was partially driven by a shift in sentiment among Russian retail depositors towards large, systemically important banks. After the Central Bank of Russia revoked the licenses of a number of small and medium-sized banks during the fourth quarter, the Deposit Insurance Agency selected VTB24 to distribute insured retail deposits to clients of several of those banks. This brought VTB24 around 40,000 new retail clients and contributed approximately 5% to the bank’s retail deposits inflow during the quarter.
  • VTB24’s private banking customers continued to make a significant contribution to retail funding. Private banking deposits increased 44.0% during 2013 to RUB 308.3 billion, representing approximately 17% of the Group's retail deposits as of 31 December 2013.
  • The Group had more than 1,600 retail offices in Russia (operating under the VTB24, Bank of Moscow, and Leto Bank brands) as of 31 December 2013. The combined number of the Group's ATMs was over 12,000 at the end of 2013.

Corporate and Investment Banking

  • The Group continued to grow its corporate loan book during 2013. Lending to high-quality borrowers drove corporate loan-book growth after VTB Bank introduced more conservative limits for clients with lower credit ratings or high debt loads.
  • In 2013, Global Transaction Banking (GTB) rendered customised cash-management solutions to 150 large corporate groups (over 1,150 legal entities). The GTB team launched multiple new products during 2013, including extensions to SWIFT services and new deposit products. GTB also focused on expanding the Group’s documentary business; in 2013, the Group’s guarantee portfolio increased by 41.0% to RUB 802.3 billion.
  • As part of the integration of TransCreditBank (TCB) into the Group, the transaction banking team successfully completed migration of about 900 of TCB’s large and mid-sized clients to VTB Bank.
  • VTB Capital has consolidated its position as Russia’s leading investment banking franchise, taking the top spots in Dealogic’s 2013 DCM, ECM and M&A rankings across Central and Eastern Europe (CEE), Russia and the CIS. In M&A, VTB Capital was #1 in Russia, CIS and CEE, advising on 23 transactions with a total value of US$ 25.0 billion and claiming market share of 15%.
  • VTB Capital was #1 in DCM for the CEE region, arranging 121 transactions worth a total US$ 20.6 billion, which gave it a market share of 11.6%. In Russian domestic DCM, VTB Capital arranged 91 transactions worth a total of US$ 12.3 billion, giving it 25.7% market share. VTB Capital also ranked first in ECM in Russia and the CIS, arranging seven transactions totalling US$ 2.3 billion and taking a very strong 22.5% market share.
  • In 4Q 2013, VTB Capital’s private-equity business completed several successful exits, including the sale of White Gardens, a Class A office centre 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. Private Equity International magazine named VTB Capital Best Private Equity Firm in Russia for 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 Business. 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 Business, VTB offers deposit accounts, lending, debit and credit cards, transaction, insurance and other 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

Consolidated Statements of Financial Position as at 31 December

(in billions of Russian Roubles)

2013

2012 (restated)

Assets

Cash and short-term funds

354.3

569.0

Mandatory cash balances with central banks

58.7

63.8

Financial assets at fair value through profit or loss

411.1

528.8

Financial assets pledged under repurchase agreements

466.6

302.9

Due from other banks

443.4

358.6

Loans and advances to customers

5,969.0

4,761.5

Assets of disposal group held for sale

36.7

15.3

Investment financial assets

- available-for-sale

135.4

97.4

- held-to-maturity

0.7

0.9

Investments in associates and joint ventures

87.6

32.8

Land, premises and equipment

170.3

142.5

Investment property

160.7

148.0

Goodwill and other intangible assets

162.5

152.8

Deferred income tax asset

45.5

42.9

Other assets

266.0

198.5

Total assets

8,768.5

7,415.7

Liabilities

Due to other banks

666.6

759.9

Customer deposits

4,341.4

3,813.4

Liabilities of disposal group held for sale

20.7

6.1

Other borrowed funds

1,485.9

806.2

Debt securities issued

738.2

753.9

Deferred income tax liability

15.0

12.3

Other liabilities

262.6

212.0

Total liabilities before subordinated debt

7,530.4

6,363.8

Subordinated debt

291.0

285.8

Total liabilities

7,821.4

6,649.6

Equity

Share capital

138.1

113.1

Share premium

433.8

358.5

Perpetual loan participation notes

73.6

68.3

Treasury shares and perpetual loan participation notes

(3.6)

(13.7)

Other reserves

35.6

33.9

Retained earnings

262.0

193.7

Equity attributable to shareholders of the parent

939.5

753.8

Non-controlling interests

7.6

12.3

Total equity

947.1

766.1

Total liabilities and equity

8,768.5

7,415.7


VTB Bank

Consolidated Income Statements for the Years Ended 31 December

(in billions of Russian Roubles)

2013

2012

Interest income

686.3

555.7

Interest expense

(363.3)

(309.7)

Net interest income

323.0

246.0

Provision charge for impairment of debt financial assets

(96.9)

(59.4)

Net interest income after provision for impairment

226.1

186.6

Net fee and commission income

55.4

48.3

Gains less losses arising from financial instruments at fair value through profit or loss

13.2

10.1

Gains less losses from available-for-sale financial assets

7.3

4.9

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

(8.7)

6.8

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

9.1

17.2

Share in profit of associates and joint ventures

2.2

1.2

Gain from disposal of subsidiaries and associates

2.8

1.1

Net insurance premiums earned

29.4

17.8

Net insurance claims incurred and movement in liabilities to policyholders

(16.4)

(9.8)

Revenue from non-banking activities

34.2

39.4

Cost of sales and other expenses from non-banking activities

(36.1)

(29.7)

Losses net of gains arising from extinguishment of liability

(3.7)

(1.8)

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

(2.3)

(2.7)

Excess of fair value of acquired net asset over cost

8.0

Impairment of goodwill

(1.5)

Other operating income

9.6

8.7

Net non-interest income

104.0

110.0

Operating income

330.1

296.6

Staff costs and administrative expenses

(210.9)

(181.2)

Profit before tax

119.2

115.4

Income tax expense

(24.1)

(24.8)

Net profit after tax

95.1

90.6

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

5.4

Net profit

100.5

90.6

Net profit attributable to:

Shareholders of the parent

101.5

85.8

Non-controlling interests

(1.0)

4.8

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

0.00805

0.00817

Basic and diluted earnings per share before profit after tax from subsidiaries acquired exclusively with a view to resale
(expressed in Russian Roubles per share)

0.00760

0.00817


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