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VTB Group announces IFRS results for 2Q 2017

 
9 August 2017

VTB Bank ("VTB" or "the Bank"), the parent company of VTB Group ("the Group"), today publishes its Interim Condensed Consolidated Financial Statements as at 30 June 2017, with the Independent Auditor’s Report on Review of these Statements.

Andrey Kostin, VTB President and Chairman of the Management Board, said: “I am very pleased to announce strong results for 1H 2017, with robust growth across our core income lines and net profit of RUB 57.9 billion putting us solidly on track to deliver on our FY 2017 guidance, as well as on our long-term strategic initiatives.

“We continued to maintain tight cost controls and optimise business processes as well as the Group’s organisational structure, including through the upcoming merger of VTB24 into VTB Bank.

“We further accelerated the growth of our retail banking operations, capturing market share by bringing our high-quality retail offerings to clients across Russia. In Corporate and Investment Banking, VTB Capital once again topped the league tables for DCM, ECM and M&A in the first half of the year, while our corporate business continues to innovate and adapt to provide Russian businesses with the financial tools and resources they need to grow.

“We have shown remarkable progress in fee income growth across all business lines while further improving the Group’s funding structure. This has made our revenue sources and balance sheet stronger and more resilient, and means we are in an even better position to continue successfully executing our strategy.”

FINANCIAL AND OPERATING HIGHLIGHTS

Income Statement

RUB billion 1H 2017 1H 2016 Change, %  2Q 2017 2Q 2016 Change, % 
Net interest income  227.1 207.0 9.7%  114.1 108.7 5.0%
Net fee and commission income  43.1 36.6 17.8%  23.4 19.2 21.9%
Operating income before provisions  276.4 237.0 16.6%  131.2 125.9 4.2%
Provision charge*  (76.0) (102.9) (26.1%)  (30.1) (62.3) (51.7%)
Staff costs and administrative expenses  (122.6) (116.3) 5.4%  (61.0) (55.7) 9.5%
Net profit  57.9 15.4 276.0%  30.3 14.8 104.7%

*Includes provision charge for impairment of debt financial assets and provision charge for impairment of other assets, credit related commitments and legal claims.

  • Net profit for 1H 2017 grew by 276.0% year-on-year to RUB 57.9 billion, driven by higher net interest income and net fee and commission income, and strengthened by tight cost controls and lower provision charges as asset quality continued to improve.
  • Net interest income rose by 9.7% year-on-year to RUB 227.1 billion in 1H 2017, supported by loan book growth and the increasing share of higher-margin retail lending. The net interest margin for 1H and 2Q 2017 was stable at 4.1%, up from 3.7% in 1H 2016 and 4.0% in 2Q 2016.
  • Net fee and commission income grew by 17.8% year-on-year to RUB 43.1 billion in 1H 2017, supported by the strong performance of the Retail business and Transaction banking (as part of Corporate-Investment banking and Mid-Corporate banking).
  • The cost of risk, including provisions for credit-related commitments, declined to 1.5% for 1H 2017 compared to 2.0% in 1H 2016. The cost of risk in 2Q 2017 was 1.2%, compared to 2.5% in 2Q 2016. The provision charge for 1H 2017 amounted to RUB 76.0 billion, down by 26.1% year-on-year.
  • Staff costs and administrative expenses in 1H 2017 grew by 5.4% year-on-year to RUB 122.6 billion, as VTB Group continued to maintain strict control over expenses, supported by cost synergies from the completion of the merger of Bank of Moscow into VTB Bank during 2016, which helped to balance the effect of certain one-off costs related to the reorganisation of the Group’s European subsidiaries.
  • The Group improved its cost efficiency in 1H 2017: the ratio of costs to operating income before provisions decreased to 44.4% for 1H 2017 versus 49.1% for 1H 2016.

Statement of financial position

RUB billion 30 Jun 2017 31 Mar 2017 31 Dec 2016 Change in 1H 2017, % or p.p. Change in 2Q 2017, % or p.p.
Total assets  12,608.9  12,459.9  12,588.2 0.2% 1.2%
Loans and advances to customers, including pledged under repurchase agreements (gross)  9,515.8   9,333.8  9,487.0 0.3% 1.9%
Gross loans to legal entities  7,194.2  7,105.2   7,311.4 (1.6%) 1.3%
Gross loans to individuals  2,321.6  2,228.6   2,175.6 6.7% 4.2%
Customer deposits  8,510.5  8,130.1  7,346.6 15.8% 4.7%
Deposits from legal entities  5,398.6  5,228.2   4,342.3 24.3% 3.3%
Deposits from individuals  3,111.9  2,901.9   3,004.3 3.6% 7.2%
NPL ratio 6.3% 6.5% 6.4% (0.1 p.p.) (0.2 p.p.)
Tier 1 CAR 13.1% 13.4% 12.9% 0.2 p.p. (0.3 p.p.)
Total CAR 14.6% 15.0% 14.6% 0.0 p.p. (0.4 p.p.)

  • In 1H 2017 the Group’s loan book grew by 0.3% to RUB 9,515.8 billion as gross loans to individuals increased by 6.7% during the first six months of the year. Gross loans to legal entities, while down by 1.6% in the first half of the year to RUB 7,194.2 billion, grew by 1.3% in 2Q 2017.
  • VTB Group’s retail lending accelerated further, up by 6.7% in 1H 2017 and by 4.2% in 2Q 2017. VTB Group continues to increase its share of the Russian retail lending market, which grew by 3.5% and 2.9%, respectively, in the same periods. The Group’s market share as of 30 June 2017 was 20.2%.
  • Consumer loans, mortgages and credit card lending increased by 8.8%, 5.4% and 2.9%, respectively, during the first half of 2017.
  • The Group’s NPL ratio was 6.3% of gross customer loans including those pledged under repurchase agreements (the “total loan book”) as of 30 June 2017, versus 6.4% as of 31 December 2016. The allowance for loan impairment declined to 6.6% of the total loan book as of 30 June 2017, compared to 7.0% as of 31 March 2017, and 6.7% on 31 December 2016. The NPL coverage ratio was 105.2% at 30 June 2017, versus 104.6% as of 31 December 2016.
  • Customer deposits grew by 15.8% to RUB 8,510.5 billion in 1H 2017. Deposits from legal entities grew by 24.3% in 1H 2017, while deposits from individuals grew by 3.6% during the period thanks to a strong 7.2% increase in deposits from individuals during 2Q 2017.
  • The Group continues to increase the share of customer deposits, while minimising reliance on funding from the Central Bank of Russia and other sources: customer deposits represented 76.1% of total liabilities as of 30 June 2017, up from 65.7% at year-end 2016. As of 30 June 2017, the Group’s market share in Russia in corporate and retail funding stood at 23.3% and 11.2%, respectively.
  • Post Bank was a key driver in the rapid expansion of VTB Group’s retail banking operations: In the first half of 2017 Post Bank acquired 1.1 million of new clients and the total client base grew to 4.4 million. The regional network grew by 67% to 10,534 outlets in more than 3,500 localities, which makes it second-largest retail banking network in Russia.  
  • The Group continued to maintain a low reliance on wholesale funding, with the share of debt securities issued in total liabilities at just 3.3% as of 30 June 2017, compared to 3.6% as of 31 December 2016.
  • VTB Capital delivered strong performance during the quarter, and once again led the DCM, ECM and M&A league tables in 1H 2017. VTB Capital was also named “Best Investment Bank in Russia” by Euromoney Awards for Excellence 2017 in July 2017.
  • Capital adequacy ratios remained strong, backed by solid profitability during 1H 2017: as of 30 June 2017, the Group’s total and Tier 1 capital adequacy ratios were 14.6% and 13.1%, respectively, versus 14.6% and 12.9% as of 31 December 2016.



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