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Bank for Foreign Trade (JSC Vneshtorgbank or VTB) presents consolidated IFRS financial results of VTB Group (VTB and its subsidiaries or the Group) for the six month period ended 30 June 2004.

 
19 November 2004

Summary of Balance sheet and P&L (US$ mln):

2003

1H2004

Assets

11,228

12,104

Shareholders` equity

2,373

2,331

Loans and advances to customers, net

4,795

5,996

Customer accounts

4,259

4,157

1H2003

1H2004

Net interest income

138

201

Net profit

119

18

The Group`s results reflect a focus on increasing its lending volumes while maintaining expense discipline and improving credit performance.

VTB showed healthy growth in different business segments in the first half of 2004. Consolidated assets grew by 7.8% to reach $12.1 billion, equating to a market share of 5.3% according to the Central Bank of the Russian Federation (Russian Accounting Standards).

Retail deposits represented a quickly growing source of liquidity with total balances on personal accounts on 30 June 2004 exceeding $1.36 billion (representing an increase of 38% compared to 31 December 2003).

VTB continued to aggressively expand its presence in the commercial banking sector increasing its customer gross loan portfolio by 24% to US$6.495 billion by the end of June 2004 despite mounting competition in the area. Meanwhile, the Group`s continuing effort aimed at improving quality of loans has allowed to reduce loan impairment rate to 7.68% from 8.26% (as at the end of 2003). Share of total overdue and restructured loans decreased from 5.8% as at the end of 2003 to 4.9% as at June 30, 2004. At the same time, provision coverage of overdue loans remained at high 2.0x, and the sectoral concentration of the loan book followed diminishing pattern.

In the first half of 2004 the mortgage and consumer loan programmes developed rapidly with the totalount of such loans reaching $51 million (112% growth to 31 December 2003).

The growth was also supported by continued international borrowings that allowed to lengthen and diversify its liability profile: within the framework of the respective programme VTB raised about $850 million in the first half of 2004 in the form of syndicated loans and Eurobonds.

As a result of the aforementioned efforts, recurring income, especially interest income on loans, continued to show healthy growth rates throughout 2004. Net interest income after provisions for loan impairment reached $123 million, almost twice as much as for the same period of 2003, while fee and commission income grew by 53% y-o-y to $49 million.

In 2004 VTB continued expansion of its geographical presence by opening 5 new branches around the Russian Federation and more than 20 offices in Moscow and regions as well as acquiring Armsavingsbank, Armenia . Business diversification and expansion has had its counter-balancing effect in the rise of operating expenses by 27% as compared to the respective prior periodounts. Management considers increased spending on branch network and technology development, promotion of retail business as strategic investment for future business growing, at the same time maintaining expense discipline as one of the core areas of focus and control.

Whilst the Group`s net interest income continued to grow in the second quarter of 2004, the external factors experienced in the second quarter of 2004, as well as increased loan impairment provisions resulting from the increase in the Group`s loan portfolio, negatively affected the Group`s profitability. The decline in the prices of Russian equity and debt securities caused unrealised mark-to market losses, primarily on investment securities available for sale. This resulted in a decline in the net profit in the first half of 2004 to $18 million. However, the market prices of Russian securities held in the Group`s portfolio have been rising throughout most of the third and forth quarters of 2004.

Interim Consolidated Financial Statements with Independent Accountants` Review Report as of 30 June 2004

1H2004 IFRS Results Presentation


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