10 April 2007
Moscow, April 10, 2007 - VTB today announces the audited consolidated IFRS financial results of the VTB Group for 2006.
2006 was another successful year for VTB Group. VTB believes that growth in major performance indicators alongside further business expansion in Russia and abroad demonstrate the VTB Group's strengthening position in the Russian banking market. The performance of the retail division, a strategic priority for VTB Group, has continued to show an impressive growth. VTB expects that restructuring of the Group's European banking operations and the re-branding of the Group, which began and achieved significant milestones in 4Q 2006, will support strong business performance in the long run.
The VTB Group's consolidated net profit for 2006 amounted to US$1,179 million, up 130.7% from 2005, another all-time high in the Group's history. This increase was mainly the result of growth in interest income and fee and commission income. Net interest income grew by US$835 million (91.8%), and net fee and commission income grew by US$183 million (108.9%) as compared to 2005. Assets increased to US$52,403 million, up 42.7% from 2005, and net loans and advances to customers increased to US$29,262 million, up 46.9% from 2005, supported by a 56.6% growth in customer deposits.
Profit and Loss Account (as compared to 2005):
- Net profit increased to US$1,179 million, up 130.7% from US$511 million;
- Interest income increased to US$3,637 million, up 98.7%, and fee and commission income increased to US$401 million, up 111.1%;
- Net interest income increased to US$1,745 million, up 91.8%, or US$835 million;
- Net fee and commission income increased to US$351 million, up 108.9% or US$183 million.
Assets and Funding (as compared to December 31, 2005):
- Assets increased to US$52,403 million, up 42.7% or US$15,680 million;
- Net loans and advances to customers increased to US$29,262 million, an increase of US$9,337 million, or 46.9%, with retail loans to individuals up by US$1,682 million, or 197.6%;
- Securities portfolio increased by 22.9% to US$8,957 million which includes approximately 5% of the shares of the European Aeronautic Defense and Space Company (EADS);
- Funding base further enhanced and diversified:
- Customer deposits increased to US$19,988 million, up 56.6%;
- April 2006: RUR 10 billion 3-year Fixed Rate Notes (voted best issue in Europe, Africa and Middle East by "International Financing Review");
- July 2006: issued Russia's debut US$ 88.3 million 28-year Mortgage-backed notes;
- November 2006: US$ 1.75 billion Series 10 Eurobonds.
New Openings and Acquisitions in 2006:
- In 1Q2006 VTB acquired 98% of Bank Mriya (Ukraine) for US$66 million, which had total assets with a fair value of US$426 million and net assets with a fair value of US$54 million, as of the acquisition date;
- In 3Q2006 VTB established Banco VTB Africa SA (VTB Africa) as a joint-subsidiary bank in Angola, in which it owns a 66% interest;
- In 4Q2006 VTB established VTB Capital (Namibia) (Proprietary) Limited as a joint-subsidiary financial company in Namibia, in which it owns a 50% plus 2 share interest;
- In 4Q2006 VTB established Vietnam-Russia Joint Venture Bank in Vietnam, in which it owns a 49% interest.
- Profit before taxation was US$1,404 million in 2006 compared to US$703 million in 2005. The 99.7% increase was mainly driven by the significant increase in net interest income, foreign exchange translation gains and increase in net fee and commission income, attributable to the expansion of the Group's customer base and increase in volumes of lending, deposit taking and other customer transactions, underpinned by consolidation of the banks acquired in the end of 2005.
- Net interest income grew to US$1,745 million, which was attributable to growth in all of the components of interest income: (i) Interest income on loans and advances to customers increased by 101.5% to US$2,872 million; (ii) interest income on securities increased by 71.3% to US$459 million; and (iii) interest on amounts due from other banks increased by 123.4%, to US$306 million. The increase in net interest income reflected expansion of the Group's lending business, particularly loans to individuals in the retail segment, growth of the Group's securities portfolio and the contribution of the subsidiary banks acquired in 2005.
- Net interest spread increased slightly to 4.5% in 2006 from 4.4% in 2005, mainly due to the increase in the Group's retail loan portfolio, which grew from 4% to 8% of the Group's gross customer loans during 2006 and which yields higher average interest rates than the Group's corporate loan portfolio.
- Operating income increased by 84.5% to US$2,810 million, compared to US$1,523 million in 2005, primarily due to an increase of net interest income to US$1,745 million, net gains from securities to US$535 million, and net fee and commission income to US$351 million, as well as foreign exchange translation gains, which increased to US$265 million, mainly attributable to the appreciation of the Russian rouble against the US dollar in 2006.
- Staff costs and administrative expenses increased by 85.4% in 2006, to US$1,370 million, primarily due to: (i) the acquisition of subsidiary banks in December 2005; (ii) organic growth of the Group`s network in Russia which entailed increased marketing and advertising expenditures; and (iii) payments to the Deposit Insurance System due to the expansion of the VTB Group's retail operations and the corresponding growth in retail deposits.
- The Group's strategic focus on its corporate, retail and investment banking operations contributed to income growth. Customer loans comprised 55.8% of total assets as of December 31, 2006, compared to 54.3% as of December 31, 2005. Accordingly, interest income on customer loans increased to 79.0% of interest income, from 77.9% in 2005. Total customer deposits increased by 56.6% to US$19,988 million in 2006, of which individual deposits represented US$7,326 million, state and public deposits represented US$2,172 million, and other legal entities deposits represented US$10,490 million.
Loan Quality and Concentration
- The share of overdue and rescheduled loans in the gross loan portfolio, and allowances for loan impairment amounted to 1.8% and 3.2% respectively, of the gross loan portfolio as of December 31, 2006.
- Coverage of overdue and rescheduled loans by allowances for loan impairment stood at a comfortable level of 181.9% as of December 31, 2006.
- As the Group seeks to continue to diversify its customer base and lending capacity and increase its lending volumes, the exposure to its ten largest borrowers as a percentage of gross customer loans decreased to 17.7% as of December 31, 2006 from 19.7% as of December 31, 2005.
Capitalization and Capital Adequacy
- The Group's consolidated shareholders' equity increased to US$6,992 million as of December 31, 2006 from US$5,269 million as of December 31, 2005 due to: (i) an increase in net profit of US$1,179 million; (ii) an increase in the value of fixed assets by US$282 million; and (iii) the increase of foreign exchange gains by US$299 million.
- As of December 31, 2006 the VTB Group's consolidated BIS Tier 1 capital was US$6,357 million, compared to US$4,927 million as of December 31, 2005, and total BIS capital was US$7,646 million, compared to US$5,898 million as of December 31, 2005. The Group's BIS Tier 1+2 capital adequacy ratio slightly decreased from 14.1% as of December 31, 2005 to 14.0% as of December 31, 2006. The capital adequacy ratio remains well above the 8.0% minimum set by the Basel Accord.
- VTB and all of its subsidiary banks observe the capital adequacy requirements set by their respective local regulatory authorities.
JSC VTB Bank and its subsidiaries (the VTB Group or the Group) are a leading Russian commercial banking group, offering a range of banking services and products across Russia, certain CIS countries and in selected countries of Western Europe, Asia and Africa. As of December 31, 2006 the Group had a network of 151 full-service branches located across Russia, comprised of 58 branches of VTB, 39 branches of VTB 24 and 54 branches of Industry and Construction Bank. Outside of Russia, the Group operates through four subsidiary banks located in the CIS (Armenia, Georgia, and two banks in Ukraine), six subsidiary banks located in Europe (Great Britain, France, Germany, Austria, Switzerland and Cyprus), one subsidiary bank in Africa (Angola) and 4 representative offices in India, Italy, China and Belarus. VTB has also established subsidiaries in Asia, and its UK subsidiary has a representative office in Singapore. VTB has operated under a full banking license, № 1000, from the Central Bank of the Russian Federation since 1990.
The Group operates in the commercial banking sector and provides services including deposit taking and commercial lending, support of clients' export/import transactions, FX, securities trading, and trading in derivative financial instruments. The Group had 28,466 employees as of December 31, 2006. The Government of the Russian Federation is VTB's main shareholder and owns, through the Federal Property Management Agency, 99.9% of its registered share capital. For more information please visit www.vtb.ru.
Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of JSC VTB ("VTB") and its subsidiaries (together with VTB, the "Group"). Such forward-looking statements are based on numerous assumptions regarding the Group`s present and future business strategies and the environment in which the Group will operate in the future. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and other important factors that we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. These forward-looking statements speak only as at the date of this presentation and are subject to change without notice. We do not intend to update these statements to make them conform with actual results.
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