VTB Bank ("VTB" or "the Bank"), the parent company of VTB Group ("the Group"), today publishes its Interim Condensed Consolidated Financial Statements for the three months ended 31 March 2017, with the Independent Auditor’s Report on Review of these Statements.
Andrey Kostin, VTB President and Chairman of the Management Board, said: “VTB Group’s net profit in 1Q 2017 was a sound RUB 27.6 billion, backed by strong core revenue generation, stable asset quality and further improvements in cost efficiency.
“Operating income before provisions grew significantly faster than costs during the first quarter, driven by robust growth in net interest income and net fee and commission income, and supported by ongoing implementation of tight controls over expenses as well as synergies from the completion of the merger with the Bank of Moscow during 2016.
“We are firmly on track to deliver our full-year targets and to achieve the goals stipulated in the 2017-2019 strategy. The Group’s 1Q 2017 results demonstrate solid growth in core revenue, as well as continued improvements in funding structure and cost efficiency while we are significantly scaling up retail lending volumes. I am confident that VTB will build upon the successful first quarter during the remainder of 2017 and beyond, providing high quality services and solutions to its clients across all business segments.”
FINANCIAL AND OPERATING HIGHLIGHTS
|RUB billion||1Q 2017||1Q 2016||Change, %|
|Net interest income||113.0||98.3||15.0%|
|Net fee and commission income||19.7||17.4||13.2%|
|Operating income before provisions||145.2||111.1||30.7%|
|Staff costs and administrative expenses||(61.6)||(60.6)||1.7%|
|Net (loss) / profit||27.6||0.6||x46|
*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 was RUB 27.6 billion in 1Q 2017, driven by strong growth in net interest income (up 15.0% year-on-year) and net fee and commission income (up 13.2% year-on-year), coupled with stable loan book quality and strict cost management.
Net interest income of RUB 113.0 billion in 1Q 2017 was supported by growth in the higher-margin retail loan book and repricing of liabilities as interest rates in Russia continue to decline. Net interest margin for 1Q 2017 reached 4.1%, up from 3.4% in 1Q 2016 and 3.8% in 4Q 2016.
Net fee and commission income grew by 13.2% year-on-year to RUB 19.7 billion in 1Q 2017, supported by the strong performance of the Retail business and Transaction banking (as part of Corporate-Investment banking and Mid-Corporate banking).
Cost of risk including provisions for credit related commitments was 1.8% in 1Q 2017 compared to 1.5% in 1Q 2016 and 2.5% in 4Q 2016. The provision charge for 1Q 2017 amounted to RUB 45.9 billion, an increase of 13.1% year-on-year.
Staff costs and administrative expenses in 1Q 2017 grew by 1.7% year-on-year to RUB 61.6 billion, as VTB Group continued to maintain strict control over expenses, supported by cost synergies from completion of the merger of Bank of Moscow into VTB Bank during 2016.
The Group improved its cost efficiency in 1Q 2017: the ratio of costs to operating income before provisions decreased to 42.4% for 1Q 2017 versus 54.5% for 1Q 2016.
Statement of financial position
|Loans and advances to customers, including pledged under repurchase agreements (gross)||9,333.8||9,487.0||(1.6%)|
|Gross loans to legal entities||7,105.2||7,311.4||(2.8%)|
|Gross loans to individuals||2,228.6||2,175.6||2.4%|
|Deposits from legal entities||5,228.2||4,342.3||20.4%|
|Deposits from individuals||2,901.9||3,004.3||(3.4%)|
|NPL ratio||6.5%||6.4%||0.1 p.p.|
|Tier 1 CAR||13.4%||12.9%||0.5 p.p.|
|Total CAR||15.0%||14.6%||0.4 p.p.|
In 1Q 2017 the Group’s loan book contracted by 1.6% to RUB 9,333.8 billion due to a 2.8% reduction in gross loans to legal entities (Russia’s corporate lending market shrank by 3.1% during the same period), balanced by 2.4% year-to-date growth in gross loans to individuals. VTB Group’s corporate loan portfolio was strongly affected by the strengthening of the Russian rouble and the corresponding revaluation of loans denominated in foreign currencies: excluding the revaluation effect, the corporate loan book contracted by 0.2% year-to-date.
Retail lending growth of 2.4% in 1Q 2017 put VTB Group well ahead of the Russian retail lending market, which grew by 0.6% in the same period.
The growth of VTB Group’s retail lending portfolio was driven by continued acceleration in issuance of consumer loans and mortgages: consumer loans increased by RUB 31.0 billion, or 3.3%, during the first quarter, while mortgage lending grew by RUB 17.9 billion, or 1.8%, during the period.
The Group’s NPL ratio was 6.5% of gross customer loans including those pledged under repurchase agreements (the “total loan book”) as of 31 March 2017, versus 6.4% as of 31 December 2016. The allowance for loan impairment was 7.0% of the total loan book as of 31 March 2017, versus 6.7% on 31 December 2016. The NPL coverage ratio remained at a comfortable 108.1% at 31 March 2017, versus 104.6% as of 31 December 2016.
Customer deposits grew by 10.7% in 1Q 2017 due to a substantial and predictable inflow of deposits from state entities in the first quarter, following the outflow in December 2016, which led to an increase in deposits from legal entities of RUB 885.9 billion, or 20.4%, during the reporting period. Deposits from individuals declined by RUB 102.4 billion during the period (down by 3.4%) predominantly due to the strengthening of the Russian rouble and the corresponding revaluation of deposits denominated in foreign currencies: excluding the revaluation effect, retail deposits contracted by just 0.5% in 1Q 2017.
Customer deposits represented 73.7% of total liabilities as of 31 March 2017, up from 65.7% at year-end 2016. As of 31 March 2017, the Group’s market share in Russia in corporate and retail deposits stood at 23.5% and 10.9%, respectively.
Post Bank continued its successful development. In 1Q 2017 Post Bank acquired 478 thousand clients and the total client base grew to over 3.7 million. The regional network grew by 28% to over 8,000 outlets in more than 2,500 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 amounting to 3.9% as of 31 March 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 1Q 2017. VTB Group’s investment banking franchise was also recently recognised as the best investment bank in Russia and in Central & Eastern Europe by Global Finance magazine.
Capital adequacy ratios remained strong, backed by solid profitability during 1Q 2017: as of 31 March 2017, the Group’s total and Tier 1 capital adequacy ratios were 15.0% and 13.4%, respectively, versus 14.6% and 12.9% as of 31 December 2016.