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VTB Group announces IFRS results for 3Q 2017

 
9 November 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 September 2017, with the Independent Auditor’s Report on Review of these Statements.

Andrey Kostin, VTB President and Chairman of the Management Board, said: “VTB’s solid franchise and business model, combined with efficient execution of our strategy, helped us deliver a strong set of results for 9M 2017. Net profit growth of 121% year-on-year to RUB 75.3 billion underscores the stability and reliability of VTB Group among Russian financial institutions.

“We saw strong performance across all of the Group’s key business lines in the first nine months of the year: our Retail business further increased market share, thanks in part to the successful development of Post Bank. On the Corporate and investment banking side, 2017 has marked a significant pickup in ECM, M&A and DCM activity. The robust increase in fee income was driven by VTB Group’s remarkable success in growing its transactional business across all business segments. Overall performance also continues to benefit from Russia’s economic recovery and lower interest rates.

“We remain fully focused on maintaining tight cost controls and becoming a leaner company through a number of corporate reorganisations, including the upcoming merger of VTB24 into VTB Bank. We also continue to pursue technological transformation and digital initiatives that streamline our operations and create new opportunities for our clients.

“VTB Group’s strong capital adequacy ratios and ongoing improvements in its funding structure, combined with solid growth across all core income lines, put us well on track to deliver on our full-year targets, and give us full confidence in our ability to execute our long-term strategy.”

FINANCIAL AND OPERATING HIGHLIGHTS 

Income Statement

RUB billion 9M 2017 9M 2016 Change, %  3Q 2017 3Q 2016 Change, % 
Net interest income  343.7  310.4 10.7%  116.6  103.4 12.8%
Net fee and commission income  67.0  55.9 19.9%  23.9  19.3 23.8%
Operating income before provisions  404.2  361.1 11.9%  127.8  124.1 3.0%
Provision charge*  (118.2)  (146.7) -19.4%  (42.2)  (43.8) -3.7%
Staff costs and administrative expenses  (185.0)  (171.6) 7.8%  (62.4)  (55.3) 12.8%
Net profit  75.3  34.1 120.8%  17.4  18.7 -7.0%

*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 9M 2017 grew by 120.8% year-on-year to RUB 75.3 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 10.7% year-on-year to RUB 343.7 billion in 9M 2017, primarily driven by improvements in the Group’s funding structure. The net interest margin for 9M and 3Q 2017 was 4.1%, up from 3.7% in 9M 2016 and 3.8% in 3Q 2016.
  • Net fee and commission income grew by 19.9% year-on-year to RUB 67.0 billion in 9M 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 stood at 1.6% for 9M 2017 compared to 1.4% in 9M 2016. The cost of risk in 3Q 2017 was 1.8%, compared to 1.3% in 3Q 2016. The provision charge for 9M 2017 amounted to RUB 118.2 billion, down by 19.4% year-on-year.
  • Staff costs and administrative expenses in 9M 2017 grew by 7.8% year-on-year to RUB 185.0 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.
  • The Group improved its cost efficiency in 9M 2017: the ratio of costs to operating income before provisions decreased to 45.8% for 9M 2017 versus 47.5% for 9M 2016.

 

Statement of financial position


RUB billion
30 Sep 2017 30 Jun 2017 31 Dec 2016 Change in 9M 2017, % or p.p. Change in 3Q 2017, % or p.p.
Total assets 12,893.7 12,608.9  12,588.2 2.4% 2.3%
Loans and advances to customers, including pledged under repurchase agreements (gross)  9,626.5  9,515.8  9,487.0 1.5% 1.2%
Gross loans to legal entities  7,200.4  7,194.2  7,311.4 -1.5% 0.1%
Gross loans to individuals  2,426.1  2,321.6  2,175.6 11.5% 4.5%
Customer deposits  9,065.8  8,510.5  7,346.6 23.4% 6.5%
Deposits from legal entities  5,735.3  5,398.6  4,342.3 32.1% 6.2%
Deposits from individuals  3,330.5  3,111.9  3,004.3 10.9% 7.0%
NPL ratio 6.4% 6.3% 6.4% 0 p.p. 0.1 p.p.
Tier 1 CAR 12.9% 13.1% 12.9% 0 p.p.  -0.2 p.p. 
Total CAR 14.5% 14.6% 14.6% -0.1 p.p.  -0.1 p.p. 
  • In 9M 2017 the Group’s loan book grew by 1.5% to RUB 9,626.5 billion as gross loans to individuals increased by 11.5% during the first nine months of the year. Gross loans to legal entities, while down by 1.5% in 9M 2017 to RUB 7,200.4 billion, grew by 0.1% in 3Q 2017.
  • VTB Group’s retail lending accelerated further, up by 11.5% in 9M 2017 and by 4.5% in 3Q 2017, while the Russian retail lending market grew by 7.9% and 4.2%, respectively, in the same periods. The Group’s market share as of 30 September 2017 was 19.0%.
  • Growth in consumer loans, mortgages and credit card lending continued to gain speed, up by 15.0%, 9.5% and 3.2%, respectively, during the first nine months of 2017.
  • The Group’s NPL ratio was 6.4% of gross customer loans including those pledged under repurchase agreements (the “total loan book”) as of 30 September 2017, unchanged from 31 December 2016. The allowance for loan impairment was 6.6% of the total loan book as of 30 September 2017, unchanged from 30 June 2017, and down slightly from 6.7% on 31 December 2016. The NPL coverage ratio was 103.0% at 30 September 2017, versus 104.6% as of 31 December 2016.
  • Customer deposits grew by 23.4% to RUB 9,065.8 billion in 9M 2017. Deposits from legal entities grew by 32.1% in 9M 2017, while deposits from individuals grew by 10.9%.
  • The Group continues to increase the share of customer deposits, while minimising reliance on wholesale funding: customer deposits represented 79.2% of total liabilities as of 30 September 2017, up from 76.1% as of 30 June 2017 and 65.7% at year-end 2016. As of 30 September 2017, the Group’s market share in Russia in corporate and retail funding stood at 23.8% and 12.2%, respectively.
  • Post Bank plays an important role in the development of VTB Group’s retail banking operations: In the nine months of 2017 Post Bank acquired 2 million new clients and the total client base grew to 5.2 million. The regional network grew by 95% to over 12.3 thousand outlets in more than 4.3 thousand 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 falling to just 2.9% as of 30 September 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 9M 2017. VTB Capital was also named “Best Investment Bank in Russia” for the fifth year running by Euromoney Awards for Excellence 2017 in July 2017.
  • Capital adequacy ratios remained sound, backed by solid profitability during 9M 2017: as of 30 September 2017, the Group’s total and Tier 1 capital adequacy ratios were 14.5% and 12.9%, respectively, versus 14.6% and 12.9% as of 31 December 2016.

 



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