VTB Group announces IFRS results for 1Q 2020

дата08.05.2020

VTB Bank (“VTB” or “the Bank”), the parent company of VTB Group (“the Group”), today publishes its Interim Condensed Consolidated Financial Statements for the first three months ended 31 March 2020 with the independent auditor’s report on review of these statements.

Andrey Kostin, VTB President and Chairman of the Management Board, said: "In the first quarter VTB Group delivered good performance in its core banking business. At the same time, the COVID-19 pandemic began to negatively impact our results as we started to build up additional provisions and mark down investment assets. While it is now difficult to gauge the scale of the problems that the current crisis will bring to the banking system, we aim to respond in a timely and appropriate matter to challenges as they arise.

"VTB Group is well prepared for the current situation: we have solid liquidity, strong market positions and extensive experience operating in a challenging environment. We possess the full capacity to provide comprehensive and high-quality customer service via digital channels, as well as an efficient cost structure and a high degree of operational flexibility. These factors have enabled us to continue the uninterrupted operations of all systems and processes.

“Our priority is the health and well-being of all employees, customers and partners, and we are taking all necessary measures to ensure this. As a socially responsible company, VTB is implementing a wide range of measures to support customers who are facing tough circumstances.

“The situation that we face today has validated our strategy of ongoing digitalisation and transformation of products and processes. Even in the current environment we continue to update and improve our services and applications. I am confident that we will further strengthen our market position and strengthen relations with customers as the bank of first choice.”

FINANCIAL HIGHLIGHTS

RUB billion

31-Mar-20

31-Dec-19

Change in 1Q 2020, % or bps

Total assets

16,588.7

15,516.1

6.9%

Loans and advances to customers, including pledged under repurchase agreements (gross), as reported

12,058.6

11,461.5

5.2%

Gross loans to legal entities

8,565.4

8,096.2

5.8%

Gross loans to individuals

3,493.2

3,365.3

3.8%

Customer deposits

11,819.7

10,974.2

7.7%

Deposits from legal entities

6,408.2

5,932.6

8.0%

Deposits from individuals

5,411.5

5,041.6

7.3%

NPL ratio

4.9%

4.7%

20 bps

LDR ratio

95.5%

98.2%

-270 bps

The total loan book expanded by 5.2%

  • The Group’s total loan book grew by 5.2% in 1Q 2020 to RUB 12,058.6 billion.
  • The retail portfolio expanded by 3.8% in 1Q 2020, primarily driven by a 5.2% increase in mortgage lending, as well as growth in consumer and credit card lending of 3.0% and 3.6%, respectively, during the period.
  • As of 31 March 2020, secured loans (mortgages and car loans) accounted for 52% of total retail lending, unchanged from the beginning of the year.
  • In 1Q 2020, the corporate loan book grew by 5.8% to RUB 8.6 trillion. Excluding the impact of the revaluation of foreign currency-denominated loans, the corporate loan book contracted by 1.3%.
  • The Group’s market share in Russia in corporate and retail lending stood at 17.4% (-80 bps for 1Q 2020) and 17.5% (+10 bps for 1Q 2020), respectively.

Customer deposits rose by 7.7% during 1Q 2020, with solid growth in both corporate and retail deposits

  • Customer deposits amounted to RUB 11,819.7 billion, increasing by 7.7% during the first quarter. Deposits from legal entities and individuals rose by 8.0% and 7.3%, respectively, during the reporting period.
  • Customer funding as a share of the Group’s liabilities rose by 30 bps to 79.5% as of 31 March 2020. The loans-to-deposits ratio was 95.5% as of 31 March 2020, compared to 98.2% as of 31 December 2019.
  • The Group’s market share in Russia in corporate and retail funding stood at 19.8% (-40 bps in 1Q 2020) and 15.5% (+30 bps in 1Q 2020), respectively.

Income statement

RUB billion

1Q 2020

1Q 2019

Change,

% or bps

Net interest income

119.7

104.2

14.9%

Net fee and commission income

28.0

18.9

48.1%

Operating income before provisions

163.2

137.0

19.1%

Provision charge*

-45.1

-15.2

196.7%

Staff costs and administrative expenses

-64.1

-60.7

5.6%

Net profit

39.8

46.5

-14.4%

ROE

9.5%

12.3%

-280 bps

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

In 1Q 2020 operating income before provisions increased by 19.1% year-on-year.

  • The Group’s net profit for 1Q 2020 was RUB 39.8 billion, decreasing by 14.4% year-on-year as a result of growing provision charges.
  • Net interest income rose by 14.9% year-on-year to RUB 119.7 billion in 1Q 2020 due to organic business growth and a further increase in the net interest margin. In 1Q 2020, net interest margin amounted to 3.6%, up from 3.5% in 4Q 2019 and 3.4% for FY 2019.
  • Funding costs were 100 bps lower year-on-year at 4.3% in 1Q 2020, driving a 12.5% year-on-year reduction in interest expense, while interest income declined at a slower pace of 1.9% year-on-year, with the return on interest-earning assets decreased to 7.9%, down by 40 bps compared to 1Q 2019.
  • Net fee and commission income rose by 48.1% year-on-year to RUB 28.0 billion in 1Q 2020. Solid organic fee growth from settlements and trade finance was further enhanced by strong commission generation from the sale of insurance products and investment products.

External factors including the decline in the price of oil and spread of the COVID-19 pandemic impacted provision charges at the end of 1Q 2020.

  • Cost of risk for 1Q 2020 rose by 100 bps year-on-year to 1.5%. Provision charges amounted to RUB 45.1 billion in 1Q 2020, an increase of 196.7% year-on-year. The accelerated growth in provision charges was due to the impact of the COVID-19 pandemic on loan quality.
  • The Group’s NPL ratio increased to 4.9% of gross customer loans as of 31 March 2020, compared to 4.7% as of 31 December 2019. The Group increased the allowance for loan impairments as a portion of the total loan book to 6.4% as of 31 March 2020, compared to 6.0% as of 31 December 2019. The NPL coverage ratio remained steady and was 128.6% as of 31 March 2020, compared to 128.7% as of 31 December 2019.

VTB Group achieved further operating efficiency improvements in 1Q 2020

  • Personnel and administrative expenses in 1Q 2020 amounted to RUB 64.1 billion, up 5.6% year-on-year.
  • The costs to income ratio (CIR) declined to 39.3% in 1Q 2020, compared to 44.3% a year earlier, as a result of the faster pace of growth in operating income.

OTHER RESULTS

VTB remained the outright leader in investment banking in 1Q 2020

  • In 1Q 2020 VTB’s investment banking franchise, VTB Capital, was named the #1 M&A advisor in Central and Eastern Europe, the CIS and Russia by Dealogic, Refinitiv and Mergermarket. In equity capital markets in Russia and the CIS, VTB Capital was ranked the #1 bookrunner by Dealogic and Refinitiv. For debt capital markets, Dealogic, Bloomberg and Refinitiv all named VTB Capital the #1 bookrunner in Russia during 1Q 2020.

VTB continued to actively develop its platform for selling investment products

  • VTB Capital Investments assets under management increased by 20% during the first quarter, reaching RUB 2.4 trillion. Assets under management from both individuals and legal entities or institutional clients rose by 20%, to RUB 1,109 billion and RUB 1,242 billion, respectively. VTB Capital Investments’ customer base grew to more than 850 thousand people.
  • The number of active clients on the VTB My Investments mobile platform in 1Q 2020 increased by 1.5 times compared to 31 December 2019 and exceeded 250 thousand. Turnover in March 2020 amounted to more than RUB 789 billion.
  • VTB Capital Asset Management mutual funds attracted more than RUB 12.5 billion in funds during 1Q 2020, which represents more than 25% of the total investments into mutual funds in Russia during the period.
  • VTB Capital Investment Management has become the largest asset management company in the country, taking the first place in the Expert RA ranking of the largest asset management companies in Russia in 1Q 2020. The volume of funds under management has increased by RUB 150 billion since the beginning of the year (an increase of 16.4%) and reached RUB 1,067 billion.

Development of IT infrastructure

  • VTB Group continues to actively increase its IT headcount as part of its digital transformation starategy that implies profound transformation on a new digital basis.
  • The number of developers working on the Bank’s digital transformation increased 2.5-fold year-on-year and amounted to 715 at the end of 1Q 2020. Overall, VTB’s IT function currently employs 4,490 people.
  • VTB Bank’s IT systems have proven their resilience during the COVID-19 pandemic, having handled the significantly increased load after over 70% of the head office began working remotely, increasing the system load by several times.