VTB Group announces IFRS financial results for 4M 2020
VTB Bank, the parent company of VTB Group (the “Group”), today publishes its unaudited consolidated financial results in accordance with IFRS for the first four months of 2020 (“4M 2020”).
Andrey Kostin, President and Chairman of the Management Board of VTB Bank, said: "VTB Group’s net profit for the first four months of 2020 amounted to RUB 40.7 billion, which corresponds to a return on equity of 7.2%.
"The COVID-19 pandemic continued to put pressure on our business: a noticeable deceleration in commercial activity led to a significant reduction in transactional revenues and we continued to build up more provisions to reflect deteriorating loan quality across a number of portfolios. At the same time, net interest margin and net interest income continued to rise, and we kept costs under control.
“In recent months, VTB Group has demonstrated its ability to quickly adapt to a changing operating environment while continuing to support customers by providing them with a full range of high-quality financial products and services. I would emphasise that while we prioritised ensuring business continuity, VTB has in no way slowed down the transformational processes or the implementation of strategic initiatives, both of which have in fact accelerated.
“I am confident that we will be able to take full advantage of new opportunities to strengthen our market position and acquire a significant number of new customers as their bank of first choice.”
Business growth in April and the first four months of 2020 was affected by the COVID-19 pandemic
- Loans and advances to customers (pre-provision) amounted to RUB 12.0 trillion as of 30 April 2020, up by 4.5% since the beginning of the year. In April 2020 the total loan portfolio decreased by 0.7%. Excluding the effect of currency revaluation, loans and advances to customers grew by 0.7% in April and by 0.8% since the beginning of the year.
- Loans to individuals increased by 0.4% in April and by 4.2% for 4M 2020, amounting to RUB 3.5 trillion; this growth was primarily driven by mortgage lending (up by 6.8% from the beginning of the year and by 1.5% in April).
- Loans to legal entities decreased by 1.1% in April, primarily due to the currency revaluation effect (excluding the effect of currency revaluation the portfolio grew by 0.8%); the corporate loan portfolio grew by 4.6% in 4M 2020 and amounted to RUB 8.5 trillion as of 30 April 2020. At the same time, the Medium and Small Business segment loan portfolio increased by 1.2% since the beginning of the year, despite a 2.5% decrease in April.
- VTB Group’s shares of corporate and retail lending in Russia stood at 17.3% (vs 18.2% at the beginning of the year) and 17.7% (vs 17.4% at the beginning of the year), respectively.
- As of 30 April 2020, customer accounts totalled RUB 11.8 trillion. In April 2020, total customer funds decreased by 0.2%; excluding the effect of currency revaluation, customer funds increased by 1.8%. Since the beginning of the year, customer accounts have grown by 7.5%.
- Deposits from legal entities increased by 1.0% in April and by 9.1% for 4M 2020, amounting to RUB 6.5 trillion as of 30 April 2020.
- Retail deposits decreased by 1.6% in April; excluding the impact of currency revaluation, retail funding grew by 0.4%. Since the beginning of the year, retail deposits increased by 5.6%, amounting to RUB 5.3 trillion as of 30 April 2020.
- The share of customer accounts in the Group’s total liabilities increased in the first four months of 2020 to 80.4% (79.2% as of 31 December 2019). VTB Group’s market shares in corporate and retail deposits in Russia amounted to 20.4% (vs 20.2% at the beginning of the year) and 15.2% (vs 15.1% at the beginning of the year), respectively.
- As a result of the faster growth in customer deposits, the loans to deposits ratio (LDR) decreased to 95.0% as of 30 April 2020 (98.2% as of 31 December 2019).
Profitability metrics were under pressure in the context of the COVID-19 pandemic, while operating income was supported by improving net interest margin amid the easing of monetary policy by the Bank of Russia.
- VTB Group’s net income amounted to RUB 40.7 billion and RUB 0.9 billion, decreasing year-on-year by 19.2% and 76.9%, respectively, in 4M and April 2020.
- Net interest income was RUB 161.7 billion for 4M 2020 and RUB 42.0 billion in April 2020, growing year-on-year by 15.6% and 17.6%, respectively. Net interest margin was 3.6% for 4M 2020 and 3.7% in April 2020 (an increase of 40 bps year-on-year for both periods).
- Net fee and commission income rose by 27.2% year-on-year for 4M 2020 to RUB 34.6 billion and declined by 20.5% year-on-year to RUB 6.6 billion in April 2020, amid a significant decline in business activity.
- The cost of risk was 1.6% for 4M 2020 and 1.7% in April 2020, compared with 0.8% and 1.5% in the same periods of the previous year. Provision charges amounted to RUB 62.4 billion for 4M 2020 and RUB 17.3 billion in April 2020, increases of 117.4% and 28.1% year-on-year, respectively. Additional provision charges for 4M 2020 in the amount of RUB 16.5 billion were due to macro corrections, of which RUB 13.6 billion were macro corrections created for loans to individuals, and RUB 2.9 billion were for loans to legal entities.
- The allowance for loan impairments was 6.5% of the total loan book (pre-provision) as of 30 April 2020, an increase of 10 bps for the month 50 bps since the beginning of the year. This growth was due to the increased level of risks in the economy caused by the COVID-19 pandemic.
- The non-performing loans (NPL) ratio was 5.0% as of 30 April 2020 (+30 bp since the beginning of the year). The NPL coverage ratio was 129.7% as of 30 April 2020 (31 December 2019: 128.7%).
- Personnel and administrative expenses amounted to RUB 86.4 billion for 4M 2020 and RUB 22.3 billion in April 2020, increases of 4.7% and 2.3% year-on-year, respectively. The main source of this growth is the ongoing strategic business transformation, including in the area of information technologies. The cost-to-income ratio for 4M 2020 was 42.3%, compared with 46.1% a year earlier due to the higher pace of growth in pre-provision operating income.