VTB Group announces IFRS financial results for May and 5M 2020
VTB Bank, the parent company of VTB Group (the “Group”), today publishes its unaudited consolidated financial results in accordance with IFRS for May and the first five months of 2020.
Andrey Kostin, President and Chairman of the Management Board of VTB Bank, said: "VTB Group’s net profit for the first five months of 2020 amounted to RUB 41.2 billion, which corresponds to a return on equity of 5.8%.
“Amid the crisis caused by the COVID-19 pandemic, VTB Group achieved sound growth of its core banking income, while asset impairment stemming from a decrease in business activity, which has primarily taken the form of a sharp increase in provisions, led to a decrease in overall profitability in April and May.
“The significant increase that we have seen in revenue from our core activities is an indication of the soundness of our strategic priorities, the sustainability of our business model and of considerable financial resilience that has enabled us to expand our customer base, to continue to improve our products and services and to increase the speed of the transformation of our business and our operational IT platform even in this challenging market situation.”
Business growth in May and 5M 2020 was affected by the COVID-19 pandemic
- Loans and advances to customers (before provisions) amounted to RUB 12.0 trillion as of 31 May 2020, up 4.4% since the beginning of the year. In May 2020, the total loan portfolio decreased by 0.1%, however, it increased by 0.5% after adjustment for currency revaluation.
- Loans to individuals increased by 1.0% in May to RUB 3.5 trillion (30% of the total loan portfolio), an increase of 5.2% from the beginning of the year. Mortgage lending continued to grow at a faster pace, with the mortgage loan portfolio increasing by 1.7% in May and by 8.6% for 5M 2020.
- Loans to legal entities decreased by 0.5% in May, however, adjusted for the effect of currency revaluation loans to legal entities grew by 0.3%; loans to legal entities grew by 4.0% in 5M 2020 and amounted to RUB 8.4 trillion as of 31 May 2020.
- VTB Group’s shares of corporate and retail lending in Russia stood at 17.3% and 17.9%, respectively.
- As of 31 May 2020, customer funding totalled RUB 11.9 trillion. In May 2020, total customer funding increased by 1.1%; adjusted for the effect of currency revaluation, customer funding increased by 2.3%. Since the beginning of the year, customer funding has grown by 8.7%.
- Funding from legal entities increased by 3.0% in May; adjusted for the effect of currency revaluation, funding from legal entities increased by 4.2%. Since the beginning of the year, funding from legal entities rose by 12.3% and amounted to RUB 6.7 trillion as of 31 May 2020.
- Funding from individuals decreased by 1.2% in May; adjusted for the effect of currency revaluation, retail funding remained unchanged. Since the beginning of the year, funding from individuals increased by 4.4%, amounting to RUB 5.3 trillion as of 31 May 2020.
- The share of customer funding in the Group’s total liabilities increased in 5M 2020 to 82.8% (79.2% as of 31 December 2019). VTB Group’s market shares in corporate and retail funding in Russia amounted to 21.0% and 15.0%, respectively.
- As a result of the faster growth in customer funding, the loans to deposits ratio (LDR) decreased to 93.8% as of 31 May 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 growth in net interest income and net fee and commission income
- VTB Group’s net income amounted to RUB 41.2 billion and RUB 0.5 billion, decreasing year-on-year by 33.0% and 95.5%, respectively, in 5M and May 2020.
- Net interest income was RUB 209.0 billion for 5M 2020 and RUB 47.3 billion in May 2020, increasing by 18.2% and 28.2% year-on-year, respectively.
- Net interest margin was 3.7% for 5M 2020 and 4.1% in May 2020 (an increase of 40 bps and 80 bps year-on-year, respectively). The increase in net interest margin is taking place amid the easing of monetary policy and the fast-paced revaluation of liabilities. In addition, the considerable increase in net interest margin in May 2020 was attributable to the one-off effect of a change in the base rate for contributions to the Deposit Insurance Fund since the beginning of 2020.
- Despite the pressure caused by decreased business activity, net fee and commission income showed strong organic growth and amounted to RUB 41.9 billion for 5M 2020 (up 25.4% year-on-year) and RUB 7.3 billion in May 2020 (up 17.7% year-on-year).
- The cost of risk was 1.5% for 5M 2020 and 1.2% in May 2020, compared with 0.7% and 0.6% in the same periods the previous year. Provision charges amounted to RUB 74.8 billion for 5M 2020 and RUB 12.4 billion in May 2020, increases of 116.8% and 113.8% year-on-year, respectively.
- The allowance for loan impairments was 6.5% of the total loan book (before provisions) as of 31 May 2020, unchanged for the month and an increase of 50 bps since the beginning of the year. This growth since the beginning of the year is 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 31 May 2020 (up 30 bps since the beginning of the year). The NPL coverage ratio was 129.7% as of 31 May 2020 (128.7% as of 31 December 2019).
- Staff costs and administrative expenses amounted to RUB 110.1 billion for 5M 2020 and RUB 23.7 billion in May 2020, increases of 7.3% and 17.9% year-on-year, respectively. The Group remains focused on further enhancing operational efficiency and optimising base costs. At the same time, the year-on-year increase in expenses in 5M 2020 was caused by the indexation of salaries of line employees in the regional network in December 2019, the implementation of unforeseen measures related to ensuring security and business continuity in the context of the COVID-19 pandemic, as well as the ongoing technological transformation, including the expansion of headcount in information technologies areas.
- Due to the higher pace of growth in operating income in 5M 2020, the cost-to-income ratio improved to 45.9%, compared with 46.7% a year earlier.