VTB Group announces IFRS results for 2Q 2021

дата30.07.2021

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 and six months ended 30 June 2021, along with the independent auditor’s report on these statements.

Dmitry Pianov, a member of the Management Board and Chief Financial Officer of VTB Bank, said:

"In 1H 2021, VTB Group achieved a record net profit of RUB 170.6 billion, delivering a return on equity of 18.5%. Key banking revenues — net interest income and net fee and commission income — demonstrated remarkable year-on-year growth of 21% and 38%, respectively.

“On the back of improved performance and owing to a successful programme to raise hybrid equity, VTB expanded its business in targeted segments and improved its capital position: its total capital adequacy ratio grew by 60 bp since the beginning of the year to 12.4%.

“Our successful performance in 1H 2021 has enabled us to increase our full-year net profit guidance to RUB 295 billion. Achieving this bottom line will lay a solid basis for the sustainable growth of VTB’s shareholder value.”


Financial highlights


(RUB billion)

30 June 2021

31 March 2021

31 December 2020

Change over 1H 2021

Change over 2Q 2021

Assets

19,649.3

18,588.4

18,142.2

8.3%

5.7%

Loans and advances to customers, including pledged under repurchase agreements (before loan loss provisions), as reported

13,782.2

13,145.6

13,162.6

4.7%

4.8%

Loans to legal entities

9,506.8

9,118.8

9,305.4

2.2%

4.3%

Loans to individuals

4,275.4

4,026.8

3,857.2

10.8%

6.2%

Customer funding

14,360.2

13,690.8

12,831.0

11.9%

4.9%

Funding from legal entities

8,448.1

7,969.0

7,095.1

19.1%

6.0%

Funding from individuals

5,912.1

5,721.8

5,735.9

3.1%

3.3%

NPL ratio

4.8%

5.5%

5.7%

-90 bp

-70 bp

LDR ratio

89.6%

89.4%

95.6%

-6.0 pp

0.2 pp

Business volumes grow accompanied by an increase in the share of retail lending

  • As of 30 June 2021, the total loan book before loan loss provisions amounted to RUB 13.8 trillion, an increase of 4.7% from the beginning of the year.
  • Loans to individuals increased by 10.8% from the beginning of the year to RUB 4.3 trillion amid a recovery in demand for consumer lending, as well as continued growth in the mortgage portfolio thanks to the Group’s participation in the state-supported mortgage programme. In 1H 2021, VTB Group issued mortgage loans worth RUB 515.9 billion, an increase of 27.6% year-on-year. Lending to legal entities increased by 2.2% from the beginning of the year to RUB 9.5 trillion. As a result of higher growth in lending to individuals, the share of retail in the Group’s total loan book increased to 31%, up from 29% at the end of 2020.
  • Since the beginning of 2021, customer funding has increased by 11.9% to RUB 14.4 trillion. Customer funding from legal entities increased by 19.1% in 1H 2021, while the current-account balances of legal entities increased by 23.0%. Customer funding from individuals increased by 3.1% to RUB 5.9 trillion: while there was a considerable increase in balances in savings accounts, this was offset by a decrease in term deposits.
  • In 2Q 2021, VTB offered investors, for the first time ever, bonds secured by a portfolio of consumer loans as part of a securitisation transaction in the amount of RUB 45 billion. The volume of bonds issued with pledged collateral amounted to RUB 35 billion. Structured entirely in accordance with Russian laws, this is the first transaction of its kind in the Russian market. The bonds are available to a wide range of retail investors; applications will be accepted until 20 September 2021.
  • As a result of faster growth in customer funding, the loans-to-deposits (LDR) ratio decreased to 89.6% as of 30 June 2021, down from 95.6% as of 31 December 2020. The share of customer funding in the Group’s total liabilities increased in 1H 2021 to 81.3%, up from 78.1% as of 31 December 2020. The structure of customer funding continues to change in line with the Group’s strategic targets: the share of current accounts increased to 43%, up from 40% at the beginning of the year.

Income statement

(RUB billion)

1H 2021

1H 2020

Change

2Q 2021

2Q 2020

Change

Net interest income

306.0

252.0

21.4%

160.4

132.3

21.2%

Net fee and commission income

84.1

60.8

38.3%

45.5

28.4

60.2%

Operating income before provisions

405.1

290.5

39.4%

211.1

127.3

65.8%

Provision charge(1)

-54.3

-113.9

-52.3%

-31.7

-68.8

-53.9%

Staff costs and administrative expenses

-135.6

-129.1

5.0%

-70.7

-65.0

8.8%

Net profit

170.6

41.9

307.2%

85.5

2.1

41x

(1) 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.

Substantial improvement in profitability amid a strong increase in key banking revenues and stabilisation of the loan book quality

  • VTB Group’s net profit in 1H 2021 increased by 307.2% year-on-year to RUB 170.6 billion, which represents a return on equity of 18.5%, up from 4.9% in 1H 2020.
  • Net interest income amounted to RUB 306.0 billion in 1H 2021 and RUB 160.4 billion in 2Q 2021, increasing 21.4% and 21.2% year-on-year, respectively. Net interest margin was 3.8% in 1H 2021 and 3.9% in 2Q 2021, up from 3.7% and 3.9% year-on-year, respectively. The increase in net interest margin was the result of further optimisation of the funding structure and an increase in the share of more profitable loans to individuals in the total loan book.
  • Net fee and commission income amounted to RUB 84.1 billion in 1H 2021 and RUB 45.5 billion in 2Q 2021, increases of 38.3% and 60.2% year-on-year, respectively. The considerable increase in net fee and commission income was driven by the expansion of the Group’s transactional business and a steadily increasing volume of commissions from the sale of insurance products and commissions from the brokerage business.
  • The Group’s cost of risk was 0.8% in 1H 2021 and 1.0% in 2Q 2021, having decreased by 90 bp year-on-year for both periods as the Russian economy continued to recover from the acute phase of the COVID-19 pandemic. Provision charge amounted to RUB 54.3 billion for 1H 2021 and RUB 31.7 billion for 2Q 2021, decreases of 52.3% and 53.9% year-on-year, respectively.
  • The Group’s NPL ratio decreased by 90 bp to 4.8% as of 30 June 2021. The Group decreased its allowance for loan impairments to 6.6%, down from 6.8% as of 31 December 2020. The NPL coverage ratio was 136.9%, up from 120.6% at the beginning of the year.
  • Staff costs and administrative expenses amounted to RUB 135.6 billion in 1H 2021 and RUB 70.7 billion in 2Q 2021, increases of 5.0% and 8.8% year-on-year, respectively. Growth in key income lines contributed to considerable improvements in operating efficiency, with the ratio of costs to net operating income before provisions decreasing by 10.9 p.p. year-on-year to 33.5%

CORPORATE-INVESTMENT BUSINESS

Investment banking leadership

  • As of the end of 1H 2021, VTB Capital retained its leading positions in the rankings of lead managers from Russia in both domestic and international capital markets, according to Dealogic, Refinitiv, Bloomberg and Mergermarket. In the equity capital markets, VTB Capital organised the largest number of transactions, including landmark IPOs for FixPrice, which was the largest Russian IPO in the past 10 years, and for Segezha Group, the world’s largest IPO in the wood processing industry in the past 10 years.
  • According to Bloomberg and Dealogic, VTB Capital was the top lead manager in 1H 2021 for bond placements in domestic and international markets for issuers from Russia, as well as in the markets of the CIS and Eastern Europe. Mergermarket also named VTB Capital the leader among financial advisors in terms of the volume of M&A transactions in Russia (six transactions worth a total of USD 2.8 billion).

Continued growth of the investment platform VTB Capital Investments

  • In 1H 2021, VTB Capital Investments increased customer assets by 18% to RUB 4 trillion. Assets under management — both retail and corporate — reached RUB 2.3 trillion and RUB 1.7 trillion, respectively, increases of 28% and 7% since the beginning of the year. VTB Capital Investments’ customer base exceeded 1.6 million as of 30 June 2021, an increase of 36% since the beginning of the year. VTB Capital Investments’ income in 1H 2021 grew by 78% year-on-year to RUB 15.6 billion.
  • VTB Capital Investments continued to develop the services and functionality of the VTB My Investments platform. For example, an ESG strategy was launched as part of the robo-advisor service in the VTB My Investments app, and five new foreign exchange portfolios with global allocation were added, which for the first time are made up entirely of exchange-traded funds. Since the second quarter, users of the mobile app have been able to see their mutual fund portfolio in the app. In addition, the VTB My Investments app was seamlessly integrated with the Bank’s app, and a number of other features were added to improve the customer experience. On 1 June 2021, VTB My Investments launched a campaign for new customers opening a brokerage account, offering them shares in Russian companies as a gift.
  • As of the end of 2Q 2021, the app had 350 thousand daily active users; the number of daily transactions was around 1 million, with turnover of more than RUB 100 billion.

Development of digital services of Corporate-investment business

  • In Moscow, VTB expanded the contactless payments system used by the Moscow metro and the Central Circle line to include other forms of ground passenger transport as well. In doing so, the Bank united ground transport in Moscow with a single contactless fare payment system, thus making travel more convenient for passengers.
  • VTB launched a new personal account service for developers enabling a transition to a paperless, legally binding document workflow at all stages of a construction project.

MEDIUM AND SMALL BUSINESS

  • A comprehensive loyalty program called VTB Business League was launched based on service privileges that are available to existing customers when expanding cooperation and actively using the Bank’s services.
  • A service was implemented to enable limited-liability companies (for the sole executive body who is the individual and independent owner of the company) to open a current account in 25 minutes during one visit to a VTB office.
  • VTB launched an updated deposit line for Medium and Small Business customers. Small businesses can open two new types of bank deposits: “Advance”, which offer interest payments at the beginning of the term, and “Collateral”, which can be used as collateral for loans and guarantees.
  • For companies conducting international business, VTB introduced the following new digital services: buying or selling currency at the desired rate and monitoring violations of currency laws. In addition, VTB now has a personal currency controller for every customer that does business outside the country. The Bank’s personal expert, in addition to carrying out currency control of current transactions on a turnkey basis, will help customers conclude transactions in accordance with legal requirements, conduct a preliminary expert review of foreign trade contracts and assist in resolving other issues related to international business.
  • VTB began issuing electronic bank guarantees to small businesses on behalf of the Federal Customs Service. Previously, this possibility was available only to larger customers.
  • VTB launched a convenient new service making it possible to register a business (sole proprietorship or LLC) completely online for customers who have a biometric passport.
  • VTB, together with the Federal Tax Service of Russia, launched a service for issuing a electronic signatures on physical media.

RETAIL BUSINESS

  • VTB became the first bank in Russia to launch a video banking service. The service enables customers to visit a virtual bank branch as an alternative to a visiting an office to receive detailed advice on complex products, discuss individual terms of service or execute contracts remotely.
  • Testing of the “Bank Next Door” service has begun; the service enables anyone to make an appointment with a financial advisor at the place of their choosing. A VTB advisor will come to the meeting with a tablet with software installed that makes it possible to complete an application for the Bank’s products without visiting a branch office.
  • The VTB Online app made it possible for users to apply for a credit limit increase on a bank card without contacting a Bank office.
  • VTB Online now has a fraudulent call identifier that verifies the authenticity of web addresses and that provides analysis of transactions based on artificial intelligence and verification of transactions using NFC wireless data transmission technology. In addition, a service to insure accounts and cards against fraudulent transactions was made available to customers.
  • As part of the development of the mobile operator VTB Mobile, VTB Online launched a free courier delivery service for SIM cards.
  • VTB increased the number of countries for international card-to-card transfers to 105 for Visa cards and 112 for Mastercard cards.
  • As part of the development of its mortgage product line, VTB launched a mortgage programme to finance the individual construction of homes. The Bank also launched its “Rural Areas Mortgage” programme, which makes it possible to get a loan at a rate of 2.7% for the purchase of residential real estate under construction or for a finished residential property in a house with a land plot, a townhouse or an apartment building up to five storeys high. “Rural Areas Mortgage” operates within the framework of the “Comprehensive development of rural areas” state programme developed by Russia’s Agriculture Ministry. The offer is available for rural areas and cities with a population of up to 30 thousand inhabitants in 15 regions of Russia.

Business digitalisation and the development of a digital ecosystem

  • In the context of the digitalisation of the Retail Business, a voice assistant was added for payments by mobile phone, transfers to a telephone number, advisory services, etc.
  • As part of the digitalisation of Medium and Small Business, a new taxation system called “Income—Expenditure” was added for clients using the Cifra service. In addition, a “Multibank” function was added that enables users to add their banks to the app and to see detailed information about their accounts in a single space.
  • As part of the digitalisation of the Corporate-Investment Business, services continued to be developed for customers of brokerage services and investment products for individuals:
    • A function enabling 24/7 transfers of funds from the redemption of securities was added to VTB My Investments;
    • The ability to obtain the status of a qualified investor was added to the mobile app;
    • Accrued taxes and withdrawal limits are now displayed when withdrawing funds in VTB My Investments;
    • VTB became the first bank in the market to enable online registration of tax deductions for customers with individual investment accounts in just a few clicks through the Bank’s Internet channels;
    • A function was added enabling retail broker customers to manage the margin lending option in their personal account;
    • A function enabling customers to open a forex account remotely through the Bank’s Internet channels was added.