2 Jun 2010 07:00
VTB announces results for the first quarter of 2010
Unaudited financial results for the three months ended 31 March 2010
Moscow, 2 June 2010 - VTB Group today announces its unaudited IFRS results for the three months ending 31 March 2010.
FINANCIAL HIGHLIGHTS
·; Net profit RUB 15.3 billion - highest quarterly profit in VTB's history versus a loss of RUB 20.5 billion in 1Q 2009
·; Corporate banking profit before tax of RUB 9.1 billion versus a RUB 18.2 billion loss in 1Q 2009
·; Retail banking profit before tax of RUB 6.7 billion versus a loss of RUB 4.3 billion in 1Q 2009
·; Investment banking profit before tax of RUB 6.1 billion, up 103% year-on-year
·; Operating income before provisions up 34% to RUB 58.1 billion
·; Net interest margin increased to 5.2% from 4.1% in 1Q 2009
·; Credit quality deterioration slowed down - NPLs ratio increased 40 bps in 1Q 2010 versus 200 bps in 4Q 2009; allowances for loan impairment at 9.8% of total loans up from 9.2% at the end of 2009
·; BIS ratio at 22.2%, up from 20.7% at year end 2009
Andrei Kostin, VTB President and Chairman of the Management Board, said:
"I am delighted to report that VTB has returned strongly to profitability in the first quarter of 2010. While we have been helped by an improving economic backdrop, I am pleased that the efforts to re-orientate the Group towards areas which can drive profitability are bearing fruit. With the new strategy announced, I look forward to building on our strong franchise and delivering solid returns in the future."
FINANCIAL AND OPERATING REVIEW
VTB has emerged significantly strengthened from the economic crisis. The emphasis on developing strong retail and investment banking capabilities, delivering higher value product and services to the Group's traditional corporate customer base and extending the franchise into new areas has delivered strong earnings momentum throughout the business.
VTB returned strongly to profit in the first quarter of 2010 delivering a record quarterly net result of RUB 15.3 billion with annualized return on equity at 11.9%. That compares with a loss of RUB 20.5 billion in the first quarter of 2009.
The Group benefited from improving credit quality as the economic recovery gathered pace, while its underlying performance was also strong, reflecting good contributions from interest income, fees and commissions and from financial instruments. Operating income before provisions rose 34% year-on-year to RUB 58.1 billion, against RUB 43.2 billion in the first quarter of 2009. Net interest income before provisions increased 22% year-on-year to RUB 42 billion, while net fee and commission income was up 19% year-on-year to RUB 5.1 billion. Income from financial instruments was RUB 8.4 billion as compared to a RUB 11.3 billion loss in the first quarter of 2009.
Funding costs, which have been an important focus of management attention, came down in the first quarter. As a result, net interest margin before provisions stood at 5.2% in the first quarter of 2010, up substantially compared with 4.1% in the first quarter of 2009.
Demand for credit remained subdued in the first quarter and with competition for quality borrowers increasing there was downward pressure on interest rates, a trend that was exacerbated by strong liquidity in the banking sector. In this environment, VTB focused its efforts on expanding operations with quality customers through a targeted relationship approach and providing higher value added product. Corporate gross loans were up 1% to RUB 2,120.9 billion in the quarter. Retail loans were RUB 419.1 billion as compared to RUB 435.3 billion at the end of 2009. There was strong growth in consumer loans which increased by 4% during the first three months of 2010 to RUB 190.5 billion. VTB's total gross loans remained flat at RUB 2.5 trillion.
Provision charges fell by 68% year-on-year to RUB 15.5 billion in the first quarter of 2010 from RUB 49.2 billion in the same period of 2009 reflecting a slow down in the pace of credit deterioration. The allowance for loan impairment was 9.8% of total gross loans at the end of the first quarter as compared to 9.2% at the end of 2009. Non-performing loans (NPLs) amounted to 10.2% of total loans against 9.8% at the end of last year. NPLs growth rate slowed down in the first quarter - NPLs ratio increased 40 bps versus 200 bps in the fourth quarter of 2009. Coverage remained at a comfortable level of 96% of NPLs.
In a highly competitive deposit market, deposits remained broadly flat at RUB 1.6 trillion. Total corporate deposits were down slightly to RUB 1,060.9 billion from RUB 1,092.3 billion at the end of 2009. Retail deposits were up 4% quarter-on-quarter to RUB 493.6 billion from RUB 476.5 billion at the end of December 2009.
VTB also took advantage of the progressive re-opening of the wholesale capital markets. During the quarter, the Group successfully priced a U.S.$1.25 billion Eurobond offering at 6.465% which resulted in a tightening of the VTB secondary curve. VTB also placed RUB 20 billion of domestic bonds with a coupon 7.6%. The Group increased its share of funding from customer deposits to 55% at the end of the first quarter of 2010 from 51% at the end of 2009.
Focus on cost control and improved efficiency remained a key priority for the Group. In February 2010, JSC VTBBank announced plans to reduce its staff and vacancies by 10% to be implemented by the end of the first half of the year, together with measures to improve efficiency. Overall, costs were RUB 22.2 billion up from RUB 17.1 billion in the first quarter of 2009, but down 7% from RUB 23.9 billion in the fourth quarter of 2009. The cost-to-income ratio (defined as ratio of staff and administrative expenses to operating income before provisions) improved to 38.2% compared to 39.6% in the first quarter of 2009.
During the quarter, VTB's capital position remained strong. The total BIS ratio was 22.2% with a Tier-1 ratio of 16.2%, up from 20.7% and 14.8% respectively since the end of 2009.
CORPORATE BUSINESS
In a more competitive environment, VTB's priority was to strengthen its relationships with top customers operating in key industries while continuing expansion into the quality regional customer segment.
VTB's corporate business benefited both from an improvement in credit quality and increased focus on efficiency and margins, posting a profit before tax of RUB 9.1 billion versus a loss of RUB 18.2 billion in the same quarter of 2009.
Management has worked on the implementation of the Corporate Investment Banking (CIB) concept to maximize the synergy opportunities across the two businesses in line with the Group's strategy for 2010 - 2013.
In step with the improving market conditions and the progressive normalization of the loan market, the corporate business has relaxed some of the emergency lending controls imposed at the height of the crisis to allow faster approvals and greater flexibility to respond to customer needs.
RETAIL BUSINESS - VTB24
Growing VTB's retail franchise is a key element in the Group's long term strategy of diversifying earnings into higher growth, higher margin areas and capitalizing on the secular growth in demand in Russia and the former CIS for sophisticated retail banking services. The retail business posted a strong quarterly pre-tax profit of RUB 6.7 billion versus a loss of RUB 4.3 billion in the first quarter of 2009.
In the lending market VTB24 continued to focus on shorter-term and higher margin products including consumer loans, auto loans and credit cards. The Group's market share in retail lending increased by 30 basis points to 10.5% at the end of the first quarter.
Despite strong competition for retail deposits, which partially came from smaller institutions, VTB24 focused on protecting margins and was able to maintain its share of the retail deposit market at 5.9% and grow the absolute level of retail deposits overall.
With the return to economic growth, VTB24 has cautiously resumed its branch network expansion program and opened three new branches in the first quarter of 2010. The bank plans to open 48 new outlets by the end of the year to boost its presence in key markets and continue to grow its client base which totaled 4.8 million active retail customers at the end of the first quarter of 2010.
INVESTMENT BUSINESS - VTB CAPITAL
VTB Capital continued its progress, having established itself as the leading investment banking business in Russia in less than two years from its launch. In the quarter, VTB Capital delivered profit before tax of RUB 6.1 billion compared to RUB 3 billion in the first quarter of 2009 with the largest contribution generated by fixed income sales and trading. VTB Capital benefited strongly from the capital markets recovery in the first quarter of 2010 with increased client activity in both the primary and secondary markets.
In the first quarter, VTB's investment business continued to win prestigious mandates in the bond market. In the reporting period, VTB Capital topped the Bloomberg Russia Domestic Bonds league table acting as bookrunner on 9 transactions totaling RUB 41.5 billion. VTB Capital's share of the Russian domestic bond market in the first quarter of 2010 was over 30%. VTB Capital also took the lead position in the Cbonds DCM rankings. It was #1 Rouble bond bookrunner with a market share of 27.5% and #1 Rouble bond underwriter with a market share of 25%.
The quarter was also marked by a recovery in equity issuance by Russian corporates. VTB Capital took a leading position in major ECM league tables with a market share of 16% in domestic equity capital market and 8.8% in Eastern Europe ECM, according to Dealogic and Bloomberg. Among the highlights in the first quarter was the IPO of Rusal in Hong Kong in which VTB Capital acted as joint-bookrunner.
VTB Capital's Infrastructure Capital department arranged the financing package for the public-private partnership (PPP) project to rebuild St Petersburg's Pulkovo airport. The PPP agreement was finalized and the operations of the airport were officially handed over to the Northern Capital Gateway consortium.
Contacts:
Investor Relations:
Tel.: +7 495 775 71 39
Email: investorrelations@vtb.ru
About VTB:
JSC VTB Bank and its subsidiaries (the VTB Group or the Group) is a leading Russian banking group, offering a wide range of banking services and products across Russia, certain CIS countries and in selected countries of Western Europe, Asia and Africa.
As of March 31, 2010 the Group had a network of 941 branches located across Russia, CIS and Europe, of which VTB24 retail branches totaled 479. Today outside of Russia, the Group operates through five subsidiary banks located in the CIS (Armenia, Ukraine, Belarus, Azerbaijan and Kazakhstan), subsidiary bank in Georgia, five banks located in Europe (Austria, Germany, France, UK and Cyprus), one subsidiary bank and one financial company in Africa (Angola, Namibia), and an associated bank in Vietnam. VTB also has branches in India and China and a presence in Singapore and UAE through the branches of its UK investment banking subsidiary. VTB has operated under a full banking license, №1,000 from the Central Bank of the Russian Federation, since 1990.
The Group's business franchise spans corporate, retail and investment banking. In corporate banking, the Group provides a broad range of commercial banking services and products including corporate lending, foreign trade transactions, syndicated loans, deposit and settlement services, as well as custody services, leasing and treasury services to large- and medium-sized corporations and financial institutions. In retail banking, VTB offers financial services, including deposit accounts, lending, debit and credit cards and transaction services, to individuals and small-sized corporations. In investment banking it provides debt capital markets underwriting, project financing, merger and acquisition financing, advisory services, asset management and venture funds.
The number of employees of the Group at 31 March 2010 was 40,608. The Government of the Russian Federation is VTB's main shareholder and owns, through the Federal Property Management Agency, 85.5% of its registered share capital.
Interim Condensed Consolidated Statement of Financial Position as at 31 March 2010
| RUB billion | 31 March 2010 (unaudited) | 31 December 2009 |
|
|
|
|
| Assets |
|
|
| Cash and short-term funds | 169.3 | 260.2 |
| Mandatory cash balances with central banks | 22.3 | 23.9 |
| Financial assets at fair value through profit or loss | 258.3 | 267.9 |
| Financial assets pledged under repurchase agreements and loaned financial assets | 10.5 | 96.2 |
| Due from other banks | 282.1 | 345.6 |
| Loans and advances to customers | 2,291.0 | 2,309.9 |
| Financial assets available-for-sale | 25.3 | 24.9 |
| Investments in associates | 13.8 | 13.9 |
| Investment securities held-to-maturity | 32.6 | 11.7 |
| Premises and equipment | 64.8 | 65.9 |
| Investment property | 79.1 | 79.8 |
| Intangible assets and goodwill | 11.5 | 11.9 |
| Deferred tax asset | 33.9 | 31.4 |
| Other assets | 67.5 | 67.6 |
|
| ||
|
|
|
|
| Total assets | 3,362.0 | 3,610.8 |
|
|
|
|
|
|
| |
| Liabilities |
|
|
| Due to other banks | 309.0 | 287.0 |
| Customer deposits | 1,554.5 | 1,568.8 |
| Other borrowed funds | 161.5 | 470.9 |
| Debt securities issued | 535.1 | 485.7 |
| Deferred tax liability | 6.7 | 7.0 |
| Other liabilities | 89.1 | 91.2 |
|
|
|
|
| Total liabilities before subordinated debt | 2,655.9 | 2,910.6 |
| Subordinated debt | 185.6 | 195.3 |
|
|
|
|
| Total liabilities | 2,841.5 | 3,105.9 |
|
|
|
|
|
|
|
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| Equity |
|
|
| Share capital | 113.1 | 113.1 |
| Share premium | 358.5 | 358.5 |
| Treasury shares | (0.4) | (0.4) |
| Unrealized gain on financial assets available-for-sale and cash flow hedge | 3.6 | 3.4 |
| Premises revaluation reserve | 11.8 | 11.8 |
| Currency translation difference | 10.1 | 13.2 |
| Retained earnings | 21.4 | 2.7 |
| Equity attributable to shareholders of the parent | 518.1 | 502.3 |
|
|
|
|
| Non-controlling interests | 2.4 | 2.6 |
|
|
|
|
| Total equity | 520.5 | 504.9 |
|
|
|
|
|
|
|
|
| Total liabilities and equity | 3,362.0 | 3,610.8 |
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Interim Condensed Consolidated Income Statement for theThree-month Period Ended 31 March 2010 (unaudited)
|
RUB billion | For the three-month period ended 31 March | |
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| ||
|
| 2010 | 2009 |
|
|
|
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| Interest income | 83.6 | 94.0 |
| Interest expense | (41.6) | (59.7) |
|
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|
|
|
|
|
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| Net interest income | 42.0 | 34.3 |
| Provision charge for impairment | (15.5) | (49.2) |
|
|
|
|
|
|
|
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| Net interest income / (expense) after provision for impairment | 26.5 | (14.9) |
|
|
|
|
|
|
|
|
| Gains less losses / (losses net of gains) arising from financial instruments at fair value through profit or loss | 8.4 | (11.3) |
| Gains less losses arising from extinguishment of liability | - | 5.5 |
| Losses net of gains arising from dealing in foreign currencies | (12.0) | (42.6) |
| Foreign exchange translation gains less losses | 13.5 | 52.1 |
| Fee and commission income | 6.2 | 5.6 |
| Fee and commission expense | (1.1) | (1.3) |
| Share in income of associates | 0.1 | - |
| Provision charge for impairment of other assets and credit related commitments | (1.9) | (0.6) |
| Income arising from non-banking activities | 1.3 | 0.6 |
| Expenses arising from non-banking activities | (0.8) | (0.2) |
| Other operating income | 0.5 | 0.5 |
|
|
|
|
|
|
|
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| Net non-interest income | 14.2 | 8.3 |
|
|
|
|
|
|
|
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| Operating income / (loss) | 40.7 | (6.6) |
|
|
|
|
| Staff costs and administrative expenses | (22.2) | (17.1) |
|
|
|
|
|
|
|
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| Profit / (loss) before taxation | 18.5 | (23.7) |
|
|
|
|
| Income tax (expense) / recovery | (3.2) | 3.2 |
|
|
|
|
|
|
|
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| Net profit / (loss) for the period | 15.3 | (20.5) |
|
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|
|
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| Net profit / (loss) attributable to: |
|
|
| Shareholders of the parent | 15.3 | (21.4) |
| Non-controlling interests | - | 0.9 |
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|
|
|
|
|
|
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| Basic and diluted earnings per share (expressed in Russian Roubles per share) | 0.0015 | (0.0032) |