21 Oct 2009 07:00
VTB announces results for the First Half of 2009
Unaudited financial results for the three months and six months ended 30 June 2009 (unaudited)
Moscow, 21 October 2009 - VTB Group today announces its unaudited IFRS results for the six months ending 30 June 2009.
FINANCIAL AND OPERATING HIGHLIGHTS
Total gross loans up 3.0% to RUR 2.7 trn as at 30 June 2009 - corporate loans up by 2.3%, retail loans up by 6.7%
Customer deposits up 41.7% to RUR 1.6 trn as at 30 June 2009 - both corporate and retail deposits up
Core income up 36.8% y-o-y to RUR 80.0 bn
Net fee and commission income up 29.3% y-o-y to RUR9.7 bn, up 25.6% q-o-q to RUR 5.4 bn in 2Q'09
Net interest margin at 4.2% in 1H'09 from 4.8% in 1H'08; 2Q'09 margin up to 4.3% from 4.1% in 1Q'09
Net loss of RUR 31.5 bn in 1H'09 due to high loan loss provisions of RUR 96.6 billion, although loss was down in 2Q'09 to RUR 11.0 bn from RUR 20.5 bn in 1Q'09
Allowance for loan impairment up to 6.9% of total gross loan portfolio at the end of 1H'09 from 3.6% at the end of 2008
On track to meet cost target: cost-to-core income ratio improved to 44.6% in 1H'09 from 50.8% in 1H'08
Total BIS ratio at 16%
VTB President and Chairman of the Management Board Andrei Kostin said:
"Against a difficult economic backdrop, we continue to manage the business with a focus on costs and risk. In the second half of the year, we expect to see signs of improvement and the benefits of a reinforced capital base and, while there is still some uncertainty, we believe we have now passed the lowest point of the economic cycle."
FINANCIAL AND OPERATING REVIEW
The first half of 2009 continued to be difficult for Russia with GDP falling 10.1% and unemployment rising to 8.3%.
Faced with challenging economic conditions, the Government has been focused on encouraging the banking sector to lend and support jobs and industrial production. VTB has played a full active role in these efforts and, despite the contraction in the Russian economy, the Bank continued to seek prudent ways to increase lending to industry and households.
VTB's total gross loans increased 3.0% to RUR 2,729.5 billion from the year end 2008. Corporate loans increased 2.3% to RUR 2,316.3 billion while retail loans rose 6.7% to 413.2 billion. The slowdown in the Russian economy, however, had an impact on total loans outstanding as a rise of 7.5% in total gross loans in the first quarter of 2009 was followed by a fall of 4.2% in the second quarter. Total loans were also impacted in the second quarter of 2009 by the sale of our Swiss subsidiary, Russische Kommerzial Bank AG, and its deconsolidation from April 2009.
Customer deposits increased 41.7% to RUR 1,561.8 billion from RUR 1,101.9 billion at the end of 2008 reflecting growing customer confidence in the VTB brand and the Bank's strong franchise. The increase in the level of deposits was also due to an inflow of Ministry of Finance funds in the second quarter of 2009 which contributed RUR 186 billion. Both corporate and retail deposits (adjusted for Ministry of Finance funds) were up in the first six months of the year by 24.9%.
Core income, defined as net interest income before provisions and net fee and commission income, was up 36.8% to RUR 80.0 billion in the first half of 2009 from RUR 58.5 billion in the same period last year reflecting strong underlying business performance. Net interest income before provisions increased 37.8% to RUR 70.3 billion from RUR 51.0 billion year-on-year. Net fee and commission income rose 29.3% year-on-year to RUR 9.7 billion, and 25.6% quarter-on-quarter to RUR 5.4 billion as a result of the successful implementation of VTB24's new commission strategy.
Net interest margin decreased to 4.2% in the first half of 2009 from 4.8% in the first half of 2008 mainly as a result of high state funding costs. Net interest margin, however, improved by 20 bps to 4.3% in the second quarter from 4.1% in the first quarter of 2009 due to the positive effect of loan re-pricing and a decrease in floating wholesale funding costs.
In the difficult macro-economic environment, high provision charges of RUR 96.6 billion or 6.9% of the average loan portfolio were made in the first half of 2009, although the second quarter charges were lower that those made in the first quarter (6.6% versus 7.1% of the average loan portfolio, respectively). As a result, the allowance for loan impairment increased to 6.9% of total gross loans in the first half of the year from 3.6% at the end of 2008. The share of overdue and rescheduled loans in the total gross loan portfolio increased to 9.1% from 2.4% at the end of 2008, whereas the share of rescheduled loans increased to 2.9% of total gross loans from 0.6% at the end of 2008.
Impacted by heavy provision charges, VTB net result for the first half of 2009 was negative at RUR31.5 billion. The level of losses, however, was markedly lower in the second quarter at RUR11.0 billion compared to RUR20.5 billion in the first quarter of the year mainly due to stronger core income, net gains from financial instruments and foreign exchange.
VTB continued to focus on cost control and improved efficiency and, as a result, the Group's cost-to-core income ratio improved to 44.6% in the first half of 2009 from 50.8% in the first half of 2008. VTB is on track to meet its cost reduction target with quarterly staff costs and administrative expenses remaining below the fourth quarter 2008 base guidance level. The number of VTB Group employees decreased in the first six months of the year by 3.6% or 1,506 employees to 40,486. VTB24, VTB Group's retail bank, cut 5.5% of its staff or 988 employees to 16,893 in the first half of 2009. Reflecting close attention to costs, staff reductions were also implemented in a number of VTB's subsidiary banks in the CIS. As a result, the total number of employees in this region (excluding Russia) in the first half of 2009 decreased by 254 to 6,842.
CAPITAL BASE
VTB has been focusing on ensuring that the Bank retains a strong capital base. At the end of June 2009, the total BIS ratio of the Group stood at 16%, even after absorbing substantial provisions. The capital increase announced in the first half of the year was successfully completed on September, 25th, 2009 raising RUR 180.1 billion of additional Tier 1 capital. As a result, the Government's stake in VTB has gone up from 77.5% to 85.5%. The increase has strengthened VTB's capital base and will enable the Group to continue to grow its lending book and support its customers as the economy recovers.
Contacts:
Investor Relations:
Tel.: +7 495 775 71 39
Email: investorrelations@vtb.ru
Media Relations:
Tel.: +7 495 783 1717
Email: pr1@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 June 30, 2009 the Group had a network of 966 branches located across Russia, CIS and Europe, of which VTB24 retail branches totaled 481.
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 a presence in Singapore and UAE through the branches of its UK subsidiary as well as branches in India and China. 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 is in the areas of 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 and certain ancillary 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 Group had 40,486 employees as of June 30, 2009. 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.
Consolidated Balance Sheet
Unaudited financial results as of 30 June 2009
| (RUR bln) | 30 June 2009 | 31 December 2008
|
| Assets |
|
|
| Cash and short-term funds | 316,7 | 416,1 |
| Mandatory cash balances with central banks | 14,4 | 7,6 |
| Financial assets at fair value through profit or loss | 181,1 | 170,8 |
| Financial assets pledged under repurchase agreements and loaned financial assets | 1,0 | 44,5 |
| Due from other banks | 353,1 | 308,0 |
| Loans and advances to customers | 2 541,2 | 2 555,6 |
| Financial assets available-for-sale | 33,4 | 23,9 |
| Investments in associates | 4,7 | 4,5 |
| Investment securities held-to-maturity | 33,7 | 20,7 |
| Premises and equipment | 63,6 | 60,8 |
| Investment property | 4,8 | 4,3 |
| Intangible assets | 11,6 | 11,3 |
| Deferred tax asset | 24,4 | 9,3 |
| Other assets | 53,6 | 60,0 |
| Total assets | 3 637,3 | 3 697,4 |
|
|
|
|
| Liabilities | ||
| Due to other banks | 275,4 | 388,7 |
| Customer deposits | 1 561,8 | 1 101,9 |
| Other borrowed funds | 660,2 | 848,7 |
| Debt securities issued | 475,4 | 560,1 |
| Deferred tax liability | 4,0 | 5,5 |
| Other liabilities | 102,0 | 174,1 |
| Total liabilities before subordinated debt | 3 078,8 | 3 079,0 |
| Subordinated debt | 195,8 | 226,3 |
| Total liabilities | 3 274,6 | 3 305,3 |
|
|
|
|
| Equity | ||
| Share capital | 75,7 | 75,7 |
| Share premium | 215,8 | 215,8 |
| Treasury shares | (0,4) | (0,4) |
| Unrealized gain / (loss) on financial assets available-for-sale and cash flow hedge | 0,7 | 0,1 |
| Premises revaluation reserve | 13,9 | 14,2 |
| Currency translation difference | 15,9 | 13,1 |
| Retained earnings | 34,7 | 70,9 |
| Equity attributable to shareholders of the parent | 356,3 | 389,4 |
| Minority interest | 6,4 | 2,7 |
|
| ||
| Total equity | 362,7 | 392,1 |
|
|
|
|
| Total liabilities and equity | 3637,3 | 3 697,4 |
Statement of income
Unaudited financial results for the three months and six months ended 30 June 2009
| RUR (bn) | For the three-month | For the six-month | ||
| period ended 30 June | period ended 30 June | |||
|
| 2009 | 2008 | 2009 | 2008 |
| Interest income | 94,6 | 52,2 | 188,6 | 103,3 |
| Interest expense | (58,6) | (27,4) | (118,3) | (52,3) |
|
|
|
|
|
|
| Net interest income | 36,0 | 24,8 | 70,3 | 51,0 |
| Provision charge for impairment | (47,4) | (9,5) | (96,6) | (14,2) |
|
|
|
|
|
|
| Net interest (expense) / income after provision for impairment | (11,4) | 15,3 | (26,3) | 36,8 |
|
|
|
|
|
|
| (Losses net of gains) / gains less losses arising from financial instruments at fair value through profit or loss | (2,7) | 5,5 | (14,0) | (5,5) |
| (Losses net of gains) / gains less losses from available-for-sale financial assets | (0,5) | 1,2 | (0,5) | 1,2 |
| Gains less losses arising from extinguishment of liability | 9,2 | - | 14,7 | - |
| Losses on initial recognition of financial instruments | (2,1) | - | (2,1) | - |
| Gains less losses / (losses net of gains) arising from dealing in foreign currencies | 18,3 | 6,9 | (24,3) | 21,7 |
| Foreign exchange translation (losses net of gains) / gains less losses | (14,3) | 0,4 | 37,8 | (11,8) |
| Fee and commission income | 6,1 | 4,6 | 11,7 | 8,7 |
| Fee and commission expense | (0,7) | (0,6) | (2,0) | (1,2) |
| Share in income / (loss) of associates | 0,1 | 0,1 | 0,1 | 0,2 |
| Provision charge for impairment of other assets and credit related commitments | (1,7) | (0,1) | (2,3) | (0,1) |
| Income arising from non-banking activities | 0,7 | 0,7 | 1,3 | 1,5 |
| Other operating income | 0,9 | 1,3 | 1,4 | 2,1 |
| Net non-interest income | 13,3 | 20,0 | 21,8 | 16,8 |
|
|
|
|
|
|
| Operating income / (loss) | 1,9 | 35,3 | (4,5) | 53,6 |
| Staff costs and administrative expenses | (18,6) | (16,6) | (35,7) | (29,7) |
| Expenses arising from non-banking activities | (0,4) | (0,3) | (0,6) | (0,9) |
| Profit from disposal of subsidiaries | 1,0 | - | 1,0 | - |
| (Loss) / Profit before taxation | (16,1) | 18,4 | (39,8) | 23,0 |
| Income tax recovery / (expense) | 5,1 | (5,0) | 8,3 | (6,7) |
| Net (loss) / profit | (11,0) | 13,4 | (31,5) | 16,3 |
|
|
|
|
|
|
| Net (loss) / profit attributable to: | ||||
| Shareholders of the parent | (12,4) | 13,2 | (33,8) | 15,9 |
| Non-controlling interests | 1,4 | 0,2 | 2,3 | 0,4 |