17 Dec 2009 07:01
VTB announces results for the Nine Months of 2009
Unaudited financial results for nine months ended 30 September 2009 (unaudited)
Moscow, 17 December 2009 - VTB Group today announces its unaudited IFRS results for the nine months ending 30 September 2009.
FINANCIAL AND OPERATING HIGHLIGHTS
VTB Capital and VTB 24 increasing market share to become significant drivers of VTB Group's revenues
Maintaining existing level of lending despite tight credit quality requirements
Net interest margin continued to recover reaching 4.4% in Q3'09
Net fee and commission income up 26.7% to RUB 14.7 billion
Core income up 31.4% to RUB 122.1 billion
Cost reduction measures showing results with cost to core income ratio down to 43.0% in 9M'09 from 50.7% in 9M'08
Loan quality deterioration slowed down - NPLs 90+ days at 7.8% at the end of 9M'09; prudent coverage at 101%
Net loss of RUB 45.5 billion impacted by high provisions
Funding position improved in Q3'09 as a result of reduced reliance on state funding and continued strong deposit inflow
Balance sheet strengthened by capital increase taking Tier 1 to 14%
VTB President and Chairman of the Management Board Andrei Kostin said:
"In spite of a severe economic recession, VTB has made substantial progress in the first nine months of this year in creating a strong investment banking capability and consolidating its position as a leading retail banking franchise. Strong growth in core income reflects the underlying performance of the bank, and we believe these businesses will continue to drive growth going forward. Although provisions have adversely affected results in the first nine months, we are increasingly confident that our focus on loan quality and cost efficiency has positioned the bank well for economic recovery in 2010."
FINANCIAL AND OPERATING REVIEW
VTB's strategic priorities continued to focus on developing the Group's core businesses. With the rollout of both VTB 24 and VTB Capital substantially complete, the bank is now beginning to see the benefits of these investments with both businesses increasing their market shares to become significant drivers of revenues of the Group. VTB Capital continued to strengthen its competitive position and has established itself as the leading investment bank in Russia. VTB24 is now Russia's second biggest retail bank with a strong branch network and a competitive product offering. Both businesses contributed to the strong underlying performance of the bank in the first nine months of 2009.
Core income, defined as net interest income before provisions and net fee and commission income, continued to show strong growth year-on-year, with a 31.4% increase to RUB 122.1 billion in the first nine months of 2009, compared to RUB 92.9 billion a year ago. Net interest income before provisions increased 32.1% to RUB 107.4 billion from RUB 81.3 billion year-on-year, while net fee and commission income rose 26.7% year-on-year to RUB 14.7 billion. Net interest margin continued to recover reaching 4.4% in 3Q'09 from 4.3% in 2Q'09 and 4.1% in 1Q'09.
The Bank continued to focus on driving productivity and efficiencies across the business. Delivery on costs in the third quarter of the year was better than expected. VTB cut its total headcount by 4.4% from 41,992 employees at the end of 2008 to 40,142 at the end of the third quarter of 2009.
As a result, the Group's cost-to-core income ratio improved to 43.0% in nine month 2009 from 50.7% in nine month 2008.
The bank continued to focus on improving lending quality. The Group delivered moderate loan portfolio growth despite the severe contraction in the economy, while maintaining a disciplined approach to managing risk. Total gross loans grew 3.0% to RUB 2,728.8 billion, with an 8.7% growth in retail loans since the end of last year and a 2.0% increase in corporate loans. While provision charges in the first nine months of the year were high compared with the previous year, the rate of growth of provision charges has slowed. Third quarter charges were lower than those made in the previous two quarters of 2009 (4.3% annualized rate in the third quarter of 2009 versus 6.6% in the second quarter of 2009 and 7.1% in the first quarter of 2009) indicating that the provision charge has passed its peak and is on a downward trend. As a result of high provisions, the allowance for loan impairment increased to 7.9% of total gross loans in the first nine months of the year from 3.6% at the end of last year. For the first time, VTB reported on asset quality including non-performing loans. Non-performing loans were 7.8 % at the end of September 2009 on an IFRS basis, up 1.8% percentage points from 6.0% at the end of June 2009. The Group maintains a prudent provisioning policy with a coverage rate of 101% of non-performing loans.
VTB saw strong inflow and encouraging deposit growth in the first nine months of the year. Customer deposits increased by 30.5% to RUB 1,438.4 billion (excluding Ministry of Finance funds) compared to RUB 1,101.9 billion at the end of 2008. Retail deposits were up 21.5% to RUB 430.2 billion from RUB 354.1 billion at the end of last year. VTB Group increased its retail deposit market share to 6.0% by the end of September 2009 from 5.7% at the end of December 2008, with VTB24 continuing to outperform its main competitors. Corporate and government bodies' deposits (adjusted for Ministry of Finance deposits) showed an increase of 34.8% to RUB 1,008.2 billion in the first nine months of the year from RUB 747.8 billion at the end of 2008.
The share of short-term state funding in VTB Group's liabilities decreased to 10.2% at the end of September 2009 from 19.0% at the end of 2008.
VTB Group net result for the first nine months of 2009 was negative at RUB 45.5 billion mainly as a result of high provision charges.
The capital increase completed in the third quarter 2009 significantly strengthened VTB's capital base. As a result, VTB Group now has a Total BIS ratio of 19% and a Tier 1 ratio of 14%. The strong balance sheet will provide shareholders and bond holders with additional comfort about the Bank's ability to withstand further shocks as well as ensuring the Bank is sufficiently well capitalised to support its business going into recovery.
INVESTMENT BUSINESS - VTB CAPITAL
VTB Capital continued to strengthen its position as the leading Russian investment bank in the third quarter of 2009. With growing demand particularly for domestic debt market financing, combined with improving investor sentiment, VTB expects the additional flow of investment banking revenue to become a significant contributor to its bottom line going forward. As debt and capital markets are reopening, VTB's investment business is well positioned to win new mandates and to continue to grow its market share. According to Bloomberg Capital Markets League Tables (Russia) VTB Capital's market share stands at nearly 30%.
The bank ranked #1 in Cbonds' Russian debt capital market ranking for Q3 2009 having arranged 24 transactions totalling RUB 170.5bn in the third quarter. Earlier in the quarter, VTB Capital was ranked #2 Bookrunner of international bonds by CIS issuers in 2009 year to date by EuroWeek, later in the year rising to the top position. VTB expects to continue to benefit from growing demand for arranging bond issues from Russian issuers both on the local and the international debt capital markets.
In the first 9 months of 2009, VTB Capital kept strengthening its positions on MICEX equity REPO market. In July 2009, VTB Capital for the first time entered Top-5 operators of MICEX equity REPO market according to "Leading Operators" rating (Top-3 operators of MICEX equity REPO market, in October 2009).
RETAIL BUSINESS - VTB24
Since the launch of its retail operations in 2003, VTB has become the second biggest retail player in Russia, with an extensive branch network across Russia, a strong and growing affluent customer base, and a competitive product offering. The bank has benefited from strong brand recognition among retail customers and a strong balance sheet in a fragmented market.
Following the branch expansion programme completed last year, the focus this year has been on consolidating its market position and improving systems and efficiency. As part of the efficiency programme, VTB24 reduced the number of retail branches in its network to 476 by the end of September 2009 from 504 at the end of 2008. This was made possible thanks to the successful introduction of new technologies and automated services. VTB24 significantly expanded its network of cash machines, which reached an impressive 4040 at the end of the reporting period. The bank also continued to improve the range of services accessible through its cash machines, now offering automated cash deposits and loan repayment options.
VTB24 successfully introduced new technologies aiming at improving the efficiency of its operations and the quality of its services. The bank has been able to migrate a significant proportion of client services online as a further 300,000 customers gained access to online banking. The bank has also grown its credit card portfolio having issued over two million cards so far this year. VTB24 remains focused on expanding the range of products available to its retail customers and improving the level and quality of service.
As a result of the continued efforts to grow the customer base and focus on higher margin operations, the bank achieved a robust growth in net interest income helped by a wider spread on retail operations and significant growth in net fee and commission income.
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 September 30, 2009 the Group had a network of 949 branches located across Russia, CIS and Europe, of which VTB24 retail branches totaled 476. 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 30 September 2009 was 40,142. 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.
Statement of income
Unaudited financial results for nine months ended September 30, 2009
| For the three-month | For the nine-month | |||
| period ended | period ended | |||
| 30 September | 30 September | |||
|
| 2009 | 2008 | 2009 | 2008 |
| Interest income | 92.2 | 62.7 | 280.8 | 166.0 |
| Interest expense | (55.1) | (32.4) | (173.4) | (84.7) |
|
|
|
|
|
|
| Net interest income | 37.1 | 30.3 | 107.4 | 81.3 |
| Provision charge for impairment | (29.8) | (19.0) | (126.4) | (33.2) |
| Net interest income / (expense) after provision for impairment | 7.3 | 11.3 | (19.0) | 48.1 |
| Losses net of gains arising from financial assets at fair value through profit or loss | (1.8) | (6.5) | (15.8) | (12.0) |
| Gains less losses from available-for-sale financial assets | 2.4 | - | 1.9 | 1.2 |
| Gains less losses arising from extinguishment of liability | - | - | 14.7 | - |
| Losses on initial recognition of financial instruments and on loans restructuring | (16.9) | - | (19.0) | - |
| Gains less losses / (losses net of gains) arising from dealing in foreign currencies | 14.4 | (30.5) | (9.9) | (8.8) |
| Foreign exchange translation (losses net of gains) / gains less losses | (13.3) | 30.0 | 24.5 | 18.2 |
| Fee and commission income | 6.2 | 5.0 | 17.9 | 13.7 |
| Fee and commission expense | (1.2) | (0.9) | (3.2) | (2.1) |
| Share in (loss) / income of associates | - | (0.1) | 0.1 | 0.1 |
| Recovery / (provision charge) for impairment of other assets and credit related commitments | 1.0 | (0.2) | (1.3) | (0.3) |
| Income arising from non-banking activities | 0.6 | 0.5 | 1.9 | 2.0 |
| Other operating income | 0.6 | 0.5 | 2.1 | 2.6 |
| Net non-interest (loss) / income | (8.0) | (2.2) | 13.9 | 14.6 |
| Operating (loss) / income | (0.7) | 9.1 | (5.1) | 62.7 |
| Staff costs and administrative expenses | (16.8) | (17.1) | (52.5) | (46.8) |
| Expenses arising from non-banking activities | (0.1) | (0.3) | (0.8) | (1.2) |
| Profit from disposal of subsidiaries | - | - | 1.0 | - |
| (Loss) / Profit before taxation | (17.6) | (8.3) | (57.4) | 14.7 |
| Income tax recovery / (expense) | 3.6 | (0.4) | 11.9 | (7.1) |
| Net (loss) / profit | (14.0) | (8.7) | (45.5) | 7.6 |
| Net (loss) / profit attributable to: | ||||
| Shareholders of the parent | (15.0) | (8.8) | (48.8) | 7.1 |
| Non-controlling interests | 1.0 | 0.1 | 3.3 | 0.5 |
Consolidated Balance Sheet
Unaudited financial results for the nine months ended September 30. 2009
| Statement of Financial Position as at 30 September 2009 | 30 September | 31 December |
| 2009 | 2008 | |
| (unaudited) |
| |
| Assets | ||
| Cash and short-term funds | 165.5 | 416.1 |
| Mandatory cash balances with central banks | 21.8 | 7.6 |
| Financial assets at fair value through profit or loss | 277.2 | 170.8 |
| Financial assets pledged under repurchase agreements and loaned financial assets | 23.3 | 44.5 |
| Due from other banks | 333.1 | 308.0 |
| Loans and advances to customers | 2 512.7 | 2 555.6 |
| Assets of disposal group held for sale | 14.8 | - |
| Financial assets available-for-sale | 33.5 | 23.9 |
| Investments in associates | 4.7 | 4.5 |
| Investment securities held-to-maturity | 32.7 | 20.7 |
| Premises and equipment | 64.6 | 60.8 |
| Investment property | 5.8 | 4.3 |
| Intangible assets | 11.2 | 11.3 |
| Deferred tax asset | 30.2 | 9.3 |
| Other assets | 52.7 | 60.0 |
| Total assets | 3 583.8 | 3 697.4 |
| Liabilities | ||
| Due to other banks | 262.1 | 388.7 |
| Customer deposits | 1 518.4 | 1 101.9 |
| Liabilities of disposal group held for sale | 5.1 | - |
| Other borrowed funds | 462.4 | 848.7 |
| Debt securities issued | 531.6 | 560.1 |
| Deferred tax liability | 3.5 | 5.5 |
| Other liabilities | 75.7 | 174.1 |
| Total liabilities before subordinated debt | 2 858.8 | 3 079.0 |
| Subordinated debt | 194.8 | 226.3 |
| Total liabilities | 3 053.6 | 3 305.3 |
| Equity | ||
| Share capital | 113.1 | 75.7 |
| Share premium | 358.5 | 215.8 |
| Treasury shares | (0.4) | (0.4) |
| Unrealized gain on financial assets available-for-sale and cash flow hedge | 1.3 | 0.1 |
| Premises revaluation reserve | 13.8 | 14.2 |
| Currency translation difference | 13.8 | 13.1 |
| Retained earnings | 19.8 | 70.9 |
| Equity attributable to shareholders of the parent | 519.9 | 389.4 |
| Non-controlling interests | 10.3 | 2.7 |
| Total equity | 530.2 | 392.1 |
| Total liabilities and equity | 3 583.8 | 3 697.4 |