29th Jun 2007 07:03
JSC VTB Bank29 June 2007 VTB GROUP 3M2007 FINANCIAL RESULTS STRONG START TO THE YEAR NET INTEREST INCOME UP BY 40.9% RETAIL LOAN PORTFOLIO UP 19.5% Moscow, June 29, 2007 - VTB, Russia's leading universal banking group, todayannounces its consolidated IFRS financial results for 3M2007 ended March 31,2007. The VTB Group's net interest income grew by 40.9% (or US$141 million), and netfee and commission income grew by 13.6% as compared to 3M2006. Net of gains fromdisposal of investments, pre-tax profit increased by 13.9% from US$259 millionto US$295 million. Assets increased to US$56,153 million, up 7.2% or US$3,750million, with retail loans up 19.5% outperforming market averages. Financial Highlights Profit and Loss Account (as compared to 3M2006): • Interest income increased to US$1,066 million, up 46.2%, and fee and commission income increased to US$111 million, up 22.0%;• Net interest income increased to US$486 million, up 40.9% or US$141 million;• Net fee and commission income increased to US$92 million, up 13.6% or US$11 million, reaching 13.6% of operating income;• The Group's effective taxation rate (consolidated) increased from 10.9% to 25.9%, reflecting gradual substitution of FX and securities gains by interest and commission income;• Consolidated net profit for 3M2007 amounted to US$232 million, down 30.5% due to a decrease in securities gains, which in 3M2006 included income from sale of KamAZ shares.• Earnings per share decreased from US$6.3 to US$4.2 per 100,000 shares. Assets and Funding (as compared to December 31, 2006): • Loans and advances to customers increased to US$31,697 million, up US$2,435 million or 8.3%, with retail loans to individuals up US$494 million to US$3,027 or 19.5%;• Securities portfolio grew by 19.8% to US$10,729 million, including 5% of shares of European Aeronautic Defense and Space Company (EADS);• Customer deposits increased to US$23,381 million, up 17.0%, with retail deposits up 8.1% to US$7,918;• March 2007: VTB EUR 1,000 million Eurobond with a floating rate of LIBOR + 0.6% p.a. maturing in March 2009, and VTB GBP 300 million Eurobond with an interest rate of 6.332% p.a. maturing in March 2010. 3M2007 Important Events: • Increase of VTB's share capital by 1,734,333,866,664 shares (24.97% of number of VTB shares after the increase) approved by extraordinary general meeting of shareholders of VTB, followed by an IPO in May 2007;• Vneshtorgbank officially renamed to JSC VTB Bank;• Angola Banco VTB Africa SA started operations. 3M2007 Acquisitions: • VTB initiated the process of acquiring 50% + one share of Slavneftebank in Belarus for US$25 million (deal completed in May 2007);• VTB purchased 25% plus one share in OJSC Terminal for US$40 million. Comments: Andrei Kostin, Chairman of the Management Board and CEO: "Early 2007 delivered encouraging results underpinning our competitive positionfor strong growth in a rapidly developing Russian economy. We continue toimplement our strategy for further business expansion in Russia and abroad,focusing on increasing our market share in the fast-growing retail banking inRussia. Our successful Global Offer completed in May this year provided us withthe capital to achieve this and reflected strong interest of the investmentcommunity in rapidly expanding banking market in Russia." Nikolai Tsekhomsky, CFO: "The results for the beginning of 2007 indicate the further growth of VTB Groupand the anticipated positive changes of the structure of the Group's earnings.Early 2007 results demonstrate a clear trend toward gradual replacement of gainsfrom proprietary activities by interest and commission income, reflecting theongoing shift from proprietary activities to corporate and retail business. Wehope that the improved quality of earnings will enable us to meet expectationsof our investors." Operating Performance • Net of gains arising from disposal of investments, profit before tax was up 13.9% driven primarily by growth in net interest income and net fee and commission income, reflecting the expansion of the Group's customer base and increase in volumes of lending, deposit taking and other customer transactions.• Net interest income reached US$486 million, which was attributable to growth in all of the components of interest income: (i) Interest income on loans and advances to customers increased by 50.9% to US$854 million; (ii) interest income on securities increased by 21.1% to US$115 million; and (iii) interest on amounts due from other banks increased by 42.6%, to US$97 million. The increase in net interest income reflected the ongoing expansion of the Group's lending business, particularly in the retail segment, and growth of the Group's securities portfolio.• Net interest spread increased to 4.3% in 3M2007 from 4.0% in 3M2006, mainly due to fast growth of the Group's retail loan portfolio reaching 9% of the Group's gross customer loans, which yields higher average interest rates than the Group's corporate loan portfolio.• Operating income increased by 2.7% to US$674 million, compared to US$656 million in 3M2006, primarily due to an increase of net interest income to US$486 million and net fee and commission income to US$92 million. Decrease in net gains from securities by US$162 million was attributable to income from sale of KamAZ shares in 3M2006 and the performance of the Russian securities market in 3M2007, with RTS index up only 0.7% compared to 27.4% in 3M2006.• Staff costs and administrative expenses increased by 38.3% to US$365 million, reflecting organic growth of the Group's network in Russia which entailed increased staff, marketing and advertising expenditures.• Sustained increase in VTB's interest and commission income was provided by growth throughout the Group's key strategic areas: corporate, retail and investment banking operations. Customer loans comprised 56.4% of total assets as of March 31, 2007, compared to 55.8% as of December 31, 2006. Accordingly, interest income on customer loans increased to 80.1% of interest income, from 77.6% in 2006. Total customer deposits increased by 17.0% to US$23,381 million in 3M2007, of which deposits from individuals represented US$7,918 million, corporate deposits represented US$11,368 million, and state and public deposits represented US$4,095 million. Loan Quality and Concentration • Overdue and rescheduled loans and allowances for loan impairment as of March 31, 2007 amounted to 2.7% and 3.2%, respectively, of the Group's gross loan portfolio.• Coverage of overdue and rescheduled loans by allowances for loan impairment stood at 118.7% as of March 31, 2007.• The rate of provisioning decreased from 1.8% in 3M2006 to a comfortable 0.8% in 3M2007.• The Group's exposure to ten largest borrowers as a percentage of gross customer loans remained at 17.7%. The Group continues to seek to diversify its customer base and lending capacity and increase its lending volumes. Capitalization and Capital Adequacy • The Group's consolidated shareholders' equity increased to US$7,143 million as of March 31, 2007 from US$6,992 million as of December 31, 2006 due to the contribution of net profit in the amount of US$232 million and foreign exchange gains of US$44 million, offset by a decrease in the unrealized gains on financial assets available-for-sale by US$105 million, mainly attributable to revaluation of EADS shares.• As of March 31, 2007 the VTB Group's consolidated BIS Tier 1 capital was US$6,509 million, compared to US$6,357 million as of December 31, 2006, and total BIS capital was US$7,787 million, compared to US$7,646 million as of December 31, 2006. The Group's BIS Tier 1+2 capital adequacy ratio decreased from 14.0% as of December 31, 2006 to 12.9% as of March 31, 2007, remaining well above the 8.0% minimum set by the Basel Accord.• VTB and all of its subsidiary banks continue to observe the capital adequacy requirements set by their respective local regulatory authorities. Consolidated Balance Sheet (expressed in millions of US dollars) 31 March 2007 31 December (unaudited) 2006 AssetsCash and short-term funds 3,523 3,581Mandatory cash balances with central banks 641 648Financial assets at fair value through profit or loss 7,291 5,120Financial assets pledged under repurchase agreements 2,463 2,938and loaned financial assetsDue from other banks 6,193 6,813Loans and advances to customers 31,697 29,262Financial assets available-for-sale 970 888Investments in associates 173 200Investment securities held-to-maturity 5 11Premises and equipment 1,427 1,422Investment property 180 178Intangible assets 452 455Deferred tax asset 106 93Other assets 1,032 794 Total assets 56,153 52,403 LiabilitiesDue to other banks 6,643 7,587Customer deposits 23,381 19,988Other borrowed funds 4,279 4,468Debt securities issued 12,915 11,565Deferred tax liability 114 125Other liabilities 512 509 Total liabilities before subordinated debt 47,844 44,242 Subordinated debt 1,166 1,169 Total liabilities 49,010 45,411 EquityShare capital 2,500 2,500Share premium 1,513 1,513Unrealized gain on financial assets available-for-sale 49 154Premises revaluation reserve 336 341Currency translation difference 391 352Retained earnings 1,994 1,744Equity attributable to shareholders of the parent 6,783 6,604 Minority interest 360 388 Total equity 7,143 6,992 Total liabilities and equity 56,153 52,403 Consolidated Statements of Income (expressed in millions of US dollars) For the three-month period ended 31 March (unaudited) 2007 2006 Interest income 1,066 729Interest expense (580) (384) Net interest income 486 345Provision for loan impairment (62) (94) Net interest income after provision for loan impairment 424 251 Gains less losses arising from financial assets 20 71at fair value through profit or lossGains less losses from available-for-sale financial assets - 111Gains less losses arising from dealing in foreign currencies 78 (24)Foreign exchange translation gains less losses 28 123Fee and commission income 111 91Fee and commission expense (19) (10)Share in income of associates (1) 4Income arising from non-banking activities 22 22Other operating income 11 17 Net non-interest income 250 405 Operating income 674 656 Staff costs and administrative expenses (365) (264)Expenses arising from non-banking activities (14) (17)Profit from disposal of associates 18 - Profit before taxation 313 375 Income tax expense (81) (41) Net profit 232 334 Net profit attributable to:Shareholders of the parent 218 326Minority interest 14 8 Consolidated Statements of Cash Flows (expressed in millions of US dollars) For the three-month period ended 31 March (unaudited) 2007 2006 Cash flows from operating activitiesInterest received 1,057 725Interest paid (575) (376)Income received on operations with financial assets (13) (12)at fair value through profit or lossIncome received on dealing in foreign currency 79 (21)Fees and commissions received 111 91Fees and commissions paid (20) (10)Income arising from non-banking subsidiaries 32 40and other operating income receivedStaff costs, administrative expenses and (357) (258)expenses arising from non-banking activities paidIncome tax paid (99) (60) Cash flows from operating activities before 215 119changes in operating assets and liabilities Net decrease (increase) in operating assetsNet decrease (increase) in mandatory cash balances with local 13 (38)central banksNet decrease (increase) in restricted cash 13 (12)Net increase in trading securities designated at fair value through (1,960) (369)profit or lossNet decrease (increase) in financial assets pledged under repurchase 338 (762)agreementNet decrease (increase) in due from banks 653 (1,814)Net increase in loans and advances to customers (2,309) (467)Net increase in other assets (276) (194)Net (decrease) increase in operating liabilitiesNet (decrease) increase in due to banks (972) 142Net increase in customer accounts 3,148 1,551Net decrease in promissory notes and certificates of deposits issued (415) (473)Net increase in other liabilities 31 546 Net cash used in operating activities (1,521) (1,771) Cash flows from investing activitiesDividends received 3 2Proceeds from sales or maturities of investment securities 28 174available-for-salePurchase of investment securities available-for-sale (110) (18)Purchase of subsidiaries, net of cash acquired - (14)Proceeds from redemption of investment securities held-to-maturity 6 -Purchase of premises and equipment (30) (39)Proceeds from sale of premises and equipment 24 33Purchase of intangible assets (2) (2) Net cash used in investing activities (81) 136 For the three-month period ended 31 March (unaudited) 2007 2006Cash flows from financing activitiesIncrease in Central Bank of the Russian Federation funding 184 -Decrease in Central Bank of the Russian Federation funding (153) (75)Proceeds from other credit lines 321 21Repayment of other credit lines (13) -Redemption of bonds denominated in RUR - (72)Proceeds from issuance of Eurobonds 1,923 600Proceeds from issuance of SSD debentures (Schuldscheindarlehen) - 242Redemption of SSD debentures (Schuldscheindarlehen) (241) (157)Proceeds from syndicated loan 113 1,029Repayment of syndicated loan (603) (591) Net cash provided by financing activities 1,531 997 Effect of exchange rate changes on cash and cash equivalents 26 51 Net increase in cash and cash equivalents (45) (587) Cash and cash equivalents at beginning of the year 3,479 2,541 Cash and cash equivalents at the end of the period 3,434 1,954 JSC VTB Bank and its subsidiaries (the VTB Group or the Group) are a leadingRussian commercial banking group, offering a range of banking services andproducts across Russia, certain CIS countries and in selected countries ofWestern Europe, Asia and Africa. As of March 31, 2007 the Group had a network of152 full-service branches located across Russia, comprised of 58 branches ofVTB, 40 branches of VTB 24 and 54 branches of Industry and Construction Bank.Outside of Russia, the Group operates through four subsidiary banks located inthe CIS (Armenia, Georgia, and two banks in Ukraine), six subsidiary bankslocated in Europe (Great Britain, France, Germany, Austria, Switzerland andCyprus), two subsidiary banks in Africa (Angola, Namibia) and 4 representativeoffices in India, Italy, China and Belarus. VTB has also establishedsubsidiaries in Asia, and its UK subsidiary has a representative office inSingapore. VTB has operated under a full banking license, No. 1000, fromthe Central Bank of the Russian Federation since 1990. The Group operates in the commercial banking sector and provides servicesincluding deposit taking and commercial lending, support of clients' export/import transactions, FX, securities trading, and trading in derivative financialinstruments. The Group had 29,550 employees as of March 31, 2007. TheGovernment of the Russian Federation is VTB's main shareholder and owns, throughthe Federal Property Management Agency, 99.9% of its registered share capital.For more information please visit www.vtb.ru. Some of the information in this presentation may contain projections or otherforward-looking statements regarding future events or the future financialperformance of JSC VTB Bank ("VTB") and its subsidiaries (together with VTB, the"Group"). Such forward-looking statements are based on numerous assumptionsregarding the Group's present and future business strategies and the environmentin which the Group will operate in the future. We caution you that thesestatements are not guarantees of future performance and involve risks,uncertainties and other important factors that we cannot predict with certainty.Accordingly, our actual outcomes and results may differ materially from what wehave expressed or forecasted in the forward-looking statements. Theseforward-looking statements speak only as at the date of this presentation andare subject to change without notice. We do not intend to update thesestatements to make them conform with actual results. Contacts: Nataly LoginovaIrina Mokeeva Telephone:+7 (495) 739-77-998-800-200-77-99(toll free number for Russian regions) E-mail:[email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
VTBR.L