27th Sep 2007 07:16
JSC VTB Bank27 September 2007 VTB GROUP 1H2007 FINANCIAL RESULTS EXPANDING ON STRONG NEW CAPITAL ASSETS UP BY 26.4% OPERATING INCOME UP 14.2% Moscow, September 27, 2007 - VTB, Russia's leading universal banking group, hastoday announced its consolidated IFRS financial results for 1H2007. By the end of June 2007, the VTB Group's total assets increased by 26.4% toUS$66,223 million. Total gross loan portfolio of the Group grew by 21.7% toUS$36,811 million, with loans to individuals up by 62.1% outperforming marketaverages. Net interest income before provisions increased by 26.4% year-on-yearto US$1,004 million, and net fee and commission income went up by 65.8%amounting to US$267 million. In the reporting period, operating income of theGroup increased by 14.2% to US$1,477 million from US$1,293 million in the firstsix months of 2006. Financial Highlights Profit and Loss Account (as compared to 6M2006): • Interest income increased to US$2,235 million, up 36.4% and fee andcommission income increased to US$300 million, up 64.8%; • Net interest income before provisions increased to US$1,004 million,up 26.4% or US$210 million; • Net fee and commission income increased to US$267 million, up 65.8%or US$106 million. Adjusted for IPO related depositary appointment fee in theamount of US$57 million net fee and commission income grew by 30.4% to US$210million, reaching 14.8% of operating income in the first half of 2007; • The Group's effective taxation rate (consolidated) in the first sixmonths of 2007 increased to 24% from 16% in the comparable period of 2006,reflecting gradual substitution of non-taxable FX and securities gains byinterest and commission income; • Consolidated net profit for 6M2007 amounted to US$504 million, down12.5%, mostly due to a decrease in securities gains, which in 6M2006 includedincome from sale of KamAZ shares in the amount of US$116 million; • Earnings per share stood at US$8.6 per 100,000 shares as compared toUS$10.6 in the comparable period of 2006. Assets and Funding (as compared to December 31, 2006): • Total gross loans and advances to customersincreased by 21.7% to US$36,811 million. Gross loans to individuals grewstrongly by US$1,573 million or 62.1% and totaled US$4,106 million. The share ofloans to individuals in total gross loan portfolio increased to 11% by the endof June 2007 compared to 8% at the end of December 31, 2006. Corporate loanportfolio (gross) increased by 18.1% to US$32,705 million from US$27,702 at theend of 2006; • Securities portfolio totaled US$14,055million as compared to US$8,957 million (including approximately 5% of shares ofEuropean Aeronautic Defense and Space Company (EADS)); • Customer deposits increased to US$25,083million, up 25.5%, with deposits of individuals up by 21.2% to US$8,876; • Wholesale funding (which includes debtsecurities issued, other borrowed funds and subordinated debt) increased by10.8% to US$19,053 million. The major debt transactions closed in the first halfof 2007 include: VTB EUR 1,000 million Eurobond with a floating rate of EURIBOR+ 0.6% p.a. maturing in March 2009, VTB GBP 300 million Eurobond with aninterest rate of 6.332% p.a. maturing in March 2010, and VTB Europe US$500million Floating Rate Notes at LIBOR+0.625% p.a. maturing in April 2009. 6M2007 Important Events: • VTB completed the Initial Public Offering (IPO) of its shares in May2007. On 24 May 2007, the Central Bank of Russia registered the issuance of1,513,026,109,019 additional ordinary shares by VTB (22.5% of VTB number ofshares after the increase) with a nominal value of RUR 0.01 each. The offerprice per share was RUR 0.136 (USD 0.00528). The total number of shares placedin the form of GDRs was 983,387,340,000. Each GDR is worth 2,000 shares. The POproceeds totalled US$7,977 million. • Vneshtorgbank was officially renamed to JSC VTB Bank; • OJSC Industry and Construction Bank was renamed into OJSC Bank VTBNorth-West; • Banco VTB Africa SA with 66% shareholding of VTB started itsoperations in Angola in March 2007. 6M2007 Major Acquisitions: • VTB purchased 50% plus one of the share capital of the CJSCSlavneftebank in Belarus for US$25 million in April 2007; • VTB purchased 25% plus one share in OJSC Terminal for US$40 millionin March 2007. Comments: Andrei Kostin, President-Chairman of the Management Board: "The first half of 2007 was characterized by rapid change and some significantdevelopments in our business. The completion of our global IPO, the largest yetby a Russian issuer, was a major step in preparing the bank for our futuregrowth plans. In these turbulent times, we are very pleased to be able to growsafe in the knowledge that our capital base is fully secured. We are verypleased to see strong growth across all business lines and, in particular,substantial progress in our retail business development, in the first six monthsof 2007. We are keen to continue implementation of our strategy for the benefitof our shareholders." Nikolai Tsekhomsky, Member of the Management Board and CFO: "The confidence placed in us by domestic and international equity investors hasgiven us a platform for growth that is outstanding in Russia and the CIS. Thiscapital will support our future growth and has already allowed us to acceleratetowards our targets. We have already begun to deploy the increased capital in ameasured way and are glad to report that the turbulence of the past weeks hashad no effect on our ability to fund the business. Indeed, with a Tier 1 ratioof 17.4% we feel well placed to serve the best interests of both clients andinvestors through the difficult times that still exist in global markets." Operating Performance • Net interest income reached US$1,004 million as compared to US$794million in the first six months of 2006, which was attributable to growth in allof the components of interest income partially offset by the growth of interestexpense. The increase in interest income (+36.4%) reflected the ongoingexpansion of the Group's lending business, particularly in the retail segment; • Operating income increased by 14.2% to US$1,477 million, compared toUS$1,293 million in 6M2006, primarily due to an increase of net interest and netfee and commission income; • Staff costs and administrative expenses increased by 40.2% to US$809million, reflecting organic growth of the Group's network in Russia whichentailed increased staff, marketing and advertising expenditures; • Sustained increase in VTB's interest and commission income wasprovided by growth throughout the Group's key strategic areas. Net customerloans increased by 22.0% to US$35,693 million comprising 53.9% of total assetsas of June 30, 2007. Total customer deposits increased by 25.5% to US$25,083million in 6M2007 (49.2% of total liabilities), of which deposits fromindividuals represented US$8,876 million. Loan Quality and Concentration • The share of overdue and rescheduled loans in total loans reduced to1.8% from 2.1% at the end of 2006; allowances for loan impairment expressed as %of total loans decreased to 3.0% from 3.2% at the end of 2006; • Coverage of overdue and rescheduled loans by allowances for loanimpairment stood at 172.0%; • The rate of provisioning decreased to 0.8% in the first six month of2007 from 1.8% in 2006 reflecting sound quality of VTB's loan portfolio; • The Group's exposure to ten largest borrowers as a percentage ofgross customer loans decreased to 17% from 18% at the end of 2006. Capitalization and Capital Adequacy • The Group's total equity increased to US$15,216 million as of June30, 2007 from US$6,992 million as of December 31, 2006, largely due to the netequity increase related to the Global IPO proceeds; • As of June 30, 2007 the VTB Group's consolidated BIS Tier 1 capitalwas US$14,581 million, compared to US$6,357 million as of December 31, 2006, andtotal BIS capital was US$15,858 million, compared to US$7,646 million as ofDecember 31, 2006. The Group's BIS Tier 1+2 capital adequacy ratio increased to19.0% from 14.0% as of December 31, 2006, which is well above the 8.0% minimumset by the Basel Accord. VTB and all of its subsidiary banks continue to monitorand follow the capital adequacy requirements set by their respective localregulatory authorities. Consolidated Balance Sheet (expressed in millions of US dollars) 30 June 2007 31 December (unaudited) 2006 AssetsCash and short-term funds 3,441 3,581Mandatory cash balances with central banks 850 648Financial assets at fair value through profit or loss 10,301 5,120Financial assets pledged under repurchase 1,158 2,938agreements and loaned financial assetsDue from other banks 8,453 6,813Loans and advances to customers 35,693 29,262Financial assets available-for-sale 2,591 888Investments in associates 185 200Investment securities held-to-maturity 5 11Premises and equipment 1,489 1,422Investment property 182 178Intangible assets 450 455Deferred tax asset 150 93Other assets 1,275 794 Total assets 66,223 52,403 LiabilitiesDue to other banks 5,753 7,587Customer deposits 25,083 19,988Other borrowed funds 4,679 4,468Debt securities issued 13,189 11,565Deferred tax liability 113 125Other liabilities 1,005 509 Total liabilities before subordinated debt 49,822 44,242 Subordinated debt 1,185 1,169 Total liabilities 51,007 45,411 EquityShare capital 3,084 2,500Share premium 8,792 1,513Treasury stock (21) -Unrealized gain on financial assets available-for-sale 92 154and cash flow hedgeCurrency translation difference 417 352Premises revaluation reserve 334 341Retained earnings 2,123 1,744Equity attributable to shareholders of the parent 14,821 6,604 Minority interest 395 388 Total equity 15,216 6,992 Total liabilities and equity 66,223 52,403 Consolidated Statements of Income (expressed in millions of US dollars) For the three-month For the six-month period ended period ended 30 June (unaudited) 30 June (unaudited) 2007 2006 2007 2006 Interest income 1,176 913 2,235 1,638Interest expense (651) (460) (1,231) (844) Net interest income 525 453 1,004 794Provision charge for loan impairment (78) (91) (140) (185) Net interest income after 447 362 864 609provision for loan impairment Gains less losses arising from financial 44 11 86 86assets at fair value through profit or lossGains less losses from 1 8 1 119available-for-sale financial assetsGains less losses arising 63 24 141 -from dealing in foreign currenciesForeign exchange translation gains less losses 14 104 27 227Fee and commission income 189 91 300 182Fee and commission expense (14) (11) (33) (21)Share in income of associates 8 1 7 5Income arising from non-banking activities 21 16 43 38Other operating income 30 31 41 48 Net non-interest income 356 275 613 684 Operating income 803 637 1,477 1,293 Staff costs and administrative expenses (444) (313) (809) (577)Expenses arising from non-banking activities (13) (16) (27) (33)Profit from disposal of associates - - 18 - Profit before taxation 346 308 659 683 Income tax expense (74) (68) (155) (109) Profit after taxation 272 240 504 574from continued operations Profit from discontinued operations - 2 - 2 Net profit 272 242 504 576 Net profit attributable to:Shareholders of the parent 256 228 474 554Minority interest 16 14 30 22 Basic and diluted earnings per share (expressed 0.000044 0.000044 0.000086 0.000106in USD per share) Basic and diluted earnings per share - 0.000044 0.000044 0.000086 0.000106continuing operations(expressed in USD per share)Basic and diluted earnings per share - 0.000000 0.000000 0.000000 0.000000discontinued operations(expressed in USD per share) Consolidated Statements of Cash Flows (expressed in millions of US dollars) For the six-month period ended 30 June (unaudited) 2007 2006Cash flows from operating activitiesInterest received 2,215 1,574Interest paid (1,188) (780)Income received on operations with financial assets 118 107at fair value through profit or lossIncome received (loss) on dealing in foreign currency 76 (36)Fees and commissions received 300 180Fees and commissions paid (33) (22)Income arising from non-banking activities 65 82and other operating income receivedStaff costs, administrative expenses and (768) (575)expenses arising from non-banking activities paidIncome tax paid (175) (106) Cash flows from operating activities before 610 424changes in operating assets and liabilities Net decrease (increase) in operating assetsNet increase in mandatory cash balances with central banks (190) (142)Net decrease in restricted cash 50 5Net increase in financial assets at fair value through profit or loss (5,301) (1,386)Net increase in due from banks (1,556) (994)Net increase in loans and advances to customers (6,112) (2,816)Net increase in other assets (461) (396)Net (decrease) increase in operating liabilitiesNet decrease in due to banks (1,889) (698)Net increase in customer deposits 4,577 4,906Net (decrease) increase in promissory (430) 132notes and certificates of deposits issuedNet increase in other liabilities 195 110 Net cash used in operating activities (10,507) (855) Cash flows from (used in) investing activitiesDividends received 19 10Proceeds from sales or maturities of financial assets 462 160available-for-salePurchase of financial assets available-for-sale (46) (487)Purchase of subsidiaries, net of cash acquired 38 (14)Disposal of associates 44 -Purchase of associates (10) -Purchase of minority interest in subsidiaries (35) -Proceeds from maturities of investment securities held-to-maturity 6 2Purchase of premises and equipment (119) (81)Proceeds from sale of premises and equipment 45 33Purchase of intangible assets (7) (2)Proceeds from sale of intangible assets - 6 Net cash (used in) from investing activities 397 (373) For the six-month period ended 30 June (unaudited) 2007 2006Cash flows from financing activitiesDecrease in Central Bank of the Russian Federation funding (153) (75)Proceeds from other credit lines 662 140Repayment of other credit lines (256) (134)Proceeds from issuance of bonds denominated in RUR - 361Redemption of bonds denominated in RUR (216) (72)Proceeds from issuance of Eurobonds 2,394 603Repayment of Eurobonds (227) (350)Proceeds from issuance of SSD debentures (Schuldscheindarlehen) - 240Redemption of SSD debentures (Schuldscheindarlehen) - (154)Proceeds from syndicated loans 539 2,213Repayment of syndicated loans (594) (1,120)Proceeds from share issue, less transaction costs 7,842 -Cash paid for treasury stock (21) - Net cash from financing activities 9,970 1,652 Effect of exchange rate changes on cash and cash equivalents 50 129 Net (decrease) increase in cash and cash equivalents (90) 553 Cash and cash equivalents at beginning of the year 3,479 2,541 Cash and cash equivalents at the end of the period 3,389 3,094 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 June 30, 2007, the Group conducts itsbanking business in Russia through 4 subsidiary banks with its network of 155branches, including 57 branches of VTB, 46 branches of CJSC "Bank VTB 24" and 52branches of OJSC "Bank VTB North-West", located in major Russian regions. TheGroup operates outside Russia through 12 bank subsidiaries, located in theCommonwealth of Independent States ("CIS") (Armenia, Georgia, Ukraine (2 banks),Belarus), Europe (Austria, Cyprus, Switzerland, Germany, France and GreatBritain), Africa (Angola) and through 4 representative offices located in India,Italy, China and Belarus. VTB has operated under a full banking license,No. 1000, from the 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 31,682 employees as of June 30, 2007. VTB's majorityshareholder is the Russian Federation state, acting through the Federal PropertyAgency, which holds 77.47 % of VTB's issued and outstanding shares at 30 June2007 (31 December 2006: 99.9 %), the decrease was due to initial public offeringcompleted in May 2007. 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 LoginovaElena ErshovaIrina 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:
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