VTB Group's 3Q 2014 Results :: In Depth :: Business & Law

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VTB Group's 3Q 2014 Results

November 25, 2014 22:06

Photo Credit: http://finparty.ru

VTB Group has posted its Interim Condensed Consolidated Financial Statements as at 30 September 2014 with the Independent Auditors’ Report on Review of these Statements.

“Our pre-provision performance remains strong and has been resilient to the macroeconomic slowdown and geopolitical tensions. However, the headwinds we continue to face have driven up provision charges and cost of risk, which remain the key factor adversely impacting VTB Group’s profitability in 2014," said Andrey Kostin, the bank's president and chairman of the management board

"In the third quarter we considerably strengthened the Group's Tier 1 capital through conversion of subordinated debt, which enabled us to continue robust loan book growth. I am also pleased to report that our cost control initiatives are translating into notable improvements in our efficiency ratios.”

FINANCIAL AND OPERATING HIGHLIGHTS

Income Statement

RUB billion	9M 2014	9M 2013	Change, % or p.p.
Net interest income	268.2	233.2	15.0%
Net fee and commission income	44.8	38.9	15.2%
Operating income before provisions	351.3	281.3	24.9%
Provision charge for impairment of debt financial assets	(157.8)	(72.8)	116.8%
Staff costs and administrative expenses	(163.9)	(149.2)	9.9%
Net profit	5.4	46.0	(88.3%)
Return on equity	0.8%	7.4%	(6.6 p.p.)

Despite the challenging operating and geopolitical environment, VTB Group posted strong pre-provision operating income for 9M 2014, supported by healthy year-on-year growth of net interest income (+15.0%) and net fee and commission income (+15.2%).
The Group's net interest margin (“NIM”) remained substantially unchanged at 4.3% in 9M 2014 versus 4.4% in 9M 2013. Margins continued to gradually contract on a quarter-on-quarter basis (resulting in a 3Q 2014 NIM of 4.1%), mainly driven by the increase of the Russian Central Bank's key refinancing rate.
Russia’s slowing GDP growth, combined with rapid deterioration of economic conditions in Ukraine, contributed to a year-on-year increase in the Group’s annualised cost of risk (“CoR”) to 2.9% of average gross loans and advances to customers in 9M 2014, versus 1.7% in 9M 2013. In 3Q 2014 the Group saw a quarter-on-quarter increase in CoR to 3.4% versus 2.5% in 2Q 2014, mainly due to credit quality issues affecting certain corporate borrowers. The provision charge for impairment of debt financial assets increased to RUB 157.8 billion in 9M 2014, versus RUB 72.8 billion in 9M 2013.
The Group posted considerable year-on-year and quarter-on-quarter improvements in its cost-to-income ratio, which stood at 46.7% in 9M 2014 (53.0% in 9M 2013) and at 41.8% in 3Q 2014 (versus 48.7% in 2Q 2014). Staff costs and administrative expenses amounted to RUB 163.9 billion in 9M 2014, up 9.9% year-on-year, largely due to further investments into the Group’s retail franchise. In 3Q 2014 staff costs and administrative expenses were RUB 54.9 billion, corresponding to a below-inflation increase of 5.8% versus 3Q 2013.

Statement of financial position

RUB billion	30 Sept 2014	31 Dec 2013	Change, % or p.p.
Total assets	10,135.2	8,768.5	15.6%
Cash and short term funds	448.9	354.3	26.7%
Loans and advances to customers, including pledged under repurchase agreements (gross)	8,022.9	6,620.7	21.2%
Corporate gross loans	6,184.8	5,099.9	21.3%
Gross loans to individuals	1,838.1	1,520.8	20.9%
Customer deposits	5,321.4	4,341.4	22.6%
Corporate deposits	3,373.0	2,548.0	32.4%
Deposits from individuals	1,948.4	1,793.4	8.6%
NPL ratio	6.0%	4.7%	1.3 p.p.
Tier 1 ratio	11.0%	10.9%	0.1 p.p.
Total CAR	12.2%	14.7%	(2.5 p.p.)

The Group continued to expand its loan book, with new lending focused on the highest-quality segments of both corporate and retail borrowers. The weakening of the rouble against major currencies in 3Q 2014 resulted in a revaluation of the Group’s customer loans denominated in foreign currencies. At the same time, the Group has adjusted its corporate lending policies in order to limit new issuance of foreign currency denominated loans in response to the exchange rate volatility.

Sources: http://www.vtbgroup.com

Author: Mikhail Vesely

Tags: VTB Group Russian banks

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