H1 2009 IFRS Results
Sound operating results despite challenging environment.




Conference Call
August 26, 2009
Agenda

• Macroeconomic overview
• Highlights of financial results
• Risk management
• Recent developments
• Q3 expectatio...
Macroeconomic Overview
Industry Production, %                                                                             ...
H1 2009 Financial highlights
                                 H1 2009   H1 2008   Change Y-o-Y

Total Deposits            ...
Revenues continue to be sound
                                      +30%
                                                 ...
Tight control over expenses
                Net interest income     Net fees
                Other income            Opera...
Net profit declined due to lower income and higher provision
charges
                                                   +1...
Credit Quality Management
  NPL growth in line with expectations                                                         G...
Credit quality outlook
                            Large         SMEs       Mortgages       Other       Total        % of
...
Currency and capital management
 Start of RUB balance recovery                                    Sound capital position
 ...
Stability in challenging environment
 Q-o-Q evolution without significant changes                       Good inflow of ret...
Strong recovery of retail funds
     Retail deposits, 2007-2009                                           Card accounts, 2...
Spread evolution in sluggish business environment
Spread analysis                                                         ...
Moderate cost growth due to tight control
Composition of costs                                             Fees & Commissi...
What we expect in Q3 2009

       Tough risk management in environment of
               asset quality deterioration


   ...
Questions and answers




        Julia Vinogradova         Andrey Shalimov
        Advisor to the Chairman   Member of th...
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H1 2009 IFRS results

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H1 2009 earnings presentation of Bank Vozrozhdenie

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H1 2009 IFRS results

  1. 1. H1 2009 IFRS Results Sound operating results despite challenging environment. Conference Call August 26, 2009
  2. 2. Agenda • Macroeconomic overview • Highlights of financial results • Risk management • Recent developments • Q3 expectations 2
  3. 3. Macroeconomic Overview Industry Production, % CPI evolution Y-o-Y,% 120% M-o-M,% 116 CPI 2008 CPI 2009 Official forecast 110% 104.5 104.7 114 112 100% 110 106% 97.9 90% 108 101% 106 80% 91% 104 90% 89% 70% 87% 88% 102 84% 86% 83% 83% 100 60% 98 50% 96 01.10.08 01.01.09 01.04.09 01.07.09 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Unemployment and Income Operating Environment Unemployment,% (left axis) - Continued sharp Q2’09 GDP contraction (-10,9%) in Russia and Real Disposable Income, % Y-o-Y (right axis) the highest inflation comparing to developed countries 11% 105 102,3 103,4 101,4 - Industrial production is still shrinking but at a slower pace. 100,3 99,0 First positive signs of some growth appeared in June (+4,5% 100 9% 9,5% M-o-M) 8,7% 9,2% 8,8% 8,5% 8,3% 95 - Slower then expected recovery of consumption resulted in 7,8% downward trend in inflation. Ministry of Economic Development 7% 92,2 reviewed its forecast from 13% to 12 – 12-5% by the year end. 90 88,4 - Three refinancing rate cuts (-150 bps) made by the CBR in 5% 85 Q2’09 in order to decrease lending rates are in line with the 01.01.09 01.04.09 01.07.09 slowing inflation 3
  4. 4. H1 2009 Financial highlights H1 2009 H1 2008 Change Y-o-Y Total Deposits 96 146 100 885 -4.6% Net Loans 90 177 93 449 -3.5% Loans to Deposits ratio 101.7% 95.8% 5.9 p.p. Net Profit 642 1 559 -58.8% Total Operating Income b.p. 6 842 5 825 +17.5% Total Operating Costs, of them - 2 912 - 3 351 -13.1% Personnel expenses -1 631 -2 112 -22.8% Cost to Income ratio 42.6% 57.5% -14.9 p.p. Capital Adequacy 18.3% 14.4% 4
  5. 5. Revenues continue to be sound +30% - Due to intra-quarter loan portfolio -4,5% contraction interest income decreased Interest Income Interest Interest Expenses by 4,5% Q-o-Q. Portfolio repricing was completed mainly in Q1’09 Income and 3,9 4,4 4,6 4,3 3,3 Interest - Despite the significant inflow of retail Expenses, -1,4 -1,7 -1,8 -2,2 -2,2 and corporate deposits funding costs remained flat due to good RUB bln 0% growth in non-interest bearing card +83% accounts and partial repayment of CBR funding as well as reduction in its Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 pricing. -0,4pps - Due to intra-quarter loan book decrease net interest margin decreased by 0,7 7,50% pps Q-o-Q pressured by lower interest 6,40% 6,70% 6,70% 6,00% income. NIM evolution Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 5
  6. 6. Tight control over expenses Net interest income Net fees Other income Operating Expenses - Operating income decline resulted from 0% -11% lower net interest income in Q2’09. Notwithstanding slowdown of clients’ Operating 0,2 0,1 1,1 0,3 1,2 0,4 0,9 0,3 business activity net fees remained at 1,0 0,9 Income and 2,0 2,3 2,6 2,3 2,1 the same level as in Q1’09 and amounted to 29% of total operating Expenses, -1,4 income . -1,8 -1,7 -2,0 -1,5 RUB bln - Operating expenses Q-o-Q grew by 7%. Personnel expenses remained flat. +7% -14% Main growth came from fixed-assets Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 related costs. -7,2pps - Cost-to-Income ratio reduced by 54,7% 7,5 pps Y-o-Y. Cost to 47,8% 50,0% 47,2% Q2 growth caused by lower income 38,4% base. Income Target for 2009 - focus on cost management with key area of saving – before stuff costs (0% Q-o-Q). provisions,% Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 6
  7. 7. Net profit declined due to lower income and higher provision charges +13,3% Operating profit before provisions -23% Operating Provisions - Operating profit before provisions declined by 23% Q-o-Q, but still profit and 1,8 2,0 2,2 1,7 exceeded the result of the previous 1,5 year by 13%. provisions, -0,3 -0,6 - We continue to apply conservative RUB bln -1,2 -1,6 -1,2 policy of provisioning for loan impairment. Charges grew 4 times Y-o-Y Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 -67% Net profit - Net profit was 34% less than in Q1 2009 due to significant charges to Net profit, provisions for loan impairment and -34% lower operating income RUB bln 0,9 1,0 0,6 0,4 0,3 Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 7
  8. 8. Credit Quality Management NPL growth in line with expectations Good diversification by industry As at June 30,2009 Provisions, % of Total Loans Other NPL, % of Total Loans * 7,70% of them impaired, % of Total Loans 7,30% Transport 13% 7% Manufacturing 5,00% 4,79% 6,27% 26% State 3,59% 3,53% 3,40% organizations 10% RUB 2,50% 80,845 1,40% 1,80% Finance 4% mln. 0,58% 2,20% 12% Construction 24% 4% 2005 2006 2007 2008 H1 2009 Wholesale & * NPL includes the whole principal of loans at least one day overdue either retail trade Agriculture on principal or interest Retail over-due loans* NPL Distribution 6,0% As at June 30,2009 Overdue loans on credit cards Loan portfolio NPLs Provisions 5,0% Overdue car and consumer loans Overdue mortgages/mortgage portfolio 8,3% 7,2% 4,0% 7,3% 7,3% 6,3% 3,0% 80 845 2,0% 4,3% 1,0% 8 533 8 387 0,0% Corporates Mortgages Other retail loans 01.01.06 01.07.06 01.01.07 01.07.07 01.01.08 01.07.08 01.01.09 01.07.09 * Over-due includes the whole principal of loans at least 30 day overdue 8 15
  9. 9. Credit quality outlook Large SMEs Mortgages Other Total % of corporates retail total as of 30.06.2009 loans Gross loans, including 25 680 55 165 8 533 8 387 97 765 100.0% Provisions Coverage Current loans 25 580 49 368 7 916 7 773 90 637 92.7% Ratio NPLs, of them 100 5 797 617 614 7 128 7.3% 106% Past-due less - 359 318 164 841 0.9% than 30 days Past-due over - 10 139 3 152 0.2% 30 days Rescheduled Impaired 100 5 428 160 447 6 135 6.3% Loans Provisions - 991 - 5 705 -363 - 529 -7 588 7.8% 8.4% Net Loans 24 689 49 460 8 170 7 858 90 177 - the whole amount of loans with principal overdue for more than 1 day as well NPL - as loans with any delay in interest payments. Rescheduled loans - even if we changed only a term of a loan not altering any others conditions 9
  10. 10. Currency and capital management Start of RUB balance recovery Sound capital position Data as of August 01, 2009 Assets Foreign currency assets Tier 1 Tier 1 + Tier 2 CAR USD - Correspondent accounts under CBR rules 16% (H1) Other - Cash 8% - Eurobonds of best 18,4% 18,45% Russian corporates 17,7% RUB 16,5% 76% 15,0% Reduction in line 14,4% 14,3% 13,7% with FX liabilities 12,6% MIN 12,0% 11,7% 11% Liabilities Foreign currency liabilities (less capital) - Retail deposits USD 16% - Corporate funds Other 8% RUB Equity 64% 12% Mostly Rub inflow in Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 01.07.09 10
  11. 11. Stability in challenging environment Q-o-Q evolution without significant changes Good inflow of retail and corporate deposits RUB bln RUB bln 141 141 137 137 138 137 138 137 Cash & Retail deposits 132 equivalents 132 18 Retail accounts 29 16 30 27 40 1 Due from 8 other 43 44 46 Corporate 10 2 41 3 banks accounts 11 0,2 8 20 10 10 Corporate Securities 12 deposits 18 19 17 16 10 13 13 12 Securities 22 issued 21 Retail loans 26 21 Due to other 27 banks 17 15 83 17 Syndicated 6 5 loans 75 76 76 74 22 Corporate 20 6 loans Other Liabilities 21 19 8 7 12 3 2 2 3 3 3 2 5 5 Subordinated Other 4 4 loans assets 13 14 15 15 16 5 7 5 5 7 Equity Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 11
  12. 12. Strong recovery of retail funds Retail deposits, 2007-2009 Card accounts, 2007-2009 RUB bn ’000 acc. RUB bln 50 17 1220 RUB Credit turnovers, rub bln RUB 46.9 bln 16 1160 Balances, rub bln 43.4 bln 15 Active accounts,'000 1100 14 1040 40 13 980 12 920 11 860 30 10 800 9 740 8 680 Consistent inflow of 20 primarily RUB 7 84,4 620 deposits since May 2009. 6 126 560 5 500 Oct08 Dec08 Jan09 Feb09 4 89 440 10 Vbank -12.9% +9.1% +4.3% +1.9% 3 380 Sector -6.0% +6.9% +3.5% +1.7% 2 320 1 260 0 0 200 2007 2008 2009 2007 2007 2008 2008 2009 2009 12
  13. 13. Spread evolution in sluggish business environment Spread analysis Spread Yield on Loans Yield on Securities Cost of funds 18,2% 16,5% 17,2% 14,5% 13,8% 9,9% 9,0% 9,8% 10,10% 10,10% 9,20% 8,6% 8,60% 8,1% 4,9% 7,2% 7,3% 5,6% 5,8% 3,3% Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Assets structure Liabilities structure RUB bln RUB bln 138 138 135 137 138 138 135 137 Cash & accounts w ith CBR 17 17 12 10 CBR Loans 27 29 25 24 3 5 7 7 Due from banks 33 10 31 33 32 Client demand 10 10 10 accounts Securities Retail deposits 43 43 43 44 Corp clients deposits 94 88 87 90 Loan book and veksels 20 19 21 22 Other borrow ed Other assets 12 12 11 11 funds 16 15 16 16 Equity 4 6 6 6 01.04.09 01.05.09 01.06.09 01.07.09 01.04.09 01.05.09 01.06.09 01.07.09 13
  14. 14. Moderate cost growth due to tight control Composition of costs Fees & Commissions / Operating costs Personnel expenses Fixed assets related 66% Other 2 022 63% 1 762 61% 1 656 59% 59% 1 522 1 390 52% 61% 60% 54% 59% 12% 17% 18% 16% 21% 36% 22% 22% 26% 25% Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Great progress in C/I ratio, % Cost summary 76,1% Operating expenses fell by 14% Y-o-Y due to tight cost 72,3% management measures 62,7% Stuff costs, major part of expenses, were flat Q-o-Q. 52,7% 42,6% Fixed assets related expenses growth resulting from additional spending on collateral charged on bad loans was the main driver of costs increase. Target C/I ratio 40-50% 2005 2006 * 2007 2008 H1 2009 *2006 - less extraordinary items 14
  15. 15. What we expect in Q3 2009 Tough risk management in environment of asset quality deterioration Flat or slightly negative NIM evolution Strong focus on cost management Sound operating results 15
  16. 16. Questions and answers Julia Vinogradova Andrey Shalimov Advisor to the Chairman Member of the Management Board +7 495 620 90 71 Head of Treasury Yu.Vinogradova@voz.ru A.Shalimov@voz.ru investor@voz.ru http://www.vbank.ru/en/investors 16

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