FY 2010 IFRS Results

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FY 2010 IFRS Results

  1. 1. 2010 IFRS ResultsBottomed out, taking offAnalyst DayMarch 31, 2011
  2. 2. 2010 HighlightsResults came slightly above planned: NI of RUB 581 mlnAssets increased by 14.1% YoY to RUB 166 158 mlnTotal net loan growth was 22.1% YoY to RUB 104 046 mlnCorporate loan portfolio up by 22.5% YoY to RUB 98 626 mlnRetail loan portfolio up by 17.7 % YoY to RUB 16 610 mlnIncrease in retail deposits by 26% YoY to RUB 68 712 mlnLoan/deposit ratio improved by 400 bps YoY to 88.4% NIM at 3.6% (year average), improved in Q4 by 20 bps QoQ Spread reached 6.3% for 2010, grew in Q4 by 20 bps QoQ Net fees and commissions grew by 5.5% reaching RUB 3 935 mln Cost of risk declined by 310 bps YoY to 1.8% Sufficient capital base (CAR: 15.2%, core Tier 1: 12.8% ), well above regulatory requirements. 2
  3. 3. Asset structure coming back to normal Loans’ share expanding More profitable liquid assets structureRUB bln 166 RUB bln 156 46.0 47.4 146 148 147 Cash and 33 equivalents 34 Due to banks 24% Securities 30% 35 36 28 6 1 14 7 7 19 19 Securities 15 11 11 13 14 Corresponding 13 13 Retail loans accounts and 55% 47% Corporate loans mandatory 89 reserves 72 73 79 80 Other assets 21% Cash 23% 8 8 8 8 9 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 2009 2010IEA represent 75% of total assets Improved efficiency of resources allocation RUB bln Cash and Other assets Customer funds Gross loans L/D ratio equivalents 5% 20% Due from other banks 4% 88% 87% 84% 84% 80% 9% Securities 53% 9% 102 Corporate loan 130 Retail loan 95 portfolio 95 113 119 118 106 125 115 portfolio Q409 Q110 Q210 Q310 Q410 3
  4. 4. Loans and advances Sharpening SME focus… …with surpassed growth… Total LoansRUB mln Large corporates Administrations Individuals SME 115 236 +21.7% VZRZ Sector 7% +9.2% 94 644 Regional YoY +22.1% +12.6% authorities 30.7 12% 27% Large 24.4 25.9 QoQ +10.3% +3.7% Corporate 20.6 19.1 8.1 22% 8.0 8.4 7.3 11.9 16.6 13.7 14.4 15.2 14.1 51% 52% Corporate Loans SME 59.8 48.0 54.6 55.4 57.2 VZRZ Sector 15% Individuals 14% YoY +22.6% +12.1% 2009 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 QoQ +10.4% +3.2% …in key regions… …across the industries *as of 01.01.2011 *as of 01.01.2011 Other Retail LoansMoscow Oblast Manufacturing Transport(41%) 11% VZRZ Sector 47,932 State 7% organizations 29% YoY +18.7% +14.3% 8% RUB QoQ +10.2% +5.5% 3% 98,626 47,957 mln. Other 10% 28% Construction 19,347 regions 4%Moscow (17%) (42%) Wholesale & Agriculture retail trade 4
  5. 5. Credit quality managementNPLs dynamics Annualized cost of risk NPLs, RUB mln * Provisions, % of total portfolio Charges to provisions to avg 4.90% gross loans, QoQ NPLs, % of total portfolio 11.06% 10.98% Charges to provisions to avg 10.55% 10.48% gross loans, YtD 9.89% 10.52% 10.44% 10.68% 2.63% 2.70% 9.97% 9.71% 2.51% 11,592 12,078 2.63% 2.66% 10,555 10,814 1.83% 9,362 2.49% 2.22% 0.01%Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010* NPL includes the whole principal of loans at least one day overdue either onprincipal or interest NPLs categorization: improvements in SME and retail segments SMEs Large corporate Retail RUB mln - 359 recoveries +776 new NPLs - 413 recoveries +321 new NPLs 9.3% 9.5% +161 new NPLs 13.4% 13.8% 13.9% 9.3% 8.2% 13.4% 12.1% 8.4% 7.3% 8.0% 7.2% 6.4% 12.9% 6.4% 6.4% 6.4% 12.4% 12.3% 12.9% 12.1% 7.2% 7.6% 7.0% 6.2% 4.1% 6.4% 8,426 8,605 8,155 8,117 3.3% 3.2% 2,936 1,279 1,359 1,277 7,355 1,157 1,025 2,160 850 850 850Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 NPLs, RUB mln Provisions, % of total loans NPLs, % of total loans 515
  6. 6. Credit quality Large SMEs Mortgages Other Total % of as of 31.12.2010 corporate retail total loans Provisions to NPLs RatioGross loans, including 93% 31,715 66,911 9,806 6,804 115,236 100.0% Current loans 28,779 58,794 9,327 6,258 103,158 89.52% Past-due but not 0.67% impaired, of them 0 454 240 74 768 Less than 90 Provisions to days - 231 203 61 495 0.43% 90+ days Over 90 days NPLs - 223 37 13 273 0.24% Impaired, of them Less than 90 days 2,936 2,086 7,663 970 239 - 472 20 11,310 3,076 9.81% 2.67% 132% Over 90 days 850 6,693 239 452 8,234 7.14%Total NPLs Rescheduled 2,936 8,117 479 546 12,078 10.48% LoansProvisions 9.4% - 2,014 - 8,112 - 480 - 584 -11,190 9.71%Net Loans 29,701 58,799 9,326 6,220 104,046 - the whole amount of loans with principal overdue for more than 1 day as well NPL - as loans with any delay in interest payments. 6
  7. 7. Ongoing efforts on funding costs reduction Funded by customer accounts Pace of deposit portfolio re-pricingRUB bln 166 Retail deposits 148 156 Share in retail deposits 146 147 Retail accounts 10.6% 10.4% Average rouble rates Corporate accounts 69 Corporate 8.3% 8.5% 55 59 66 63 deposits Securities 17 issued 14 13 14 Due from other 15 banks 35% 25 25 28 24 26 28% 27% 17 Other Liabilities 20 23 17 18 Subordinated 6 5 5 4 5 4 5 6 4 4 loans 9% Equity 16 16 16 17 17 Less than 1 month 1-6 months 6-12 months More than 1 year Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Card accounts High share of interest-free funding sources RUB bln 000’ acc Active accounts, 000 1460 Current accounts/ 20 Credit turnovers, rub bln Balances, rub bln 1280 Liabilities 16 12 Credit turnovers a month, rub bln 1100 920 30.1% 151 740 8 Customer accounts/ 137 560 4 126 Liabilities 0 2008 2008 2009 2009 2010 2010 380 200 87.3% 7
  8. 8. Currency and gap management, capital adequacy Strong capital position No mismatches on the balance-sheet* Tier 1 Tier 1 + Tier 2 CAR 19.0% under CBR rules Assets 18.2% 17.2% Liabilities 16.3% (H1)*** 15.5% 15.0% 15.2% 14.1% 14.4% 13.5% 12.8% USD MIN USD 12% 11% 13% Other 7% Other 8% RUB Equity RUB 70% 10% 80% Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 31.12.10 *** Preliminary estimations * Based on monetary assets and liabilities Maturity gap** Key pointsRub bln 60 Total assets Total liabilities The bank’s capital position of 15.2 (Tier 1 - 12.8%) of 50 15.2% remains comfortable amid continued business expansion. 40 30 We stick to strategy of no mismatches on the balance sheet in terms of currency risk with particular focus on 20 ruble-nominated assets. 10 0 Accumulated long-term resources allow the bank to On demand and less 30-180 days 180 days -1 year over 1 year satisfy revived demand for loans, credit facilities and than 30 days banking guarantees.** Based on expected expiration date, only monetary assets and liabilities are accounted 8
  9. 9. 2010 Key financials 4Q10 3Q10 FY10 FY09 Interest income 3 263 3 243 13 600 16 954 Interest expense (1 860) (1 992) (8 109) (8 628) Fee and commission income 1 204 1 134 4 295 4 027 Fee and commission expense (115) (90) (360) (298) Other operating income 122 179 473 941 Total operating income 2 614 2 474 9 899 12 996 Operating expenses (2 252) (1 718) (7 180) (6 325) Provisions (3) (577) (1 872) (4 752) Provisions on non-core assets (121) (0) (121) (0) Tax (54) (0) (145) (702) Net profit 184 179 581 1 217 9
  10. 10. Decline of funding costs started to offset yields contraction in Q4 Quarterly NIM dynamic Cumulative NIM dynamic -2.4pps NIM NIM 9.2% Interest Spread 9.6% Interest Spread 7.4% +0.2pps 7.4% 6.5% 6.9% 6.5% 6.3% 5.6% 5.8% 5.4% 6.0% 4.0% 3.7% 3.3% 3.5% 4.0% 3.9% 3.7% 3.6% Q4’09 Q1’10 Q2’10 Q3’10 Q4’10 2009 3M’10 6M’10 9M’10 20105% Key takeaways +0,44% -0,21% Average NIM 2010 accounted for 3.6%, having -0,20% increased in Q4 by 20 bps QoQ in line with the interest +0,18% spread dynamic. The most significant +44 bps NIM increase was 3,3% 3,5% resulted from deposits re-pricing on the back of cheaper new funds inflow. +20 bps Q4 loan growth has also contributed to NIM3% improvement (+0,18 bps) despite continued pressure Q3 NIM Loans Deposits Other Base Q4 NIM on lending rates. effect effect effect 10
  11. 11. First positive developments in spread dynamicsCorporate loan rates nearly bottomed… …while cost of funds is gradually declining Corporate term deposits 17.1% 17.3% Retail term deposits Interest spread 16.0% 16.0% 15.8% Current accounts 2010: 16.9% 15.3% 10.1% 10.1% 6.27% 14.0% 9.6% 9.1% 12.2% 8.2% 10.6% 11.3% 9.8% 9.1% 9.2% 8.5% 7.4% Yields on corporate loans 5.8% 5.3% Yields on retail loans 4.4% 4.6% Yields on securities 0.4% 0.1% 0.1% 0.2% 0.1% Q409 Q110 Q210 Q310 Q410 Q409 Q110 Q210 Q310 Q410Spread recovery in Q4 Key takeaways Yield on earning assets (net) Cost of funds Interest rates on corporate loans were on record lows16.0% Spread (net) as of the end of 2010. 14.1% 12.9% 11.6% Cost of funding is steadily decreasing in line with 11.0% 9.2% expiration of expensive deposits attracted during the 7.4% crisis. 6.5% 5.8% 6.0% In Q4 2010 trend has reversed and spread has grown 6.7% 6.7% 6.4% 5.6% 5.2% by 20 b.p., as deposits repricing started to outpace yields contraction. Q409 Q110 Q210 Q310 Q410 11
  12. 12. Costs – the issue to be resolved Operating expenses breakdown 2010 costs summaryRUB mln 15.8% +2.1% The bulk of operating expenses increase resulted from 31.1% 2252 13.5% 7 180 seasonal personnel expenses hike due to annual 7 029 1945 6 325 bonuses payment in Q4. 1718 59% Although cost to income ratio was pretty high at 52% 56% 54% 59% 72.6% level, strong coverage of operating expenses by 50% fees and commissions (55%) was higher than 42% average for Emerging markets and 52% for European 41% Union.* 48% 50% 44% 41% 46% Q4 2009 Q3 2010 Q4 2010 2008 2009 2010 * -source: ECB and DB research Personnel expenses Other expenses C/I ratio 2011 cost-saving steps Step 1 Wider implementation of online auctions 72.3% 72.6% for administrative purchases 62.7% Further automation of accounting Step 2 52.7% systems and routine banking procedures 48.7% Step 3 Complex review of banking products efficiency Mid-term project with a one of Big 4 * Step 4 consulting company aimed at operating 2006 2007 2008 2009 2010 *2006 - less extraordinary items efficiency improvement 12
  13. 13. Fee income generationStrong non-interest income based on long-termrelations with customers Net fee income distribution Cards Other RUB mln Cash transactions Settlements Share of non-interest vbank +4.3% income in total operating peer 1 +7.1% 1,089 income b.p. 45% peer 2 peer 3 985 -16.0% +17.9% 975 1,044 338 827 292 308 335 257 26% 170 190 158 159 18% 15% 138 262 277 274 248 214 Net fee margin 215 276 304 287 218 0.0% 1.0% 2.0% 2,6% 3.0% 4.0% Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010* Vbank and Peer1, Peer2 data for 2010, Peer 2 data for 9M 2010Non-interest income breakdown by segments Key points Vbank’s share of net fee income in total operating income b.p. 2010 2009 reached 39% in 2010, that is one of the highest across the sector and even exceeds average European Union level of Others Corporate Others 30%*. Financial Corporate Financial 1% business 1% business 3% 6% Our developed infrastructure and long-term relations with clients allows us to support our revenues in low interest rate 25% environment with fee generating products like settlements, Cards 25% 51% 57% Cards money transfer, payments, cash collections, that are well diversified across internal businesses and types of banking 14% products. 17%Retail business Retail business 4% fee growth QoQ was mainly driven by card business, cash transactions and servicing settlements of the customers. * -source: ECB and DB research 13
  14. 14. Well-positioned for future success Economic We’ll benefit from shorter duration of loan portfolio as IT efficiency improvements, centralization, less costly Growth compared to deposit one clients transactions, joint project with BIG4 partner Timeframe for “return to normal” is NIM to improve as a result of continued re-pricing of shortening, additional reserves for loan retail deposits growth, implementation of Risk-Calc by Moody’s Highest Earning growth driven by “normalized” charges to interest provisions, provision releases rates Operating efficiency Electronic auctions, business-oriented motivation system improvement Further penetration to existing Credit Tight clientele, higher than average growth in core niches, goal-oriented programs with quality expense EBRD, RosBR, regional funds improvement control Lower IT-transformation, start of internet- provisioning banking, clients communication via charges electronic channels Deposits Higher Technology- Re-pricing lending driven growth growth Timescale 14
  15. 15. DisclaimerSome of the information in this presentation may contain projections or other forward-looking statements regarding future events or thefuture financial performance of Bank Vozrozhdenie (the Bank). Such forward-looking statements are based on numerous assumptionsregarding the Bank’s present and future business strategies and the environment in which the Bank will operate in the future.The Bank cautions you that these statements are not guarantees of future performance and involve risks, uncertainties and other importantfactors that we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we haveexpressed or forecasted in the forward-looking statements. These forward-looking statements speak only as at the date of this presentationand are subject to change without notice. We do not intend to update these statements to make them conform with actual results.The Bank is not responsible for statements and forward-looking statements including the following information:- assessment of the Bank’s future operating and financial results as well as forecasts of the present value of future cash flows and relatedfactors;- economic outlook and industry trends;- the Bank’s anticipated capital expenditures and plans relating to expansion of the Bank’s network and development of the new services;- the Bank’s expectations as to its position on the financial market and plans on development of the market segments within which theBank operates;- the Bank’s expectations as to regulatory changes and assessment of impact of regulatory initiatives on the Bank’s activity.Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materiallyfrom those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include:- risks relating to changes in political, economic and social conditions in Russia as well as changes in global economic conditions;- risks related to Russian legislation, regulation and taxation;- risks relating to the Bank’s activity, including the achievement of the anticipated results, levels of profitability and growth, ability to createand meet demand for the Bank’s services including their promotion, and the ability of the Bank to remain competitive.Many of these factors are beyond the Bank’s ability to control and predict. Given these and other uncertainties the Bank cautions not toplace undue reliance on any of the forward-looking statements contained herein or otherwise.The Bank does not undertake any obligations to release publicly any revisions to these forward-looking statements to reflect events orcircumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws. 15

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