OREANDA-NEWS. On 09 June 2008 BANK URALSIB reported on 2007 financial results under IFRS.

Key 2007 achievements

1.  Growth in core banking income; 

2.  Lowering dependence on volatile financial instruments; 

3.  Financial improvement in 2H07vs1H07; 

4.  Operating expenses control; 

5.  Change in assets structure, credit portfolio and customer accounts growth. 

Financial results

Net income of the Bank reduced to 2.2 bln rubles in 2007 (47% down vs 2006).  Pre-tax income decreased by 37% to 3.6 bln rubles vs 2006. Despite the market trends, the Bank reversed the setup and reported on positive financial results for 2H07. Net income grew to 5.1 bln rubles in 2H07vs1H07 and pre-tax income increased to 7.1 bln rubles.

The reduction in net income in 2007 was caused mainly by losses from securities. The Bank decreased the volume and share of equity securities in assets while implementing the strategic decision on lowering the dependence of operating income on volatile financial instruments. The sale of equity securities under disadvantageous market trend in 2006 led to losses from securities in the amount of 2.5 bln rubles vs net income of 6.7 bln rubles.

Last year the growth of the core banking income was the most important challenge for the management.  In 2007 vs 2006 net interest income after allowance for impairment was up 119% to 15.5 bln rubles, net fee and commission income reached 5.0 bln rubles (28% growth).

During last year the Bank demonstrated an advanced growth of the net interest income after allowance for impairment that characterizes in particular the process of reallocation of proceeds from equity securities portfolio to loans. Operating expenses coverage by core banking income reached 120% in 2007. Totally the financial ratio became positive in FY2007. Net interest income and net fee and commission income amounted to 22.7 bln rubles and exceeded 17.1 bln rubles of the operating expenses.

Lowering dependence on volatile financial instruments

In 2007 the market entered the turbulence epoch and that led to the necessity of the qualitative redistribution of the Bank assets. The reduction of the gains net losses from securities pepped the organizational reassignment, which facilitated the efficiency growth and expenses decrease. The management arrived at a strategic decision on lowering dependence on volatile financial instruments.

Securities portfolio decreased from 68.0 bln rubles as of 01.01.2007 to 47.4 bln rubles as of 01.01.2008, the equity securities portfolio reduced by 66.5 % to 12.6 bln rubles.

Expense control

Operating expenses were up 28.4% to 17.1 bln rubles in 2007. The key growth was in 1H07. The growth of expenses was caused particularly by considerable IT expenses spent on the delivery of brand new software and equipment in all consolidated banking institutions.

Significant expenses in the reporting period were also caused by the integration of merged regional banks completion. In 2007 the consolidation of 6 banks on the platform of Stroyvestbank was finalized and that partially led to the prolongation of the expenses optimization process.

Furthermore in 2007 there were implemented the decisions on expansion and improvement of the regional network, namely: refinement of working places, modernization of regional offices etc. During last year the Bank invested in 70 new sales points, 45 of which were already opened in 2007.

Assets structure

In 2007 the Bank assets were up to 374.7 bln rubles (22.2% y-o-y growth). The key task of the reporting period was the assets optimization by changing the assets structure. This assets growth rate below the market was connected with the necessity of lowering dependence on volatile financial instruments. The reallocation from securities to credit portfolio is an inert process, taking into consideration the Bank focusing on retail and SME loans.

The Bank credit portfolio (after allowance for impairment) increased by 45.5% to 229.1 bln rubles as of 01.01.2008. Loans to individuals were up to 63.8 bln rubles (73.6% up as of 01.01.2007), corporate loans – 175.6 bln rubles (34.5%). The credit portfolio share in assets increased from 54.9% to 66.5%, the equity securities portfolio share reduced from 12.3% to 3.4%.

The further diversification of credit portfolio became one of the key goals of the Bank during the reporting period. Loans to SME and mortgages still remained the perspective key products. Mortgage share in the credit portfolio was up from 27.5% to 43.8%, and the growth rate was 176.7% for the last year.

The stake of the loans to SME in the corporate credit portfolio was up to 16% during last year. Totally the loans to individuals and to SME amounted to 65.5% of the Bank credit portfolio in 2007.

Credit portfolio coverage by customer accounts remained at sufficiently high level – 93.9%. It characterizes traditionally stable Bank liabilities structure. The syndicated loan facilities, loans and deposits from banks constituted a major part in the non-customer funding structure. Thus today the Bank has not only stable liabilities, but a development potential both for various directions and sources.