URSA Bank Comments to Unaudited 1Q2008 IFRS Statements
OREANDA-NEWS. June 30, 2008. According to the unaudited 1Q2008 IFRS financial statements, as of March 31, 2008, URSA Bank’s assets amounted to US\\$ 7.5 billion, or over 50% more compared to 31 March of 2007. The shareholders’ equity more than doubled over the same period to reach US\\$1.29 billion. In 1Q2008, the Bank earned \\$66.3 million in net income, or 170% higher compared to the same period in 2007.
Vladislav Khokhlov, CFO of URSA Bank, offered the following comment:
There are some operations in 1Q2008 financial statements that need additional comment:
The sale of non-performing loans to a collection agency;
Revaluation of derivative instruments
The sale of non-performing loans to a collection agency
The total sold portfolio amounted to RUR 1.8 billion. The discount rate of the transaction was 87.8% (the discount amount is reflected in the PNL as “portfolio sale losses”). The provisions recovery as a result of the transaction amounted to 86.2% of the sold portfolio, therefore having practically no influence on the net income of the Bank.
The gain from provisions recovery in the income statement for 1Q2008 of RUR 0.7 billion is made up of two components:
Provisions recovery in the amount of RUR 1.5 billion,
Provisioning charge for loan impairment in the amount of RUR 0.8 billion
The above transaction and the Bank’s effective work on the reduction of non-performing loans facilitated the decrease of the share of non-performing loans in the consumer loans portfolio from 10.2% in 2007YE to 7.6% in 1Q2008. The Bank plans to further improve the recovery of non-performing loans. The Bank plans to further improve the recovery of non-performing loans, and to sell those whose recovery by the Bank’s own efforts are no longer cost-effective to specialized collection agencies.
Revaluation of derivatives
The sizeable foreign exchange income of RUR 0.6 billion was due to the revaluation of derivative financial instruments. Given that a significant portion of the Bank’s funding base is in foreign currencies, the Bank hedges foreign exchange risks through swaps and forwards. In accordance with IFRS requirements, the Bank revalues such transactions at fair value. The foreign exchange income is primarily thanks to the volatility of interest rates in 1Q2008; however, we expect that by the end of 1H2008 the impact of foreign exchange revaluation will become immaterial to the net income for the respective period.
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