OREANDA-NEWS. On September 24, 2008 VTB Group announced its unaudited IFRS results for the six months ending 30 June 2008, reported the press-centre of VTB Group.

1H 2008 FINANCIAL HIGHLIGHTS

Net profit up 34.7% to US679 million y-o-y due to strong growth in both interest income and fees and commissions

Core income up 101.3% to US2.4 billion y-o-y

Total loans up 29.3% to US77.6 billion from year end 2007, with strong growth in both retail and corporate lending

Net interest margin at 4.8%, up from 4.4% in 2007

Total assets up 17.4% to US108.8 billion in the first six months of 2008. Overall asset mix improved

Around US3.4 billion in EMTN Notes and US1.4 billion in syndicated loan facility raised during first half of 2008

VTB backed by solid capital with BIS ratio at 15%

OPERATING AND FINANCIAL REVIEW
VTB Group`s net profit for the first six months of 2008 increased by 34.7% to US679 million from US504 million in the first six months of 2007. The major contributor to this growth was the Group`s core income reflecting the fundamental strength of VTB`s business and significant growth in its lending activities.

In the reporting period, core income defined as net interest income before provisions and net fee and commission income excluding one-off item, was up 101.3% year-on-year to US2.4  billion.  Net interest income of the Group grew by 112.5% to US2.1 billion. Net fee and commission income excluding one-off item increased by 48% to US311 million in the first six months of 2008 year-on-year in line with VTB`s policy of improving the quality of earnings.

At a time when the cost of funding is rising for many financial institutions, VTB was able to report an increase of net interest margin to 4.8% from 4.4% in 2007.

Total customer loans  increased by 29.3% to US77.6 billion in the first half of 2008 from year end 2007. Corporate loans grew by 25.0% to US65.4 billion, raising  market share to 11% from 10.7% at year end 2007. Loans to individuals went up 58.5% to US12.2 billion, significantly lifting VTB`s overall market share in individual loans to 7.5% in 1H 2008 from 5.9% at year-end 2007. The share of loans to individuals in VTB`s total loans increased to 16% by the end of June 2008 from 13% at the end of 2007.

Total assets grew 17.4% to US\\$ 108.8 billion in the first six months of 2008, and the overall asset mix has improved. The proportion of customer loans in VTB`s overall asset mix has increased further to 69.4% from 63.2% at year end 2007, while the securities portfolio represents 10.2% compared with 14.6% at year end 2007. VTB`s securities portfolio now stands at US 11.1 billion, down 18% from US 13.5 billion at year-end 2007.

VTB`s securities exposure continues to decrease as a result of a prudent risk management strategy. Proprietary book and risk limits have been revised, with the aim of reducing the overall earnings volatility and improving the quality of earnings. The 10.63% stake in Alrosa was sold in the second quarter of 2008 with a pre-tax gain of US51 million. 

In the first half of 2008, total customer deposits increased by 20.2% to US\\$44.6 billion from US37.1 billion at the end of 2007. Corporate deposits increased by 22% to US32.2 billion, whereas retail deposits increased by 15.8% to \\$US12.4 billion. The share of customer deposits in total liabilities remained stable at 48.7%. During the first half of 2008, VTB retained its position as second biggest deposit-taker in Russia.

Despite challenging market conditions, VTB Group successfully raised around US\\$5 billion in public debt instruments in the first half of 2008, including over US 3.4 billion in EMTN Notes and US1.4 billion in syndicated loan facility.

VTB Group`s capital base remained strong, with a total BIS ratio of 15%. This proves to be one of the key fundamental strengths for VTB in a period of market turbulence. 

In 1H 2008 VTB made further progress in its chosen strategy, expanding its core business areas and developing its high-quality customer base across Russia and the CIS. In retail banking, a new deposit sales model with competitive pricing has been introduced. VTB`s ambitious branch expansion programme has been essentially completed, with 90 new VTB24 branches opened - bringing the total number of branches to 418. The total number of VTB Group branches across Russia, CIS and Europe now totals 1001.

In corporate banking, VTB is putting particular focus on profitability and effective cross-selling with investment banking products.

VTB has essentially completed building its investment banking team, and the division is on track to be fully operational from October 2008.  

VTB`s international expansion is progressing well. The bank has been awarded a banking license in Kazakhstan. An application for approval of the acquisition of AF-Bank is currently reviewed by the Azerbaijan regulator.

VTB Group remains confident in the continued profitable growth of its business. Going forward, VTB expects an increasing contribution to net profit from its retail business, significant revenue generation in investment banking and enhanced effectiveness in corporate banking. Although market conditions are more challenging and VTB is taking a more prudent stance in its lending, VTB intends to continue developing innovative products and services to match the evolving needs of its clients, and will maintain the ROE and capital ratios at appropriate levels.

VTB Chief Financial Officer and Member of the Management Board Nikolai Tsekhomsky said: "We are delighted to report a strong set of first half 2008 results. Given the challenging environment, we are focussing on developing further the fundamental strengths of our business and maintaining resilience in difficult market conditions. However, longer term we continue to have confidence in our ability to deliver our strategic objectives."