OREANDA-NEWS  On 17 December MDM Bank published its reviewed IFRS results for the nine month period ending 30 September 2008.

In line with its conservative approach to ongoing economic instability, MDM Bank has increased provision coverage of non-performing loans to 145.6%. Management intends to maintain coverage at or above this level for as long as economic conditions demand; 
The bank has increased its excess liquidity (cash held in overnight accounts) to approximately USD 1.7 bln as of the date of this release;

These measures will help the bank continue to maintain its strong position, protecting MDM Bank’s depositors and investors during the ongoing financial crisis.

Individual deposits in November and December show a positive trend, largely reversing the outflow in October;

The Bank’s small business credit portfolio continues to grow; corporate lending continues, portfolio growth is expected to restart in 2009.

Total assets increased to RUR 333,858 mln (up 3.8% from RUR 321,482 mln as of YE 2007);

The main driver for asset growth was loan portfolio growth of 23.3%, totaling RUR 230,008 mln (YE 2007: RUR 186,505 mln). In 3Q08 MDM Bank began adjusting its lending policy to tighten underwriting criteria and loan portfolio growth was suspended;

Overall, the deposit base was stable during 3Q08 (ex. Latvian Trade Bank – LTB) and significantly recovered in November after outflows, primarily in October;

Total equity grew by 5.7% compared to YE 2007, and totaled RUR 41,128 mln (YE 2007: RUR 38,898 mln);

Exposure to the real estate and construction sectors declined from 25% as of YE 2007 to 17.7% as of 30 September 2008;

The bank’s proprietary securities portfolio declined by 97.1% and amounted to RUR 314 mln (USD 12.4 mln) as of 30 September 2008.

Net profit after tax for 9M08 was RUR 2,502 mln, down 35.1% vs. 9M07 (RUR 3,855 mln), a decrease primarily due to increased provisions coverage for non-performing loans, which will help to protect the bank, its clients and investors from possible asset quality deterioration going forward;

Revenue, reached RUR 14,526 mln, a y-o-y increase of 11.8%;

The 9M08 cost-to-income ratio improved to 45.1% from 46.8% y-o-y;

Operating expenses for 3Q08 were RUR 1,734 mln, down 17.9% vs. 3Q07 (RUB 2,112 mln) due to efficiency measures implemented during the quarter;

Provision coverage of non-performing loans increased from 131.7% as of 1H08 to 145.6% (166.8% and 120.6% for the Corporate & Investment Banking and Retail books respectively). The bank will continue to record adequate provisions based on its evaluation of the market situation and the risk profile of its borrowers.

Commenting on the 9M08 results, MDM Bank CFO Vadim Sorokin said: “We continue to take a conservative approach to managing our credit risks, which is in the best interests of the bank’s depositors and investors; this guided our decision to increase loan loss reserves to RUR 8.8 bln an increase by 42% from YE 2007 – up. MDM Bank remains in a strong position, having taken steps more than a year ago to prepare for the current crisis. The bank’s management, together with the Board of Directors, took decisions that enabled the bank to maintain an excess liquidity cushion since August of 2007, to gradually reduce its loan book exposure to the real estate and construction sectors, and to take measures to increase efficiency. We have reacted with similar speed to the deposit instability during October, and believe that with the help of new deposit products, increased communication with clients and our reputation as a reliable bank, we emerged in a stronger position than many.”

The full text of the financial statements for 9M08 can be found here.