OREANDA-NEWS. On 06 August 2009 Financial Corporation URALSIB (FC URALSIB or Corporation) reported on financial results under IFRS for the twelve-month period ended December 31, 2008. The Corporation publishes its annual1  consolidated financial statements under IFRS (Auditor -KPMG) for the first time and with early application of segment reporting IFRS 8.

Financial results

Net income amounted to 2.1 bln rubles for 12 months of 2008. Pre-tax income reached 3.9 bln rubles.

The Corporation displayed significant growth of operating and core banking income2 , as well as high level of efficiency in the reporting period. Net interest income3  increased to 28.8 bln rubles (by 53.8% vs y-o-y 2007) during 12 months of 2008. Net fee and commission income amounted to 7.6 bln rubles in 2008 (growth by 7.7% vs 2007).

Due to a considerable growth of net interest income, net interest margin was up to 8.98% in 2008 vs 7.13% y-o-y 2007. Advanced growth of core banking income and reduction of operating expenses allowed to improve significantly Cost-to-Income ratio (C/I)4   to 59.8% during 2008 vs 78.2% y-o-y 2007. The core banking income/operating expenses ratio reached 171.8% vs 115.5% y-o-y 2007.

Core banking income amounted to 36.4 bln rubles, growing by 47.5% in 2008 vs 2007. Net operating income of the Corporation reached 25.1 bln rubles in 2008.

In view of the financial crisis the Corporation was to increase allowances for impairment of interest earning assets, which amounted to 10.3 bln rubles in 2008 growing by 9.3 times vs 2007. Despite considerable expenses on allowance for impairment of interest earning assets, the Corporation demonstrated high efficiency and profitability level.

Operating income adjusted on allowances for impairment of interest earning assets amounted to 35.4 bln rubles (growth by 29.6% vs 2007), pre-tax income5  before allowances for impairment of interest earning assets – 14.2 bln rubles (growth by 2.4x vs 2007).

Operating expenses amounted to 21.2 bln rubles in 2008, showing insignificant reduction by 0.8% vs 2007. Personnel expenses reduced by 19.4% to 10.2 bln rubles from 12.7 bln rubles. The share of staff costs in operating expenses structure decreased to 48.2% for the 12 months 2008 vs 59.3% y-o-y 2007.

 Income Statement

12 months 2008

12 months 2007

Change (%)

mln rubles

Net operating income

25,105

26,227

(4.3%)

net interest income before impairment of interest earning assets

28,790

18,723

53.8%

net fee and commission income

7,625

7,080

7.7%

net gains/ losses on securities and derivatives

(3,968)

(1,170)

239.1%

net gains/losses on foreign currencies and on operations with precious metals

2,012

(181)

-

other net operating income

987

2,888

(65.8%)

allowances for impairment of interest earning assets

10,341

1,113

829.1%

Operating expenses

21,202

21,371

(0.8%)

Pre-tax income from continuing operations

3,903

4,856

(19.6%)

Net income from continuing operations

2,082

2,942

(29.2%)

Net income

2,082

3,365

(38.1%)

Assets structure

Total assets increased to 495.0 bln rubles by the end of the reporting period (by 16.8% up y-t-d 2007). The assets optimization by changing the assets structure and assets quality improvement remained the key task of the reporting period. The increase of credit portfolio and net investments in finance leases were the key driver for assets growth.

The credit portfolio6  grew up by 14.2% to 288.1 bln rubles as of 31.12.2008. Loans to individuals were up to 91.4 bln rubles by the end of 2008 (29.9% up), corporate loans – to 196.7 bln rubles (8.1% growth). Residential mortgages prevailed in retail loan portfolio structure (48.5%), consumer loans amounted to 24.9%, auto loans – 19.8%, credit cards – 2.2%, other loans to individuals – 4.7%. Loans to retail and wholesale trade – 29.6% prevailed in corporate loan portfolio structure as before.

Net investments in finance leases increased by 54.5% to 32.0 bln rubles as of 31.12.2008. Assets structure underwent qualitative changes. The share of credit and leasing portfolio7  in assets structure remained almost at the same level - 61.2%, the share of securities portfolio decreased from 13.6% to 9.5%. The share of liquid assets grew from 13.5% to 16.7% during 2008, absolute amount increased by 44.6% to 82.9 bln rubles.

The total volume of securities portfolio8  amounted to 47.1 bln rubles as of 31.12.2008, reducing by 18.2% y-t-d 2007. Equity securities portfolio9  shrank by 47.4% to 7.7 bln rubles. The share of equity securities in securities portfolio reduced to 16.3%; in assets – to 1.5% as of 31.12.2008. 

 Balance sheet

31.12.2008

31.12.2007

Change,  %

mln rubles

Assets

495,040

423,711

16.8%

Equity

63,704

69,581

(8.4%)

Credit portfolio (gross)10

288,126

252,288

14.2%

loans to individuals

91,380

70,363

29.9%

loans to corporates

196,746

181,925

8.1%

Customer accounts

243,512

226,008

7.7%

individuals accounts

74,047

82,470

(10.2%)

corporate accounts

169,465

143,538

18.1%

Securities portfolio

47,078

57,532

(18.2%)

Customer accounts increased by 7.7% to 243.5 bln rubles for 12 months of 2008, mainly, owing to the growth of corporate deposits – by 18.1% to 169.5 bln rubles. Individual accounts were down by 10.2% to 74.0 bln rubles by the end of 2008 caused by the customers’ outflow of funds during critical phase in October-November 2008. The dynamics was typical only for current accounts of individuals and corporates. Individual and corporate time deposits were fixed with positive dynamics in 2008.

Segment reporting

For the first time the Corporation presented early application of segment reporting IFRS 8 in relation to operating results and balance sheet figures by business lines. This standard is based on management accounting, which is a key basis for management decisions. Nine segments are singled out in the reporting. The banking business is presented by OJSC “URALSIB”, OJSC AKB “Stroyvestbank” and by OJSC "URALSIB – YUG BANK", leasing business– URALSIB Leasing company, other segments are also presented by series of subsidiaries, including units in investment funds.

• Corporate banking (commercial lending and deposit taking, cash operations, trade finance, operations with precious metals for corporate customers)

• Retail banking (deposit taking, bills and depositary certificates, money transfer, foreign exchange services, a range of banking card products and others for retail customers)

• Private banking (full range of banking services to high net worth individuals, including their savings management and financial consulting) as well as asset management (trust management, services to corporate and individual clients, including units in investment funds)

• Leasing business (leasing services and products)

• Investment banking (primary and secondary equity and debt capital markets activities, brokerage services, including repo transactions and derivative operations)

• Treasury and asset-liability management unit (treasury, which lends and borrows funds on money market, issue of debt securities and attraction of syndicated facilities)

• Corporate investments and other operations (corporate operations that are not conducted by and attributed to any business segment)

• Head office (expenses incurred by the central administrative divisions of the Group)

• Insurance business11  (separate business segment, spin-off in December 2007).

According to the segment reporting, net income of the Corporation for 12 months of 2008 was generated mainly by corporate and retail banking, as well as by corporate investments and treasury operations. All business segments were profitable in the reporting period, corporate and retail banking showed the highest RoA – 5.9% and 5.1% respectively in 2008.

Commercial banking12  (about 46%), as well as treasury operations and assets/liabilities management (21%) prevailed in assets structure. The considerable liabilities share is accounted also for commercial banking (about 50%) and treasury operations (29%).

  1interim (semi-annual) consolidated financial statements under IFRS was published for the first time in 2008

  2net interest income before impairment of interest earning assets and net fee and commission income 

  3before allowances for loan losses

  4operating expenses /net operating income before allowances for impairment of earning assets

  5from continuing operations

  6gross - before allowances for loan losses

  7net - after impairment of interest earning assets

  8includes bonds, shares, promissory notes, units in investment funds, participations in companies and derivatives

  9includes shares and participations in companies

  10before allowances for loan losses

  11financial result of this business segment was accounted as result from discontinued operations

  12corporate and retail banking