Bank Uralsib Reports 3Q and 9M 2009 Financial Results under RAS

OREANDA-NEWS. October 23, 2009.  BANK URALSIB (Bank) (RTS: USBN) reports IIIQ and 9M2009 financial results under Russian Accounting Standards (RAS).

Net loss of the Bank reached 6.8 bln rubles for 9M2009, pre-tax loss amounted to 6.6 bln rubles. This negative result was caused exclusively by the loss in IIIQ2009 (mainly, in August 2009), which evened net income of IH2009. In September 2009 the Bank obtained net income in the amount of 1.6 bln rubles.

The increased allowances for loan losses (14.1 bln rubles during 9M2009, 9.3 bln rubles in IIIQ2009) became a key factor of the negative financial result for the reporting period.

At the same time the Bank remains profitable exclusively of allowances for loan losses. Pre-tax income before allowances for loan losses during January-September 2009 amounted to 7.5 bln rubles, operating income before allowances reached 21.2 bln rubles that exceeds similar financial results for 9M2008.

Supplementary allowances for loan losses were caused by the further predicted deterioration of a financial position of corporate borrowers of the Bank and by the subsequent decline of their financial discipline. The basic volume of the reserved allowances for loan losses was defined exclusively by revaluation of corporate borrowers according to instructions of the Central Bank of Russia.

According to the methodology of the Central Bank of Russia, the Bank had to transfer some borrowers to groups of higher risk due to the publications of the IIQ and IH2009 financial statements of corporate clients in July and August, which showed the reduction of their potential sources of debt service. It led to the necessity of supplementary reserves formation in spite of the absence of payment discipline infringements on the part of the Bank’s clients at present.

Nevertheless, the results of last months show some slowdown of overdue loans growth rates. The Bank considers that the volume of the overdue loans reached the "bottom" by the end of IIIQ2009, thus planning further decrease of overdue loans and reduction of allowances for loan losses if the economy situation does not worsen. The Bank intends to keep the volume of allowances at the level adequate to economic situation in the country. The allowances for loan losses/overdue loans ratio amounted to 100.4% as of 30.09.2009.
At the beginning of the current year the Bank dealt with its toxic assets, kept on improving its business efficiency, the results should be reflected in IVQ2009.

During 9 months 2009 net interest income amounted to 11.9 bln rubles, net fee and commission income – 4.4 bln rubles. Favorable conditions at Russian stock market allowed the Bank showing sharp growth of net gains from operations with securities up to 2.1 bln rubles in IIIQ09, and up to 3.8 bln rubles during 9 months 2009. These gains resulted from trading operations with equity and debt financial instruments and securities revaluation.

Net gains from operations with foreign currencies and precious metals had similar dynamics, reaching 772 mln rubles during January–September 2009.

During the reporting period (31.12.2008 - 30.09.2009) the Bank’s assets reduced by 10.4 % to 381.8 bln rubles. This dynamics was caused by steadily reduction of loan portfolio during reporting period. During 9 months 2009 the Bank gradually reduced obligations to the Central Bank, raised under unsecured auctions and now the debt to Central Bank is fully repaid.

Besides, at the beginning of July 2009 the Bank completely and in time repaid two syndicated loans with total amount of \\$US 717 mln. Currently all debts to foreign financial institutions and organizations are fully repaid.

The Bank’s loan portfolio dropped to 213.4 bln rubles (by 19.4%) y-t-d. Loans to retail customers shrank to 73.1 bln rubles (by 11.6% to 31.12.2008), loans to corporate customers decreased to 140.2 bln rubles (by 22.9% y-t-d). Such dynamics resulted from toughening of risk-management system in crisis conditions. Thus September became the first month of current year during which loan portfolio has shown the growth, mostly due to the increase of corporate loans by 2.3%.

Customer accounts¹ reached 228.6 bln rubles as of 30.09.2009, showing positive dynamics (by 6.7% y-t-d). Individual accounts growth rate remained at the stable level within last 9 months. Individual accounts increased to 76.5 bln rubles (growth by 19.7%). Corporate accounts showed high volatility during 9M09, totally demonstrating increase by 1.2% to 152.2 bln rubles y-t-d. Thus in September corporate accounts increased by 5.9%.

Assets structure underwent qualitative changes towards higher liquidity. Loan portfolio/customer accounts ratio decreased to 93% as of 30.09.2009 vs 124% as of 31.12.2008.

Net income, obtained by the Bank in September, and the increase of the authorized capital by 6.1 bln rubles due to additional share issue led to increase of total regulatory capital under CBR methodology to 49.8 bln rubles as of 01.10.2009. As a result, the capital adequacy ratio (N1) highly exceeded the minimum level and increased to 15.3% as of 01.10.2009.

Note: ¹ Corporate and individual customer accounts exclusive of budgetary funds.