OREANDA-NEWS. November 02, 2009. BANK URALSIB (Bank) (RTS: USBN) reports IH2009 financial results under IFRS for six-month period ended June 30, 2009.

Financial results

Financial result of the Bank in IH2009 was formed under the influence of considerable growth of interest income, net fee and commission income, profitability of stock market transactions on the one side and increased allowances for loan losses on the other side. Noticeable increase of allowances for loan losses resulted in insignificant loss of 0.9 bln rubles in IH2009.

The Bank views this financial result as an indicator of its effective performance under existing economic environment.

At the same time the Bank remains profitable exclusively of allowances for loan losses. Pre-tax income before allowances for loan losses during January-June 2009 amounted to 8.4 bln rubles (5.8 bln rubles in IH2008), operating income before allowances reached 16.8 bln rubles (14.3 bln rubles in IH2008).

Worsening of macroeconomic environment in the reporting period, and as consequence, growing decrease of payment discipline of corporate borrowers of the Bank became a key reason for supplementary allowances for loan losses (growth by 3.8x to 9.4 bln rubles).

Selected Income Statement Items

   6M09

6M09

Change
6M09/6M08

(mln. RUB)

Net interest income

10,108

12,879

-21.5%

Net fee and commission income

2,200

1 ,772

24.2%

Net gains/(loss) from operations with securities

3,069

(964)

418.4%

Net gains/(loss) from operations with foreign currencies and precious metals

190

237

-19.8%

Other non-interest income

1,275

411

210.2%

Net operating income before allowances for loan losses

16,842

14,335

17.5%

Allowances for loan losses

(9,440)

(2,502)

741.4%

Net operating income

7,402

11,833

-37.4%

Operating expenses

8,408

8,540

-1.5%

Pre-tax income/ (loss)

(1,006)

3,293

-

Net income/(loss)

(904)

2,411

-

Net interest income amounted to 10.1 bln rubles for 6M2009, shrinking by 21.5% vs y-o-y 2008. Growth of net income by 19.2% was secured, first of all, by the increase of income from all credit products and from transactions at interbank lending market as well as from investments in finance leases. However, this positive dynamics was leveled by considerable growth of interest expenses on funding costs, in particular, interest rates at interbank lending market, customer deposit rates in January-June 2009.

Net fee and commission income during the reporting period demonstrated indicative growth by 24.2% to 2.2 bln rubles that was conditioned by the outrunning growth of net fee and commission income received, in particular, from settlement operations.

Despite the volatility of Russian stock market the Bank showed significant growth of net gains from operations with securities – 3.1 bln rubles vs net loss of 1.0 bln rubles in IH2008. This result was achieved due to effective management of securities trading portfolio. Operations with foreign currencies, derivatives and precious metals, as well as other non-interest income remained profitable in the reporting period.

The measures on expenses reduction undertaken by the Bank led to the reduction of operating expenses by 1.5% to 8.4 bln rubles in IH2009.  Personnel expenses remained at almost the same level during 6M2009 (growth by 0.4% to 4.3 bln rubles). Administrative and operating expenses were considerably reduced by 16.9% due to reduction of all corresponding expenses.

Due to the outrunning growth of operating income before allowances and reduction of administrative and operating expenses, Cost-to-Income ratio (C/I) shrank to 49.9% during 6M2009 vs 59.6% y-o-y 2008.

Assets structure
The Bank’s assets dropped by 6.4% to 417.6 bln rubles during 31.12.2008 – 30.06.2009. This dynamics was caused by the progressive reduction of the loan portfolio and investments in finance leases.

The Bank’s loan portfolio reduced to 243.5 bln rubles (by 12.4%) y-t-d. Individual loan portfolio diminished to 79.4 bln rubles (by 6.2% y-t-d), corporate loans – to 164.1 bln rubles (by 15.1% y-t-d). The Bank has such dynamics due to the toughening of risk-management system in crisis conditions and due to the volume of repaid loans exceeding the volume of lending. Net investments in finance leases demonstrated similar evolution (reduction by 18.5% to 26.0 bln rubles).

Amounts due to credit institutions and other borrowed funds shrank considerably in liabilities structure. During 2009 the Bank gradually reduced its obligations to the Central Bank, raised under unsecured auctions and the debt to Central Bank was fully repaid in October 2009. Besides, at the beginning of July 2009 the Bank completely and in time repaid two syndicated loans with total amount of USD 717 mln. Currently all debts to foreign financial institutions and organizations are fully repaid.

 Selected Balance Sheet Items

30.06.2009

31.12.2008

Change

30.06.09/31.12.08

(mln. RUB)

Assets

417,556

446,268

-6.4%

Equity

54,605

48,209

13.3%

Loan portfolio (gross)1

243,497

277,994

-12.4%

Individual loan portfolio

79,362

84,597

-6.2%

Corporate loan portfolio

164,135

 193,397

-15.1%

Customer accounts

245,964

226,360

8.7%

Individual customers accounts

78,441

64,757

21.1%

Corporate customers accounts

167,523

161,603

3.7%

Securities portfolio

56,679

41,292

37.3%

The share of loans to SME was still high in corporate loan portfolio – 56.7% as of 30.06.2009. The share of loans to retail and wholesale trade enterprises was the largest in loan portfolio structure (26.6%). However, by the end of the reporting period the share fell down, while the share of loans to manufacturing and food industry grew up.

Residential mortgages prevailed in retail loan portfolio as before – 50.5%. Auto loans and consumer lending amounted to 22.5% and 17.5% respectively. The share of retail loan portfolio in loan portfolio structure reached 33%, and total share of loans to individuals and SME approximated to 64%.

Customer accounts increased by 8.7% to 246.0 bln rubles y-t-d, mainly due to the growth of individual customer accounts by 21.1% to 78.4 bln rubles. Positive dynamics resulted mainly from the increase of individuals current accounts by 43.8%.

Corporate accounts grew to 167.5 bln rubles (by 3.7% y-t-d) due to the increase of the time deposits by 4.1% to 101.6 bln rubles.

Loan portfolio coverage by customer accounts was up to 101.0% as of 30.06.2009 vs 81.4% as of 31.12.2008, the share of customer accounts in liabilities structure increased to 67.8% vs 56.9% respectively.

Total securities portfolio2  grew up by 37.3% in IH2009 amounting to 56.7 bln rubles as of 30.06.2009. Bonds were the largest item in securities portfolio structure – 59.1%, shares – 28.9% and promissory notes – 10.0%.

In the reporting period the Bank reclassified its securities by different types of portfolios that allowed partially smoothing the influence of stock market environment on securities revaluation results. In particular as of 30.06.2009 available-for-sale securities amounted to 51.9%, trading securities3  – 40.5% and held-to-maturity securities – 7.6% of the total securities portfolio.
Capital adequacy
The Bank showed considerable growth of equity by 13.3% to 54.6 bln rubles in IH2009; it resulted from additional share issue completed in June 2009. As a result, the capital adequacy ratio under Russian standards (N1) highly exceeded the minimum level and amounted to 16.3% as of 30.06.2009. Capital adequacy ratio under BIS methods increased to 15.4% as of 30.06.2009 vs 14.3% as of 31.12.2008.

Shareholding structure
As a result of the additional share issue the Bank's authorized capital amounted to 26.5 bln rubles and is divided by 265.1 bln shares with the nominal value of 0.1 rubles. At present all companies of the Financial Corporation URALSIB own 95.9% of the Bank's authorized capital.

1before allowances for loan losses

 2including debt and equity securities, promissory notes, units in investments funds, investment shares in companies

 3including trading securities pledged under repurchase agreements.