OREANDA-NEWS. September 13, 2010. Home Credit & Finance Bank (“HCFB” or “the Bank”), rated Moody’s Ba3/NP/D-, S&P B+/B, and one of the largest Russian retail banks with leading positions in certain segments of the consumer lending market, announces its unaudited financial results for the six month period ended 30 June 2010 in accordance with International Financial Reporting Standards (IFRS), reported the press-centre of HCFB.

I am proud to announce that our strategy to develop the consumer lender into a fully-fledged retail bank is working and the Bank continues to provide shareholders with additional value. The Bank’s equity has grown to almost USD 1 billion (RUB 28,8 billion) In the 1H 2010, the Bank generated almost the same net profit as for the whole of last year and set a new record in its profitability. Against a competitive backdrop the Bank enhanced its lending products, bringing tailor-made offers to different customer segments, fine-tuned to their respective risk-profile. As our risk-weighted capital adequacy reached 37.9%, our appetite for risk has grown. Stabilization of our overall loan portfolio, with maturity being continuously extended through successful cash loans expansion, further supported our revenue stream. Leveraging the strong, nation-wide recognition of the Home Credit brand, we further developed our deposit base which enabled us to increase diversification of our funding base. The Bank is targeting technology-driven expansion of its banking network which should extend the reach of the Bank towards retail customers.
Ivan Svitek, HCFB Chairman of the Management Board
 
Highlights
 As of 30 June 2010 the net profit reached RUB 5,121 million significantly exceeding the result from the same period last year (30 June 2009: net profit RUB 920 million)

The loan portfolio stabilized during the second quarter of 2010 and reached RUB 64,807 million as of 30 June 2010, a decline of 4.4% from the turn of the year (31 December 2009: gross loan portfolio RUB 67,802 million)

Operating income for the six month period of 2010 reached RUB 12,158 million, a year-on-year increase of 5.2% (30 June 2009: operating income RUB 11,561 million)

HCFB maintains a well balanced and highly liquid position with cash and cash equivalents of RUB 10.8 billion and a highly liquid AFS bond portfolio of RUB 8.9 billion. The cumulative net position for 12 months totalled RUB 30,183 million as of 30 June 2010

The share of retail deposits together with current accounts in the total liabilities increased and comprised almost 27% compared to 17% as of 31 December 2009

Shareholders’ equity reached RUB 28,791 million, up by 27.7% year-on-year basis (as compared to RUB 22,541 million as of 30 June 2009). HCFB posted a risk-weighted capital adequacy ratio (CAR) of 37.9% as of 30 June 2010 (31 December 2009: CAR 36.4%) which is the highest reported in the banking system

Bank’s efficient risk-management policy enabled to improve substantially the quality of the loan portfolio and resulted in a reduction in NPLs to a level of 9.7% of the loan book (12.9% as of 31 December 2009). Annualized risk-cost indicator as of 30 June 2010 was4.2% (11.9% as of 31 December 2009)

One of the key competitive advantages for HCFB is its well developed network of 82 representative offices and 183 banking offices, and over 36,000 points-of-sale at retailers across 80 regions of Russia. The Bank also possesses a well developed ATM network, which consisted of 262 ATMs as of 30 June 2010

HCFB maintains leading position in the Russian consumer lending being #1 market player with almost 27% of market share in the POS segment and a 6.2% market share in the credit cards segment
 
BUSINESS
The competitive product offering enabled the Bank to stabilise the gross loan portfolio during the second quarter of 2010. HCFB’s gross loan portfolio remains well diversified and comprises RUB 64,807 million as of 30 June 2010. The gross loan portfolio comprised 41.2% of POS (RUB 26,731 million), 22.3% of credit cards (RUB 14,435 million), 16.6% of cash loans (RUB 10,747 million), 11.7% of mortgage loans (RUB 7,571 million), 2.5% of car loans (RUB 1,651 million) and 5.7% of corporate loans (RUB 3,672 million).

HCFB capitalized on its client base (18.6 million people as of 30 June 2010 and considered to be one of the largest in the Russian market) with effective cross-selling initiatives.

Retail deposits with current accounts grew by 32% compared with YE2009 and amounted to RUB 15,743 million at 30 June 2010 and comprised almost 27% of HCFB’s funding base compared to 17.1% as of 31 December 2009.

HCFB’s well developed banking infrastructure enables the Bank to provide its products and services across the country. The Bank is currently represented in 80 Russian regions and 1200 cities with 183 banking offices, 82 representing offices, and more than 36,000 points-of-sale at retailers and 262 ATMs. In accordance with the Bank’s strategy HCFB intends to substantially extend its banking network in future.

RESULTS
In the second quarter of 2010 HCFB continued to demonstrate strong business and financial performance from a P&L perspective. Net profit for the six month period ended 30 June 2010 amounted to RUB 5,121 million with RUB 2,642 million attributable to the second quarter of 2010, as compared to RUB 920 million for the first six month period of 2009. This over 5 fold increase in net profit was driven primarily by a significant reduction of credit risk costs.

The operating income for the six month period ended 30 June 2010 reached RUB 12,158 million. The year-on-year increase of 5.2% was favourably influenced by lower interest expenses, caused by continuous effective cost management and lower cost of funds.

The credit risk mitigation measures, undertaken by HCFB since the economic downturn, resulted in attracting better quality customers and contributed to higher quality of the loan portfolio. The level of NPLs (non-performing loans older 90 days as a percentage of gross loan book) dramatically dropped to 9.7% at 30 June 2010 (compared to 12.9% at 31 December 2009 and 15.1% at 30 June 2009).The Bank historically maintains a conservative approach towards provisions. The NPLs were sufficiently covered by provisions at a level of 98% as of the reporting date.

HCFB seeks to maintain a well balanced and highly liquid position with Cash and Cash equivalents of RUB 10.8 billion and highly liquid bond portfolio of RUB 8.9 billion, and a cumulative net liquidity position of RUB 30.2 billion for 12 months.

The historically high capital position of the Bank, supported by its high profitability, resulted in a risk-weighted capital adequacy ratio and Tier I of 37.9% as at 30 June 2010, making HCFB the highest capitalized bank in Russia.