OREANDA-NEWS. March 04, 2011. 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, announces its audited financial results for the twelve month period ended 31 December 2010 in accordance with International Financial Reporting Standards (IFRS), reported the press-centre of HCFB.

We are very proud of our exceptional financial and operational results, produced by our wining business model which has proven a success throughout the economic cycle. Our net loan portfolio exceeded pre-crisis levels demonstrating a higher than market average increase of almost 30%, while our deposit base almost doubled. We have been successful in further diversifying our loan portfolio by increasing share of alternative low-risk products in our POS portfolio and increasing share of cash loans.

We continue to build up our unique distribution network of banking offices, new format offices and an agents’ network, which enables us to continue to expand our regional penetration and increase sales whilst maintaining cost levels. At the same time our risk metrics reached historic lows thanks to continuous improvements and adjustments made by our risk-management team, and an effective ALM performance led to a reduction in the cost of funds. Together these factors resulted in a significant increase of over 80% in net profit for 2010.

We will continue further growth in the retail finance, using all the advantages that our business model provides; being one of the best growth performers in 2010, we are confident in our ability to deliver sustainable and profitable growth going forward.
Ivan Svitek, HCFB Chairman of the Management Board

Highlights
As at 31 December 2010 net profit increased by 82% and reached RUB 9,411 million significantly exceeding the results from the corresponding period last year (31 December 2009: net profit RUB 5,179 million)

The net loan portfolio exceeded the pre-crisis level and reached RUB 75,275 million, an increase of 27.7% from the previous year (31 December 2009: net loan portfolio RUB 58,929 million)

Operating income reached RUB 24,706 million, a 1.5% increase on the corresponding period of 2009 with the operating income of RUB 24,345 million

HCFB maintains a well balanced and highly liquid position with cash and cash equivalents of RUB 7,416 million and a highly liquid AFS bond portfolio of RUB 5,841 million, which comprised 13% of total assets as at 31 December 2010. The cumulative net position for the year totalled RUB 26,165 million

The share of retail deposits together with current accounts increased to RUB 21,641 million and comprised over 30% of our funding base compared to 17% as at 31 December 2009

Strong risk management focus led to continuing improvement in key risk metrics, with NPLs down to 6.9% of the loan book (12.9% as of 31 December 2009), and the risk-cost indicator down to 5.0%as of 31 December 2010 (11.9% as at 31 December 2009)

One of the key competitive advantages for HCFB is its unique well-developed network of 43 representative offices, 305 banking offices, and over 46,000 points-of-sale at retailers across 80 regions of Russia. The Bank also possesses a well developed ATM network, which comprises 305 ATMs

HCFB maintains its leading position in the Russian consumer lending being #1 market player with 27.3% of market share in the POS segment and top 6 in the credit cards segment with 4.6% of market share

Shareholders’ equity reached RUB 33,019 million, up by 23% compared to RUB 26,833million as at 31 December 2009. The historically high capital position of the Bank, supported by its high profitability, resulted in a risk-weighted Tier 1 capital adequacy ratio of 33.5% as at 31 December 2010, which makes HCFB substantially overcapitalised by industry standards. On 1 March 2011 during HCFB’s Annual General Participant Meeting, reflecting the company's strong earnings power and its goal to realign the capital structure to a post crisis environment, shareholders approved a dividend payment to the aggregate amount of RUB13.2 billion to be paid on 5 March, 2011. Following the dividend payment, HCFB intends to maintain this Tier 1 ratio at around 20 per cent as a long-term target

Business
During the year 2010 the Bank increased sales of POS-loans by 42% and cash loans by 135% compared with the corresponding period of last year, enabling the Bank to increase net loan portfolio by 27.7% year-on-year basis to RUB 75,275 million. Focus on POS and cash loans resulted into further portfolio diversification: the share of POS loans grew to 53.5% of gross portfolio, cash loans increased up to 23.0%, credit cards share decreased to 13.9%; mortgages, car loans and corporate comprised 8.2% and 1.3%, respectively.

The HCFB client base, which is considered to be one of the largest in the Russian market, exceeded 20 million clients, providing HCFB with in-depth market and client expertise, and great opportunities for cross-sell, taking into consideration the extended range of retail finance products and services offered by HCFB across the country.

Retail deposits with current accounts grew by almost 82% compared with 2009 and amounted to RUB 21,641 million at 31 December 2010, comprising 32% of HCFB’s funding base compared to 17% as at 31 December 2009.

Since launching its payroll project HCFB was able to establish cooperation with 360 partners across the country with over 40,000 salary clients as at 31 December 2010. As a part of its business objectives HCFB will continue the further development of the payroll project.

HCFB’s unique distribution infrastructure continued its development by increasing the number of new format banking offices, ATMs, agents, and retail partners. The Bank is currently represented in 80 Russian regions and 1200 cities with 305 banking offices, 43 representing offices, and more than 46,000 points-of-sale at retailers, and 305 ATMs. In accordance with the Bank’s strategy HCFB intends to continue banking network expansion in future, which will be supported by the further development of the agents’ network.

Results
In 2010 HCFB continued to deliver sustainable and profitable growth. Net profit for the twelve month period ended 31 December 2010 increased to RUB 9,411 million, as compared to RUB 5,179 million for the year of 2009. This increase of 82% in net profit was due to the improving quality of the loan portfolio and overall portfolio growth.

The operating income for the year ended 31 December 2010 reached RUB 24,706 million demonstrating a 1.5% increase for the corresponding period of 2009.

HCFB reached solid ROAA and ROE of 10.1% and 28.5%, respectively, (31 December 2009: 5.1% and 19.3% respectively). The Bank is continuing to manage its operating expenses effectively with a cost-to-income ratio of 37.6% by the year end compared to 36.6% as for the previous year.  Rigorous cost-discipline will remain the key priority for HCFB going forward.

During the reporting period the Bank maintained high asset quality, with the NPL level (non-performing loans older 90 days as a percentage of gross loan book) down to 6.9% at 31 December 2010 (compared to 12.9% as at 31 December 2009) and risk-costs at 5.0%.The Bank historically maintains a conservative approach towards provisions and these NPLs were sufficiently covered by provisions at a level of 107% as of the reporting date.

HCFB maintains a well-balanced liquidity position with Cash and Cash equivalents of RUB 7.4 billion and a highly liquid bond portfolio of RUB 5.8 billion, and holds a cumulative net liquidity position of RUB 26.2 billion for the next 12 months.

The historically high capital position of the Bank, supported by its high profitability, resulted in a risk-weighted Tier 1 capital adequacy ratio of 33.5% as at 31 December 2010, which makes HCFB substantially overcapitalised by industry standards. On 1 March 2011 during HCFB’s Annual General Participant Meeting, reflecting the company's strong earnings power and its goal to realign the capital structure to a post crisis environment, shareholders approved a dividend payment to the aggregate amount of RUB13.2 billion to be paid on 5 March, 2011. Following the dividend payment, HCFB intends to maintain this Tier 1 ratio at around 20 per cent as a long-term target.