Bank of Moscow Group Announces Financial Results
OREANDA-NEWS. July 29, 2011. The Bank of Moscow Group today publishes its Consolidated Financial Statements in accordance with IFRS for the year ended 31 December 2010 with Independent Auditors’ Report.
The Group’s financial results in the reporting period relate solely to the performance and activities of the Bank of Moscow previous management in 2010 and earlier.
Key financial and operating highlights
The Group’s net loss for 2010 amounted to RUB 68.2 billion;
Provision charge of RUB 91.2 billion was booked in Q42010 to cover impairment of corporate loans provided by the previous management;
The Group’s customer accounts and deposits reached RUB 543.1 billion, up 26.9% from the start of the year 2010;
The Group’s total capital adequacy ratio and Tier 1 ratio remain above BIS minimum requirements at 8.7% and 5.4% respectively;
The support plan in accordance with the Federal Law № 175-FZ was made so as to allow the Group to comply with covenants on its public debt;
Despite additional provision charges to be taken, the Group expects to deliver a net profit of RUB 3 billion in 2011.
The Bank of Moscow Group has kept and fulfilled each and every covenant on its public debt and no event of default has occurred in relation to the Group’s debt.
Update on the state support plan
In June 2011, the Central Bank of the Russian Federation (the CBR) and the Audit Chamber of the Russian Federation revealed questionable lending activities of the previous management of the Bank of Moscow. Also, it was stated that significant amount of the Bank of Moscow assets had been used to finance projects related to the Group’s previous management, which resulted in need for significant additional provisioning for impairment of the Group’s loan book.
As a result, in June 2011, the CBR recommended a set of measures to support the Bank of Moscow, in accordance with the Federal Law # 175-FZ "On Additional Measures to Strengthen the Stability of the Banking System Through December 31, 2011", which was approved by the Deposit Insurance Agency (DIA).
On 20 July 2011, the Bank of Moscow, the DIA and VTB Group companies signed a General Agreement which sets out the procedure of implementation of the support measures.
It is expected that upon acquisition of at least 75% in the Bank of Moscow by VTB Group, the DIA will issue a 10-year loan of up to RUB 295 billion to the Bank at an annual rate of 0.51%. This will allow the Group to book a positive P&L effect equal to c. RUB 150 billion, in accordance with IFRS, and to build additional provisions for impairment of the loan portfolio. The proceeds from the DIA loan will be invested in Russian Federation bonds (OFZs). Also, VTB Group is expected to provide the Bank of Moscow with additional capital of RUB 100 billion by 1 January 2013.
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