OREANDA-NEWS. September 10, 2012. Home Credit & Finance Bank ('HCFB' or 'the Bank'), the Russian operations of Home Credit B.V., announces its financial results for the six month period ended 30 June 2012 in accordance with International Financial Reporting Standards (IFRS). HCFB is rated by Moody’s at Ba3, and by Fitch at BB-, reported the press-centre of HCFB.

In 2012 HCFB continued its disciplined retail banking build-up, successfully offering a fully-fledged selection of simple, easy, fast services at c.5,400 banking offices in various formats. This resulted in a significant increase of the Bank’s loan and deposit portfolios and profit growth, while maintaining efficiency.

“During the first half of 2012, we have continued to invest and develop our IT infrastructure, banking network and distribution channels, including on-line services such as Internet and mobile banking. We have maintained our focus on enhancing our client service and increasing the customer satisfaction; today our banking services are available 24/7 to all clients in over 2,000 cities and towns throughout Russia.

The results of our growth strategy are impressive, both in financial and operational terms. We are the #1 private bank in unsecured lending in Russia. Our retail business is developing apace, resulting in the continued growth of the loan portfolio while maintaining outstanding levels of efficiency. In particular, net loan portfolio grew 30.1% in the first half of 2012 and net profit grew 10.0% on Y-o-Y basis. We believe in the strategy we chose and will drive our growth further.”
Ivan Svitek, Chairman of the Management Board of HCFB

Highlights
Net profit for the six month period of 2012 grew 10.0% to RUB 6.3 billion compared to the corresponding period of 2011, driven by overall business growth. H1 operating income was RUB 23.7 billion, a 59.3% increase year on year.

Loans granted in the first half of 2012 reached RUB 106.3 billion, twice the number for the previous year.

Net loans grew 30.1% during the first six months of 2012 from RUB 112.8 billion to RUB 146.8 billion.

HCFB maintained its strong position in its traditional segments while strengthening its position in cash loans: #1 in POS loans with market share of 22.3%1, #4 in cash loans with market share of 3.0%1, #8 in credit cards with market share of 3.1%1.

Non-performing loans (NPL) remained low with a 6.0% share of the total loan portfolio (YE 2011: 5.8%).

Deposits and current accounts grew 64.8% in H1 2012 to RUB 115.9 billion, and comprised 70.9% of the Bank’s liabilities on 30 June 2012.

Well-developed distribution infrastructure encompassing 764 bank branches (reported to CBR as bank offices), 4,624 loan offices, over 59,500 points of sale,
c. 1,200 post offices and 925 ATMs was the key driver of the growth in loans and deposits.
HCFB’s client base comprised 23.7 million contacts on 30 June 2012, with 3.6 million active clients.

Cost to income ratio for the six month period ended 30 June 2012 remained strong at 34.4% (2011: 38.8%, H1 2011: 33.1%) despite the extensive loan portfolio development and heavy investments in distribution network.

HCFB’s capital adequacy level remained solid. Tier 1 CAR was 17.1% as at 30 June 2012 (YE 2011: 20.5%).

1HCFB’s analysis

Operating results
HCFB significantly increased the volumes of loans granted during the first six months of 2012 compared to the same period of 2011. In particular, loans granted in the first half of 2012 amounted to RUB 106.3 billion compared to RUB 52.5 billion for the corresponding period of 2011, a 102.6% increase6. As a result, the loan portfolio grew 30.1%, while overall market growth was approximately 18.4% in the first half of 2012. In absolute terms the Bank’s loan portfolio amounted to RUB 146.8 billion on 30 June 2012, compared to RUB 112.8 billion at the close of 2011.

Cash loans developed to become the main driver of HCFB’s overall loan portfolio growth. They increased 72.3% in the first half to RUB 89.4 billion (YE 2011: RUB 51.9 billion). Volumes of new cash loans granted for H1 2012 grew threefold on a year on year basis.

The POS loans portfolio declined 12.8% in H1 2012 to RUB 36.0 billion compared to the end of 2011, due to seasonal effects and a the strategic decision to focus on cash loans. Nevertheless, HCFB maintained its leading position1 in the POS loan market with a 22.3% market share. The Bank has historically been strong in electronics, and has now expanded its portfolio to include furniture, DIY, apparel and services, which all together comprised about 30% of its POS loan origination.

Credit card transaction volumes doubled on a year on year basis, and net card loans grew 16.1% to RUB 16.9 billion compared to YE2011. HCFB is one of the leaders in the credit card market, where it ranks 8th, with a 3.1% market share1. This segment promises to grow going forward.

On 30 June 2012 the Bank’s net loan portfolio had the following structure:
-     Cash loan share: 60.9% (RUB 89.4 billion);
-     POS-loan share: 24.5% (RUB 36.0 billion);
-     Credit card share: 11.5% (RUB 16.9 billion);
-     Mortgage loans, car loans and corporate loans: 3.1% (RUB 4.5 billion).

Well-balanced products, an extensive distribution network and a successful marketing policy allowed HCFB to reach the #1 position for incremental growth in cash loans for H1 2012 and the #4 position in the overall cash loan market with a 3.0% market share1.

In 2011 deposits became the key funding source for HCFB’s activities, and in the first half of 2012 this trend continued. Deposits and current accounts grew 64.8% to RUB 115.9 billion compared to YE2011 and comprised 70.9% of the Bank’s liabilities.

In 2012 HCFB has been promoting the rapid development of its distribution channels and remote banking services. As at 30 June, 2012 the Bank’s distribution network reached 764 bank branches (reported to CBR as bank offices), 4,624 loan offices, over 59,500 points of sale, c. 1,200 Russian Post offices and 925 ATMs and terminals. Home Credit Bank has continued to focus on customer satisfaction and the constant improvement of its services by heavily investing in IT systems and high-tech services such as Internet, mobile and telephone banking.

The popularity of HCFB’s innovative products has resulted in client base growth of 1.5 million to 23.7 million in the first half of 2012. This growth of the client base gives the Bank a profound understanding of the consumer banking market and brings multiple cross-selling opportunities.

Financial results
Notwithstanding the heavy investment in its distribution network and customer service operations, the Bank preserved its operating efficiency over the period.

Operating income for the first half of 2012 grew by almost 60% compared with the corresponding period a year before, reflecting the outstanding business growth described above.

Rigorous risk management remained a key priority for the Bank. To support the sustainability of our very fast-growing loan portfolio, we applied a conservative provisioning policy with NPL provision coverage of 135.1% (which we believe is one of the highest in the industry). As a result of our conservative approach towards provisioning and the substantial growth and changes in the structure of our loan portfolio, risk costs in the first half of 2012 grew to 11.9% compared to 6.7% in the first half of 2011. Nevertheless, the level of NPLs remained stable and amounted to a moderate 6.0% (at YE2011: 5.8%).

Our investment programme resulted in a 65.6% increase on the costs side on a year on year basis, as the number of offices grew substantially and the number of employees grew 1.6 times year on year.  Nevertheless, the Bank continued to manage its operating expenses carefully, with a stable and comfortable cost-to-income ratio of 34.4% and a flat level of OPEX to Average Net Loans of around 12.9%.  Strict cost-discipline has always been one of our key priorities and we will continue to manage our expenses in a prudent manner in the future.

As a consequence of this period of sustained investment in the development of our business and our conservative provisioning policy, our net profit of 6.3 billion roubles was moderately  higher, at 10.0%, than the comparative period of 2011.  However, we continued to maintain a strong and stable net interest margin of 20.0% and produced solid RoAA and RoAE of 7.2% and 40.2% respectively for the reporting period, all of which makes us one of the best run banks in the industry.

The Bank’s capital adequacy level remained high. On 30 June 2012, our capital adequacy ratio was 17.1% (20.5% at the end of 2011). The decrease in the ratio reflects the growth of our loan portfolio as well as the RUB 2.8 billion in dividends paid in April to neutralise excessive capital and to re-align the Bank’s capital structure with the post-crisis environment. For the mid-term we plan to maintain our capital adequacy level above 15.0%.

For full details on the Bank’s H1 2012 financial results, please go to: http://www.homecredit.eu/.