OREANDA-NEWS. December 11, 2012.
Income statement
Profit after tax for 9 months 2012 reached RUB 14.4 billion, an increase by 59.3% (or RUB 5.4 billion) in comparison with RUB 9.0 billion received for 9 months of 2011, reported the press-centre of Raiffeisenbank.

Operating income before provisioning for impairment losses1 amounted to RUB 33.6 billion, an increase by 25.7% (or RUB 6.9 billion) compared to RUB 26.8 billion received for the first 9 months of 2011, primarily due to positive dynamics of three main factors: income from trading operations, net interest income before deduction of provisions for loan impairment2, and net fee and commission income.

Net interest income before deduction of provisions for loan impairment3 amounted to RUB 22.4 billion at the end of the first 3 quarters of 2012, increased by 15.9% (or RUB 3.1 billion) compared to the figure for the first 9 months of 2011. The main growth drivers were the following: the increase of interest income on loans and advances to customers (+21.0%) as a result of rise in the average amount of loan portfolio; more than a 4 times increase of net interest income on derivatives as a result of the widening of the spread between the ruble and the USD market interest rates compared to the first 9 months of 2011.

Income from trading operations4 more than tripled to RUB 3.6 billion (+RUB 2.5 billion) compared to RUB 1.1 billion received in the first 9 months of 2011, primarily due to unrealised gains less losses from derivative financial instruments in the amount of RUB 2.7 billion vs. a loss of RUB 0.3 billion for the same period of 2011, and due to decrease of losses, net of gains from trading securities (not including coupon income) (from RUB -1.7 billion for 9 months of 2011 to RUB -0.2 billion for 9 months of 2012).

Net fee and commission income increased by 16.6% (or RUB 0.9 billion) to RUB 6.6 billion during the first 9 months of 2012 compared to RUB 5.7 billion received in the first 3 quarters of 2011. The main growth driver of net fee and commission income was a 26.6% (or RUB 0.5 billion) rise in net commissions on operations with plastic cards resulting from the increased number of issued cards.

Administrative and other operating expenses for the 9-months period of 2012 reached RUB 14.7 billion, remaining nearly unchanged compared to RUB 14.2 billion for the same period of 2011 (a slight increase of 3.4% or RUB 0.5 billion). The cost-to-income ratio for the first 9 months of 2012 dropped to 43.7% in comparison with 55.3% at the end of 2011 and 51.1% as of the end of the third quarter of 2011 as a result of the Bank’s cost optimisation policy.

Balance sheet
As of September 30, 2012 the share of liquid assets5 accounted for 37.9% of total assets comparing to 34.4% as of December 31, 2011 due to an increase in cash and cash equivalents (up to RUB 156.3 billion as of September 30, 2012 compared to RUB 139.5 billion as of December 31, 2011) and increase in amount of due from other banks (by RUB 26.4 billion to RUB 30.4 billion compared to year-end 2011).

Loans and advances to customers before deduction of provision for loan impairment equalled to RUB 363.3 billion as of September 30, 2012, demonstrating a decline by 3.7% (or RUB 14.1 billion) compared to year-end 2011 as a result of the decrease of corporate loan portfolio down to RUB 234.3 billion (a drop by 11.7%, or RUB 31.0 billion). The negative dynamics of loan portfolio in corporate segment was partly offset by the growth of retail loans portfolio (+13.8% or RUB 14.4 billion) and SME loans (+34.8% or RUB 2.8 billion). The growth in retail segment was mainly attributed to the increase of the volume of unsecured loans (consumer and credit card loans) and car loans.

Loan portfolio quality is stable. The share of non-performing loans was 5.8% as of 30.09.2012, experiencing no change in comparison with the NPL ratio as of 31.12.2011.6

During the 9-months period of 2012 the bank made charge of provision for loan impairment in the amount of RUB 0.6 billion, which is slightly higher than the charge of provision for loan impairment during 9-months period of 2011 (RUB 0.1 billion ), mainly due to charge of individual provisions for loan impairment. At the same time, there was an improvement in the quality of both the existing loan portfolio and newly issued loans, resulting in decrease of portfolio provisions, which partly compensated the provisioning charge.

Provisions for loan impairment decreased by 5.1% to RUB 21.5 billion during the 9-months period of 2012 compared to RUB 22.6 billion at year-end 2011. Coverage ratio of impaired loans remains at a conservative level (97.2% as of September 30, 2012).

The bank’s securities portfolio was RUB 50.7 billion as of September 30, 2012, a decrease by 22.3% (or RUB 14.5 billion) compared to year-end 2011 due to the sale of corporate bonds in 2Q 2012.

Customer accounts as of September 30, 2012 rose by a moderate 2.4% (or RUB 9.7 billion) up to RUB 409.2 billion (compared to RUB 399.5 billion as of December 31, 2011), primarily due to the growth of current accounts and term deposits of individuals (an increase by 6.5% and 3.9%, respectively), and the increase of current accounts balances of legal entities (growth by 32.3% up to RUB 104.8 billion). Current accounts of legal entities demonstrated a positive dynamics, while corporate term deposits decreased (by 25.7% compared to year-end 2011). This dynamics is explained by the process of replacing more expensive term deposits with the less expensive for the Bank current accounts.

Term borrowings from the parent bank dropped by 15.6% (or RUB 7.3 billion) compared to the figure as of December 2011 and equalled to RUB 39.7 billion as a result of contractual repayments of loans, attracted earlier from the parent Bank. Thus, the share of term borrowings from the parent Bank in Bank’s liabilities continued to decrease from 9.2% as of the end of 2011 down to 7.6% as of 30.09.2012.

Bank’s equity as of 30.09.2012 was RUB 103.9 billion, up by 8.5% (or RUB 8.1 billion) in comparison with RUB 95.8 billion as of the end of 2011 due to profit after tax received during the 9-months period of 2012.

Return on equity and capital
Return on equity (ROE) before tax rose by 6.7 percentage points up to 24.9% compared to 18.2% as of 30.09.2011.

Return on equity (ROE) after tax experienced an increase by 5.5 percentage points up to 19.2% in the end of 3Q2012 (compared to 13.7% as of 30.09.2011) due to increased profit after tax.

Capital Adequacy Ratio by Basel II for the first 9 months of 2012 rose to 18.8% by 3.6 percentage points compared to 15.2% as of 31.12.2011.

Capital adequacy ratio (N-1) according to Russian accounting standards (RAS) dropped to 13.4% as of 01.10.2012, down by 0.2 percentage points compared to 13.6% as of 01.01.2012. The decrease was due to the reduction of the Bank’s equity in accordance with the changed methodology of the Central Bank of the Russian Federation, which is related to the inclusion of the revaluation of derivative financial instruments in the calculation of equity (from 1 July 2012). The revaluation of hedging instruments will balance the foreign currency revaluation result, which until July 1, 2012 could significantly affect the bank’s equity both in a positive and in a negative way, depending on the movement of the ruble exchange rate.

1 Calculated by subtracting from "Operating income" the following items: "Provisions for loan impairment", "Provisions for credit related commitments", "Provisions for investment securities held to maturity".
2 Including net interest income on derivatives
3 Including net interest income on derivatives
4 Income from trading operations includes: losses net of gains from trading securities, losses net of gains from other securities at fair value through profit or loss, gains less losses from redemption of investment securities available for sale, gains less losses from trading in foreign currencies, realized gains less losses from derivative financial instruments (excluding net interest income on derivatives), unrealized losses net of gains from derivative financial instruments, foreign exchange translation gains less losses, ineffectiveness from the hedge accounting.
5 Liquid assets are calculated as the sum of the following items: cash and cash equivalents, due from other banks, accounts receivable repurchase — trading securities, other securities at fair value through profit or loss, investment securities available for sale
6 Share of non-performing loans for "Russia" segment according to Raiffeisen Bank International 3Q2012 IFRS report