OREANDA-NEWS. March 13, 2013. Home Credit & Finance Bank ('HCFB' or 'the Bank'), the Russian operations of Home Credit B.V., announces its financial results for the year ended 31 December 2012 in accordance with International Financial Reporting Standards (IFRS). HCFB is rated by Moody’s at Ba3, and by Fitch at BB-.

HCFB continued to build up its retail banking operations,expanding its presence andgainingmarket share. Successfully offering fully-fledged banking services at 6,400 offices in various formats, HCFB increased its loan and deposit portfolios while maintaining the efficiency of its operation and high quality of its loan portfolio, which resulted in excellent profit growth. In addition to solid results in Russia, in December 2012 HCFB gained control over Home Credit Bank in Kazakhstan. 

“Our performance in 2012 was outstanding. We succeeded in strengthening our market position in retail banking where the business, is experiencing continual growth as a result of our on-going regional expansion, diverse product offering, and deep knowledge of the market and our customers’ needs. We have confirmed our position as the #1 private bank in unsecured lending in Russia, demonstrating our ability to achieve robust loan and deposit portfolio growth whilst maintain a strong level of operational efficiency.”
Ivan Svitek,
Chairman of the Management Board of HCFB

Highlights
Net profit for 2012 grew 77.2% from RUB 10.8 billion to RUB 19.1 billion compared to 2011, driven by overall business growth.

Proven efficiency with a stable net interest margin of 20.0%, a low cost-to-income ratio of 32.0% and strong ROAA of 8.8% achieved notwithstanding the extensive loan portfolio development and heavy investment in the distribution network.

RUB 285.5 billion loans granted in 2012, more than twice the number for the previous year.

Net loans grew 98.3% to RUB 223.8 billion during 2012, from RUB 112.8 billion.

Non-performing loans (NPL) remained low with a 6.6% share of the total loan portfolio (YE2011: 5.8%).

HCFB’s capital adequacy level remained solid. Total CAR was 20.9% as at 31 December 2012 (YE2011: 20.5%). In October 2012 HCFB issued a subordinated Eurobond of USD 500 million with 7.5 year tenor and 5.5 year call option. In the beginning of November this issuance was registered with the CBR as subordinate.

HCFB confirmed its leading position amongst Russian private banks in unsecured lending (#3 amongst all Russian banks): with market share of 24.9% in POS loans (#1), 4.2% in cash loans (#4) and 3.0% in credit cards (#9). (Source: HCFB's analysis)

Deposits and current accounts grew 139.7% compared to YE2011 to RUB 168.5 billion as at the end of 2012, and comprised 61.0% of the Bank’s liabilities. As a result HCFB became one of the TOP 10 banks in the Russian retail deposit market.

HCFB’s well-developed distribution infrastructure encompassing 900 bank branches (reported as bank offices to the Central Bank of Russia, the CBR), 5,456 loan offices, over 69.3 thousand points of sale and 1,231 ATMs and terminals was the key driver of the growth in loans and deposits.

HCFB’s client base comprised 24.6 million contacts as at 31 December 2012, with 3.7 million active clients. The number of employees grew to 27 thousand.

In December 2012 in consequence of a change in Kazakh banking legislation and obtaining a banking holding status from the National Bank of the Republic of Kazakhstan, and being a holder of a call option to purchase a majority stake in Home Credit Bank (JSC), a Kazakhstan-based bank, HCFB began to gain control over Home Credit Bank (JSC). The exercise of the option took place in January 2013. The acquisition is a positive step for both HCFB and the whole Home Credit Group as the highly-efficient Kazakh company promises good opportunities and a future capacity for growth.

Operating results
HCFB increased the volume of loans granted more than twofold during 2012: RUB 285.5 billion in 2012 compared to RUB 136.7 billion in 2011. As a result, the net loan portfolio grew 98.3% to RUB 223.8 billion as at 31 December 2012 compared to RUB 112.8 billion as at 31 December 2011.

During 2012 HCFB increased its regional expansion and widened its distribution channels and remote banking services. As at 31 December 2012, the Bank’s distribution network was 900 bank branches (reported as bank offices to the Central Bank of Russia, the CBR), 5,456 loan offices, over 69.3 thousand points of sale and 1,231 ATMs and terminals. HCFB continued to focus on achieving a high level of customer satisfaction and the constant improvement of its client services by heavily investing in IT systems and remote services such as Internet, mobile and telephone banking.

Cash loans were the key driver of overall loan portfolio growth. Volumes of new cash loans granted in 2012 grew threefold on a year on year basis. As a result net cash loans increased  174.1% in 2012 to RUB 142.2 billion (YE2011: RUB 51.9 billion). Continued regional expansion,the widening of distribution network and a focus on customer satisfaction all enabled HCFB to reach the #1 position for incremental growth in cash loans in 2012 and the #4 position in the overall cash loan market with 4.2% market share.

The POS loans portfolio increased 34.7% in 2012 to RUB 55.6 billion compared to the end of 2011, due to the widened POS network. HCFB maintained its leading position1 in the POS loan market with 24.9% market share1. The Bank has historically been strong in mobile and electronics and has now expanded its portfolio to include furniture, DIY, clothing, medical and other services.

Credit card transaction volumes doubled on a year on year basis, and net card loans grew 52.3% to RUB 22.1 billion compared to YE2011. HCFB is one of the leaders in the credit card market, where it ranks 9th, with a 3.0% market share (Source: HCFB's analysis). This segment promises to grow significantly going forward.

On 31 December 2012 the Bank’s net loan portfolio had the following structure:

Cash loan share: 63.5% (RUB 142.2 billion);

POS-loan share: 24.8% (RUB 55.6 billion);

Credit card share: 9.9% (RUB 22.1 billion);

Mortgage loans, car loans and corporate loans: 1.8% (RUB 3.9 billion).

In 2012 deposits remained the key funding source for HCFB’s activities, and deposits and current accounts grew 139.7% to RUB 168.5 billion compared to YE2011 and comprising 61.0% of the Bank’s liabilities. As a result, the loan to deposit ratio decreased from 160.5% at the end of 2011 to 132.8% at the end of 2012.

Successful implementation ofHCFB’s strategy and the popularity of our innovative products resulted in a constantly growing client base in 2012. At the end of the yearthe client base comprised 24.6 million people. This growth of the client base strengthens the Bank deep understanding of the consumer banking market and brings multiple cross-selling opportunities. To support this growth the number of employees at the Bank grew to 27,064 people, a 37.3% increase during 2012.

Financial Results

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

Our operating income for the 12 months of 2012 grew 90.4% to RUB 61.6 billion (on a year on year basis), reflecting outstanding business growth and solid margins.

Rigorous risk management is the key priority for HCFB. To support the sustainability of our fast-growing loan portfolio, we apply a conservative provisioning policy with NPL provision coverage of 120.4%. As a result of this strict approach to risk and the substantial growth and changes in the structure of our loan portfolio, risk costs in 2012 grew to only 11.4% compared to 6.9%a year earlierand the level of NPLs remained stable at a moderate 6.6% (at YE2011: 5.8%).

Our investment programme resulted in a 57.0% cost increase on a year on year basis,as the distribution network expanded substantially (see above) and the number of employees grew 37.3% year on year.  Nevertheless, the Bank continued to manage its operating expenses carefully, with a stable cost-to-income ratio of 32.0% and OPEX to Average Net Loans declining to 12.6%.  We have always focused on cost discipline and we will continue to manage our expenses in a prudent manner in the future.

Our investments in distribution and client service improvement brought visible results: HCFB net profit grew 77.2% to RUB 19.1 billion. We continued to maintain a stable net interest margin of 20.0% and produced a strong RoAA of 8.8% for the reporting period.  All these ratios make us one of the best-performing banks in the industry.

On 26 December 2012 as a result of a change in Kazakh legislation and our obtaining of banking holding status from the National Bank of the Republic of Kazakhstan, and being a holder of a call option to purchase a majority stake in Home Credit Bank (JSC), a Kazakhstan-based bank, HCFB began to exercise control over Home Credit Bank (JSC). The exercise of the option took place in January 2013. The consolidation of our Russian and Kazakh assets will leverage business synergies, facilitate the transfer of expertise and further increase business efficiency in both banks.

The Bank’s capital adequacy level remained stable. As at 31 December 2012, our capital adequacy ratio was 20.9% (20.5% at the end of 2011). In October we issued a new Eurobond of USD 500 million, and registered this issue with the CBR as a subordinated debt in November 2012. This helped us to strengthen our capital adequacy and support our business growth. The acquisition of Home Credit Bank (Kazakhstan) does not affect the ratio as the Kazakh subsidiary’s CAR is higher than that of HCFB.

For full details on the HCFB’s Y2012 financial results, please visit: http://www.homecredit.eu/.