OREANDA-NEWS. MDM Bank has published its 2012 financial results according to the International Financial Reporting Standards (IFRS).

Based on the 2012 results, MDM Bank continues to maintain its place among the largest Russian privately-owned banks by assets, total capital, loan portfolio and deposit volumes.

Despite the challenging economic environment, MDM Bank’s 2012 operating profit (net income) totaled RUB 399 million, as compared with the loss of RUB 8.7 billion in 2011.

During 2012, the Bank focused its attention on improving its non-interest related profitability, which led to a significant growth in fee and commission income of 16% (RUB 500 million), as compared with 2011. The key growth drivers were the fees and commissions received for payment settlement services and trade finance (14% growth), together with fee and commission income from the promotion of insurance products, that showed a ten-fold growth, as compared with 2011, and totaled RUB 300 million.

The Bank achieved significant results in reducing its operating expenses — a drop of 15%, as compared with 2011. This was the result of a change in focus toward the improvement of the effectiveness of cost control, as well as eliminating inefficient functions.

The Bank traditionally pays particular attention to liquidity management, adhering to the strategic principle of long-term sustainability. As of December 31, 2012, the Bank’s liquid assets stood at RUB 98.6 billion, or 32% of the balance sheet total (RUB 100.8 billion in 2011, or 29% of the balance sheet total). The balance sheet total, in its turn, reached RUB 309.4 billion (RUB 343.8 billion in 2011).

No significant changes occurred in the client deposits portfolio as compared with 2011, its volume stood at RUB 201.2 billion. Simultaneously, the share of retail customer deposits in the total client accounts rose from 55% to 61%, demonstrating a high level of customer trust in the Bank, as well as the recognition of high quality service standards.

As a result of intensified trading activities and a reinforced position of the Bank in the money markets during 2012, the Bank’s trading income from securities, precious metals and currency transactions grew by RUB 1 billion, as compared with 2011.

MDM Bank, being the first Russian bank accepted to the London Bullion Market Association (LBMA) as an associated member, increased its precious metals turnover up to USD 3 billion, and raised the income from this line of business by 20%. The growth of income in the interbank market of cash foreign currency in 2012 totaled over 25%.

The significant achievement of MDM Bank in 2012 was the reduction of the share of problem assets (NPL) in the total loan portfolio — from 14.5% in 2011 to 7.9% in 2012, on an annualized basis. The key reason for this ratio improvement was the Bank’s NPL sale transaction and the successful management of problem assets.

In 2012, the Bank significantly reduced its loan impairment losses, as compared with the previous year (RUB 2.5 billion in 2012 versus RUB 11.3 billion in 2011), while the problem asset coverage ratio increased from 106% to 175% as a result of adopting a more prudent approach to credit risk assessment.

The Bank’s standard capital ratio according to the Basel Accord requirements considerably exceeded the minimum required level and totaled 18.6% in 2012 on an annualized basis, this ensures a significant capacity for the Bank to absorb potential losses. Simultaneously, the Bank completed the year with a good N1 standard ratio of 11.7%.

The Bank’s comprehensive result in 2012, including an additional technical accounting item, totaled RUB ?2.5 billion, as compared with RUB ?6.9 billion in 2011. The technical accounting item in 2012 resulted from sale of the Bank’s problem assets, as the transaction involved a payment deferral with a low interest rate. According to IFRS standards, the rate had to be discounted down to the average market interest rate, and the entire discount was recognized in the 2012 results. The accounting transaction was of technical nature, as this loss will be fully amortized into profit during three years as the term of the Bank’s interaction with the external Funds expires.

“One of the primary objectives, which the Bank faced at the end of 2011, was resolving the problem debt issues, improving the Bank’s loan portfolio both in the corporate and retail segments,” Tina Kukka, the CFO of MDM Bank, remarked. “We achieved significant results in the past year, resolved the most challenging issues, and now the management and personnel are focused on the growth of the Bank and improving its operating efficiency.”