OREANDA-NEWS. March 17, 2014. Home Credit & Finance Bank (“HCFB” or ‘the Bank”), announces the consolidated financial results of operations in Russia and Kazakhstan for the financial year ended 31 December 2013 in accordance with International Financial Reporting Standards (IFRS). HCFB is rated by Moody’s at Ba3, and by Fitch at BB. SB JSC Bank Home Credit (Kazakhstan), a 100% subsidiary of HCFB, is rated by Fitch at BB-.

“Retail banking in Russia is still evolving and sometimes at an uneven pace. Increased competition, challenging market conditions and regulatory reform have been shaping the market. Faced with these testing conditions, Home Credit maintained its discipline and posted profit of RUB 11.1 billion for 2013 with ROAE of 20.9%. We also succeeded in maintaining both a high capital adequacy ratio and a strong liquidity position. Such results demonstrate our continued ability to create shareholder value in spite of unfavourable market developments and in a tougher regulatory context. Home Credit's strength lies in its ability to be nimble, responsive and disciplined in the face of change.

We expect an improvement in the risk profile of our loan portfolio from the second half of 2014 thanks to timely measures taken by us to broaden and deepen our origination capabilities across both traditional and additional customer segments.

We consider the recent market developments an opportunity to innovate our products and services, further increase their customer value to make them even more appealing to our customers and well suited to the current environment. Several major innovations will be introduced shortly. This enables us to reach out with new products to existing customers, use our large historical database to revive relationships with past customers, and enter new customer segments building even stronger relationships."

Ivan Svitek, Chairman of the Management Board, HCFB

Highlights
Operating income for the reporting period reflected the growth of the business in the previous period (FY 2012) rising 46.6% to RUB 90.3 billion (2012: RUB 61.6 billion).

Net profit for the full year 2013 was RUB 11.1 billion, a 41.7% decrease year-on-year as a result of the market wide decline in asset quality. This result is consistent with our guidance earlier this year. In the fourth quarter 2013 the Bank earned RUB 1.7 billion.

HCFB’s net interest margin arrived to 19.7% and it produced a RoAE of 20.9% for the reporting period.

General administrative and other operating expenses rose 42.9% to RUB 28.2 billion, as the number of employees grew to over 35,000, up 29.5% year on year, in line with the widening of the branch network in both Russia and Kazakhstan. Nevertheless, the Bank continued to manage its operating expenses tightly with the best-in-class cost-to-income ratio of 31.2% (2012: 32.0%) and cost-to-average-net-loans ratio improving to 10.4% (2012: 12.6%).  

Total assets amounted to RUB 358.9 billion.

Net loans grew 20.5% to RUB 285.9 billion during 2013 (YE 2012: RUB 237.3 billion), with RUB 343.8 billion new loans granted (YE 2012: RUB 285.5 billion). Given the changes in regulatory environment in Russia and also as a result of a tightening in underwriting standards, the growth rates of cash loan volumes substantially slowed down in the second half of 2013. Volumes of new cash loans granted in 2013 rose 6.0% on a year on year basis.

Retail deposit and current account balances grew 30.7% y-o-y to RUB 214.7 billion as at 31 December 2013. Deposit and current account balances comprised 72.9% of the Bank’s liabilities. As a result, the loan to deposit ratio decreased from 136.2% at the end of 2012 to 129.1% at the end of the reporting period, confirming the Bank?s declining reliance on wholesale funding. HCFB decreased deposit rates twice, in July and in September 2013; such a move was driven by both market and our intrinsic objective to optimise the funding base in line with the decreased volumes of business.

Non-performing loans (NPL) grew to 11.7% of the total loans (YE2012: 6.5%) as a result of the market trend of asset quality decline. HCFB applied a conservative provisioning policy with NPL provision coverage of 118.6%. The management team has a clear road map regarding the necessary risk management procedures to manage the situation and to improve the risk profile of both existing and future customers. 

HCFB remains strongly capitalised with a consolidated capital adequacy ratio (CAR) of 23.5% at 31 December 2013 (YE2012: 21.4%).Capital adequacy ratio based on basis set by the CBR as at 31 December 2013 was 14.7%.  

HCFB recently serves about 5.0 million active customers through 1,291 bank branches, 8,927 loan offices, over 91,000 points of sale, and 1,436 ATMs across Russia and Kazakhstan. The Bank‘s client base comprised 29.2 million customers at 31 December 2013.

Note: HCFB obtained control over SB JSC “Bank Home Credit” (Kazakhstan) in December 2012. Thus, financial results of this company were not consolidated in 2012 while financial position was.

For full details of HCFB’s 2013 financial results, please visit: http://www.homecredit.net/.